Argentina
Austria
Azerbaijan
Bahrain
Bangladesh
G4S plc ANNUAL REPORT AND
BarbadosGBelgiumACCOUNTS 2007
Bhutan
Bolivial
Botswana
Brunein
B ulgaria
Cambodia
Cameroon
Canada
Chiler
Chinaa
Colombiad
C osta Rica
Cote d'Ivoirec
Cyprusu
Czech Republict
Democratic Republic of
Congo
Denmark
Dominican Republic
Ecuador
Egyptd
El Salvador1Estonia
Finland
G ambia
Ghana
Greece
Guam
A World of Guatemala0
Guinea
Honduras
Hong Kong
Hungary
India
Security
SolutionsIndonesiaIrelandIsrael
Jamaica
Jordan
Kazakhstan
Kenya
Kuwait
Latvia
Lebanon
Lesotho
Lithuania
Luxembourg
Macau
Madagascar
Malawi
Malaysia
Mali
Malta
Mauritania
Mauritius
Mexico
Morocco
Mozambique
Namibia
Nepal
Netherlands
Nicaragua
Nigeria
Northern
Mariana Islands
Norway
Oman
Pakistan
Papua New Guinea
Paraguay
Peru
Philippines
Poland
Puerto Rico
Qatar
Romania
Russia
Saudi Arabia
Serbia
Sierra Leone
Singapore
Slo vakia
Slovenia
South Africa
South Korea
Sri Lanka
Sweden
SyriaTaiwan
Crawley, West Sussex Tanzania
RH10 9UN, UK
Thailand
Telephone:+44 (0)1293 554 400 Trinidad & Tobago
Turkey
Registered no. 4992207 Turkmenistan
Uganda
www.g4s.com Ukraine
United Arab Emirates
United Kingdom
United States
Uruguay
Uzbekistan
Yemen
Zambia
SECURE SOLUTIONS
A trusted partner
• UK cash management centre network - processing
£59bn per year on behalf of commercial banks
• Nine juvenile and adult custody facilities in UK
and USA
• Eight immigration facilities in the Netherlands
• Operation of police custody suites in the UK
• Design, construction, management and finance
of government facilities (PFI)
• Risk management and consultancy services
• Event security
• Wimbledon Tennis Championships
• Alpine World Ski Championships
• Political party conferences and events
• Aviation Security
• Schiphol International Airport, Netherlands
• London Heathrow Airport
• OR Tambo International Airport, Johannesburg
• OSL Airport, Oslo
• Fire Protection & Emergency Response
• NASA Ames Research Center,California
• Kennedy Space Center
SECURE LOGISTICS
Unrivalled expertise
• Cash services operations in 64 countries with
45,000 employees
• Over 500 cash management locations operating
9,000 vehicles
• Transporting 90% of UK bank note volumes -
£300 billion annually
• Management of 30,000 ATMs across Europe
and North America
• Secure international transportation of cash
& valuables between 58 countries
• Secure repatriation of immigration detainees
• Secure prisoner escorting
• Document and data storage and distribution
PEOPLE MANAGEMENT
Over 530,000 staff worldwide
• Recruitment and selection
• Staff vetting
• Training and development
• Deployment and scheduling
• Working in partnership with governments to
introduce security officer licensing
• Creating security experts
• Award winning Executive Leadership Programme
TECHNOLOGY
Integrated approach to security solutions
• CCTV
• Intruder alarms
• Physical security
• Access control
• X-Ray
• Explosives detection equipment
• Alarm monitoring and response
• Vehicle tracking
• ATM engineering
• Electronic monitoring of offenders
• Retail cash management solutions
GOVERNMENT EXPERTISE
A major provider of services to
governments
USA
• Protection of US defence facilities
• Support to the US military
• US embassy security in 39 countries
• Fire fighting for US armed forces in Iraq
UK
• Home Office - eight justice sector contracts
• Bank of England cash management
• Armed forces pre-deployment training
Europe
• Protection of German army facilities
• European parliament buildings
• NATO buildings
• Kazakhstan pipeline protection
G4S IS THE WORLD'S LEADING INTERNATIONAL
SECURITY SOLUTIONS GROUP,WHICH
SPECIALISES IN ASSESSING CURRENT AND
FUTURE RISKS AND DEVELOPING SECURE
SOLUTIONS TO MINIMISE THEIR IMPACT ACROSS
A WIDE RANGE OF GEOGRAPHIC MARKETS
AND BUSINESS SECTORS.
G4S is a major provider of risk management and protection to
governments and major corporate customers around the world and
is an expert in all aspects of local and international secure
logistics.
G4S is the largest employer quoted on the London Stock
Exchange and has a secondary stock exchange listing in
Copenhagen. G4S has operations in over 110 countries
and has over 530,000 employees.
2 Financial Performance 31 Report of the Directors
for 2007
4 Chairman's Statement 34 Corporate Governance Statement
6 Chief Executive's 37 Directors' Remuneration Report
Review
10 Security Services 45 Statement of directors' responsibilities in
respect of the
annual report
14 Cash Services and the financial statements
16 Financial Review 46 Independent auditor's report to the members
22 Our People 48 Consolidated income statement
24 Corporate Citizenship 49 Consolidated balance sheet
28 Board of Directors 50 Consolidated cash flow statement
30 Executive Management 51 Consolidated statement of recognised income and
expense
52 Notes to the consolidated financial statements
97 Parent company balance sheet
98 Notes to the parent company financial statements
106 Group financial record
107 Notice of Annual General Meeting
110 Recommendation and explanatory notes relating to
business
to be conducted
at the Annual General Meeting on 29 May 2008 113
Financial
calendar and corporate addresses
THE GRGLOBAL LEADER IN PROUP VISION IS TO BE RECOGNISED AS THE IN 2007 WE UNDER
OVIDING SECURITY SOLUTIONS.DEVELOP TOOK A
STRATEGIC
REVIEW TO FOCUSED ON DELIVERING THE NEXT PHASE
OF A
THE GROUP STRATEGYAND DEVELOPMENT FOR
THE FUTURE.CCELERATED
GROWTH
a160 On the following pages we provide a brief overview
of the group strategy,which was launched to the capital
markets in November 2007.
MERGER & INTEGRAPHASE ITION DELIVERY
1
completed merSuccessfully&integrationger
Delivered strong7gro
perfwth and EBITormanceA Delivered syner 2
benefits gy
Created6one br Spread Cash3
one visionand and Serto kvices experey businessestise
4
mConf
5
ulti-serirmedstrategyvicein devgeogrCreated uniqueeloping maraphic footprkintets
From 2004 to 2007 the group strorganisations,achieving the benefategy fits of
the merocused on integrger that wating two international stakeholders and
continuing to deliver strong business perfe promised to ourormance.
ACCELERATED GROPHASE IIWTH & DEVELOPMENT
1
in core basic serUnderlying trendis for
continvices
margin pressureuedWill require phased7
organisational Strategic ev 2
of our serolution
will takdevelopment - whiche pro
beneftime to shoitsw oppor vides further
longer tertunity fmor ourplans
Our gro6requires the addition ofwth Demonstr3
story
fur capabilities outside of ating our
capabilities in order tother enhance reputation andcore basic
services
‘intelligence'to ourcreate markets willperception
Extending from cur5rent 4
logical,core competencies isbelievable andlong-ter
Repositioning around
the potential tom growth has
haachievabve strong refle and wealreadyerencesmarimproket rve our ating
accelerOur strategy review in 2007 supported the view that in order to drivefrom
our core capabilities to devated growth and development,elop total rwe would
need fisk management andocus on developing outsourcing solutions across our
service range and geographies.
DEVELOPING FROM OUR CORE CAPABILITIES
Strategic Goals
Deliver fully outsourced solutions:
MANAGE a160 a160 Output based contrAbility to share in gainsacts
Deliver across all services according to market need, in a phased and
evolutionary implementation
management of rAt the heart of our strisk - and therefategy is the need to
takore delive greater responsibility for the identification andof customer
segments.ering fully outsourced secure solutions to a wide range
HIGH SECURITY FEXAMPLE:ACILITY OUTSOURCING
MANAGE High Security Facility Outsourcing
Risk Management & ConsultancySolutions DesignANALYSISSector
ExperSecurity
Facilities Management AND
DESIGN Health & SafSafety Consultancyety Infrastructure Managem tise &
Training Understanding
Health & Safety Certificationent Health & Safety
Certificationent
SubcontrSupervision / Integration
Measurement & Reporactor Managementting Systems
OPERATE
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CASH OUTSOURCINGEXAMPLE:
Cash Centre Outsourcing Retail Solution - Outsourcing Cash Management
MANAGE E2E ATM Estate Management Secure Secure Back
Office
Back Outsourcing
Office
Outsour-
ing
Bank Note IntegrQuality Certificationity /Bank Note Cycle
ConsultancyReconciliation
and Cash Retailer Cash Cycle Consultancy
Procedure
Training
ANALYSIS Secure Processing Site
AND Security Bank & Bank & Bank
& Retailer
Certification Retailer Retailer Cash
SerStaff
Cash Cash
Security
SerStaff SerStaff
Trainingvices
Security Security
Trainin-
Trainin-
vices vices
DESIGN Procedures ComplianceReconciliation and CashManagement / EffCash
Pipe-lineiciencySecurity Procedures Audit e rs
Central Bank Central Bank
Note Integrity Note Integrity
A
Machine MonitorTM / Retailing Central Bank Reporting
Production
PlanningC-
sh Centre
Cash Forecasting Note / Coin Issuage / Destruction
Reconcili-
tion
Reporting
Storage & In-TransitBulk On-Site On-Site
ATM /
Retrieval Proce- Processi-
Processing Retail
sing g
Machine
OPERATE
CRIMINAL JUSTICE SYSTEMEXAMPLE:
Criminal Justice System Outsourcing
MANAGE Pol- Court Prison Probation
Immigration
ce
Out- Outsourcing Outsourcing Outsourcing
Outsourcing
our-
ing
Offender Management Progr
ANALYSIS Facility Design - Prisons, policeammes eg EM,courts
AND
DESIGN CrSentencing / CrSentencing /
Piminal Justice Piminal Justice
olicy olicy
Government Sector ExperTrainingtise
Measurement & Reporting Systems
SubcontrSupervision / Integractor
Managementation
OPERATE
- -
- -
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FRTO OM THE GLOBTHE WORLD'S LARGEST SECURITY COMPAL LEADER IN SECURITY
SOLUTIONSANY
Repositioningthe groupSustainab(abovle growthgroe marketImprovedwth
rates)quality ofearnings
Increasing
relationshipcustomer diffCompetitive
Aligned with
erentiation outsourcingworld classproviders
“critical”Seen asservice marApproprket ratingiateshareholderIncreasedreturn
The new strby the group and will also benefategy will deliver the accelerit the
entire rated growth and devange of G4S stakelopment requiredeholders.
THE GROUP VALUES ARE A WAY OF DESCRIBING WHAT THE ORGANISATION
STANDS FOR. They are communicated throughout the organisation to
ensure that everyone understands their role in delivering the
strategy. They also form a means by which the strategy can be
implemented across the group.
Each value has a senior executive “owner” within the organisation,
responsible for driving through its implementation.
a160 INTEGRITY a160 CUSTOMER FOCUS
We can always be trusted We have close, open relationships
to do the right thing with our customers that generate
trust and we work in partner ship
for the mutual benefit of our
organisations
a160 BEST PEOPLE a160 PERFORMANCE
We always take care to employ We challenge ourselves to improve
the best people, develop their performance year-on-year to create
competence, provide opportunity long-term sustainability
and inspire them to live our values
a160 TEAM WORK & a160 EXPERTISE
COLLABORATION We develop and demonstrate our
We collaborate for the benefit expertise through our innovative
of G4S as a whole and leading edge approach to
creating and delivering the right
solution
2
CONTINUING TURNOVER BY SERVICE CONTINUING PBITA BY SERVICE*
Cash Cash
Services 22% Services 31%
Security 2007
Security
Services 78% Services 69%
Cash Cash
Services 21% Services 30%
Security 2006** Security
Services 79% Services 70%
CONTINUING TURNOVER BY GEOGRAPHY CONTINUING PBITA BY GEOGRAPHY*
New
Markets 22% NewMarkets 27%
Europe 53% 2007
Europe 55%
North
America 25% North
America 18%
New New
Markets 18%
Markets 21%
Europe 55% 2006** Europe 58%
North North
America 27% America 21%
Financi-
l
Perform- * PBITA= Profit before interest,taxation and amor tisation of
nce acquisition-related intangible assets. 2005 & 2006 at 2007 exchange
rates.
for 2007 **
G4S plc | Annual Report & Accounts 2007 3
Group Total**
TURNOVER PBITA MARGIN
£m £m %
5,000 - 350 7.00
-
-
-
-
-
4
-
-
-
-
1
- 3004,000
-
-
-
-
-
2
3,633.9 -
-
-
-
1
250 -
-
-
-
9
6.75
3,000 200
6.50
2,000 150
100 6.25
1,000
50
0 0 6.00
2005 -
-
-
5
Security Services
TURNOVER PBITA MARGIN
£m - %
m
4,000 -
-
0
7.00
-
-
-
-
-
-
8
3,500 - -
- -
- -
- -
- 7
-
1
-
-
0
3,000 - 6.75
-
-
-
-
-
9
2,500 -
-
0
2,000 6.50
1,500 100
1,000 6.25
50
500
0 0 6.00
- -
- -
- -
5 5
Cash Services
TURNOVER PBITA MARGIN
£m - %
m
1,000 - - 11.0
- -
- 0
-
6
-
-
-
-
1
800 - -
- -
- 0
-
0
-
-
-
4
- 10.5
0
600 10.2
60 10.0
400
40
9.5
200 20
0 0 9.0
- -
- -
- -
5 5
4
IT GIVES ME PLEASURE TO REPORT THESE STRONG RESULTS WHICH
NOT ONLY CONTINUE TO DEMONSTRATE THE WORTH OF THE MERGER
WHICH RESULTED IN THE FORMATION OF THE COMPANY IN 2004,
BUT ALSO REFLECT THE TREMENDOUS PROGRESS THAT HAS TAKEN
PLACE THROUGHOUT THE GROUP SINCE THEN.
Alf Duch-Pedersen
Chairman
Performance 2007 has seen the group deliver a solid performance, maintaining
good margins and growth, particularly in new mar kets. Profit before interest,
taxation and amortisation increased by 16.8%* to £312.1m and turnover grew
14.5%* to £4,490.4m. Our margin has increased to 7.0%; organic growth was strong
and improved to 9.1% and adjusted earnings per share increased by 10.7% to
13.4p.
* To show a fair comparison,constant (2007) exchange rates are used.
Dividend The directors recommend a final dividend of 2.85p or DKK 0.279 per
share, payable on 6 June 2008, which, with the interim dividend of 2.11p or DKK
0.232 per share paid on 16 November 2007, makes a total dividend of 4.96p or DKK
0.511 per share for the year ended 31 December 2007. This represents an increase
of 17.8% over the total dividend for 2006 and reflects a continuation of the
board's stated aim to reduce the company's target dividend cover to two and a
half times over the medium term.
Chairman's
Statement
G4S plc | Annual Report & Accounts 2007 5
AS WE MOVE TOWARDS THE NEXT STAGE OF a160 JANUARY
OUR DEVELOPMENT,INVOLVING GREATER
EMPHASIS ON LONGER-TERM
RELATIONSHIPS WITH CUSTOMERS
G4S divests its German cash
REQUIRING EVER GREATER EXPERTISE,I ser vices business.
AM VERY OPTIMISTIC ABOUT THE
OPPORTUNITIES TO CONTINUE THIS a160 FEBRUARY
PROCESS AND TO GROW OUR BUSINESS
EVEN FURTHER.
G4S announces the acquisitionof
Fidelity Cash
Management Services
(Pty) Ltd, the
market leader
in cash
services in South
Africa.
a160 MARCH
G4S reports 2006
operating
profits
up by 10% and
turnover growth
of
8.4%.
The Board This is my second chairman's statement and the
first covering a period when I have been chairman of the
board throughout the year.I am ver y pleased to be able to
report that the board continues to work
a160 APRILDungavel
House
Immigration
well; combining a broad spectrum of experience with great Removal Central,
operated by
enthusiasm for the task of growing and developing the G4S
business.
Justice Services
(UK) is
declared as
being “… the
best-run IRC we
have
As mentioned elsewhere in this report, Sir Malcolm inspected” by Her
Majesty's
Williamson has decided to retire from the board this year Chief
and so will not be seeking re-election at the Annual
General Meeting in May.Malcolm's contribution to the
Inspector of
Prisons.
board since the company was formed in 2004 has been extremely a160 MAY
valuable and his experience has contributed much to ensure the board
has functioned efficiently.I would like to record my personal thanks
to Malcolm for
The
U.S. Department of Energy
and
National Nuclear Security
all that he has done for the group. Lord Condon has kindly agreed to
Administration select Wackenhut
take over from Malcolm as senior independent director.
Services, Inc for the Oak Ridge
Complex Protective Services
Our Staff The board takes every opportunity it can to meet the
contracts.
group's employees who work so hard in what are often difficult and
occasionally dangerous circumstances to perform the services the
group provides for its
a160 JUNE
customers in so many parts of the world. We never fail G4S
launches its innovative global
to be impressed by the enthusiasm and
dedication sports development programme to
which we find amongst management and staff at all
levels. support the next generation of sports
We have seen that this spirit manifests itself not only during
stars, the G4S 4teen, and Group 4
working hours and in the performance of the Securicor plc becomes G4S
plc. services under taken for customers, but also in the dedication
which managers show to their staff and which
both management and staff show towards the communities in which they a160 JULY
live. Some of the ways in which individuals within the G4S family
seek to improve the lives of those around them are described
elsewhere in
G4S
acquires Omada Fire &
SecurityGroup,the Irish manned
security
this report in greater detail. I am very proud of these examples and and
fire suppression business.
of all the many other similar projects undertaken by G4S companies
and employees around the world.
a160
AUGUST
The Future As I have mentioned already,the group does As we have G4S
is awarded Norway's largest
not intend to stand still. security contract at OSL, indicated, we
Oslo intend to implement a strategy which will bring us
closer to our customers and which will involve the
provision
airport and reports 11.8% turnover
of more complex solutions to a wider spectrum of customers under
growth and 15.9% growth in group
longer term agreements. I believe our company is in excellent shape
to execute this strategy and to reap the benefits it will bring.
operating profits for the six months
to
30 June 2007.
a160
SEPTEMBER
Alf Duch-Pedersen G4S
wins a ne w contract to provide
electronic monitoring equipment
Chairman and
services to the Department of
Corrections in New Zealand.
a160
OCTOBER
G4S
Cash Services (UK) partners
with
SmartWater Technology Ltd,
specialists in forensic security,
to
protect its valuable cargoes.
a160
NOVEMBER
G4S
launches next phase of strategy,
to
drive accelerated growth and
development, to the capital markets.
a160
DECEMBER
G4S
announces agreement to
acquire Global Solutions Limited
(GSL) and enters the FTSE 100.
6
WE ARE EXTREMELY PLEASED WITH THE PERFORMANCE OF THE
BUSINESS IN 2007 AND ARE CONFIDENT ABOUT THE FURTHER
DEVELOPMENT OF THE GROUP THIS YEAR.
Nick Buckles
Chief Executive
CHIEF EXECUTIVE'S REVIEW
2007 Performance In 2006, we raised the group targets in a number of areas
following a strong business performance in that year and to demonstrate our
confidence about the future. We set a target for organic growth of 7%, a PBITA
margin target of 7% within two years and a cash generation target of 85% of
PBITA.
In 2007, we have demonstrated our ability to deliver on our promises, with
organic growth of 9.1% (more than 2% ahead of target), PBITA margins at 7% (18
months ahead of schedule) and cash generation ahead of target at 89%.
2007 Performance Highlights When we presented our full year results
for
2007, we were pleased to report that: >
We had very strong organic turnover growth* of 9.1% (2006: 7.1%) >
Group turnover* was up 14.5% to £4,490.4 million (2006: £3,923.2m) >
PBITA* was up 16.8% to £312.1 million (2006:£267.1 m) >
The group PBITA margin* had improved to 7.0% (2006:6.8%) Operating >
We had achieved cash flow generation of £276.4 million, representing
89% of PBITA (2006:86%) >
Adjusted earnings per share had increased by 10.7% to 13.4p (2006:
12.1p) & Financial
> We would recommend a final dividend of 2.85 pence per share (DKK
0.279),up 13.1% on the
prior year (2006: 2.52p/DKK 0.277), giving a recommended total
dividend
of 4.96 pence per share (DKK 0.511) (2006: 4.21p/DKK 0.463)
Review
* at constant (2007) exchange rates
G4S plc | Annual Report & Accounts 2007 7
OVERALL,THE OUTLOOK FOR THE BUSINESS IS GOOD AND WE ARE NOT
EXPECTING THE RECENT ECONOMIC UNCERTAINTIES TO IMPACT OUR ABILITY
TO DELIVER STRONG RESULTS IN THE FUTURE.
In developed markets we have achieved a solid result with a160 WE
ACHIEVED
organic growth of around 7% and margins in line with the ORGANIC
previous year.The increased or ganic growth of 17% and improved
margins in new markets have
GROWTH OF
9.1%
driven an overall margin improvement of 0.2% across the group. - 2% ahead of
target.
We have introduced the investment community to the next a160 PBITA MARGINS
REACHED
phase of our strategy which we believe will drive 7%
accelerated growth and development for the group and we have
already announced a number of acquisitions
- 18 months
ahead
which will help us steer the strategy forward. of schedule.
I would like to take this opportunity to thank everyone across
the organisation for contributing to this strong performance. It
is their commitment and enthusiasm which drives the success of
the business and I am proud
a160 CASH FLOW
GENERATION
to be a part of that winning team. WAS 89% OF PBITAagainst a target of 85%.
Strategic Development
2007 Review - In 2007, we set about reviewing the group a160 WE HAVE
INTRODUCED
strategy with a focus on driving accelerated growth and
development for the future.
A NEW
STRATEGY
to drive
accelerated
growth
Our review confirmed a growing trend of pricing pressure in and
development.
core basic services and a demand from customers for G4S to take
a broader role in managing their risks.
Strategic Goals
Deliver fully outsourced solutions:
MANAGE a160 a160 Output based contr acts
Ability to share in gains
OPERATE Enhancement of core services with supervision & IT:a160
of core services
Delivery
Deliver across all services according to market need, in a phased and
evolutionary implementation
The basic elements of the strategy which resulted from this review include a
need to add value to the core services that we already provide by taking a
greater role not just in specialist security areas, but in total outsourcing of
the management of environments where security and safety is key.
By doing this G4S becomes a partner with its customers and takes greater
responsibility for managing entire aspects of their business which are not core
to them, and where G4S can add value through its security and segment expertise.
For example:
> High security facility outsourcing in key > Cash cycle management
sectors
> ATM network management and servicing > Risk management and
consultancy
> Prison design and management > Offender management
programmes
Business of this type is usually based on long term contracts with recurring
revenues, which require commitment from both sides to deliver on promises set
out at the negotiation stage.
8
CHIEF EXECUTIVE'S REVIEW (continued)
Strategy Implementation Principles - Security remains at the core of our offer -
it is an area in which we have an extensive amount of expertise across the group
and is fundamental to our service proposition. However,in order to drive growth
forward at an accelerated level, we will build on the solid foundation that we
have created in this area.
Strategy Implementation Principles
Gain a larger share of customer spend and focus:
a160a160Build relationships via increased and more senior contact points
Demonstrate awareness of customer needs
Develop customer driven propositions:
a160 Create tailored solutions for specific industry sectors Pa r
Add Intelligence:
a160
a160
a160
Enable identification of value added solutions to customer
issues as in
Develop solid foundation:
a160a160Develop appropriate organisational str ucture
Further develop market segment understanding
We will add “intelligence” to our businesses in key areas such as risk
assessment and consulting and we will add bid capability and project management
skills to our core competencies.
We will focus on creating customer propositions tailored for specific industry
sectors which demonstrate G4S expertise in these areas.
At the same time, we will build relationships at a senior level within our
customer organisations and ultimately gain a larger share of customer commitment
and spend on secure outsourcing solutions.
Current Capability - A number of our businesses already provide complete
outsourced security solutions to our customers where they take total
responsibility for managing risk and increasing efficiency - it is important to
spread this experience more widely across the group. We estimate that this type
of contract represents around 30% of group revenues and we will seek to extend
this over time.
In cases where we do not have the appropriate expertise within the group, we
will seek to obtain it either by acquiring businesses or by attracting key
experts to the group.
Whilst we will seek to develop all businesses in line with the strategy,we will
focus initially on a few key markets - US, UK, Benelux, South Africa and India.
Operating
& Financial
Review
(continued)
G4S plc | Annual Report & Accounts 2007 9
IN DEVELOPED MARKETS WE HAVE ACHIEVED A SOLID RESULT WITH ORGANIC
GROWTH OF 7.3% AND MARGINS IN LINE WITH THE PREVIOUS YEAR AT 7.1% -
DEMONSTRATING THAT EVEN IN TOUGHER ECONOMIC ENVIRONMENTS,THE
UNDERLYING PERFORMANCE ACROSS OUR DEVELOPED MARKETS BUSINESSES IS
ROBUST AND RELIABLE.
Summary & Outlook We are extremely pleased with the performance of the business
in 2007 and feel confident about the further development of the group this year.
In developed markets we have achieved a solid result with organic growth of 7.3%
and margins in line with the previous year at 7.1% - demonstrating that even in
tougher economic environments, the underlying performance across our developed
markets businesses is robust and reliable.
The increased organic growth of 17% and improved margins in
new markets have driven an overall margin improvement of 0.2%
across the group. New markets continue to grow at significant
rates and with our unique position and experience of operating
in these markets we are well-placed to continue to drive
forward the
a160 INCREASED
ORGANIC
performance of our businesses in these countries. GROWTH OF 17%
We have introduced the investment community to the next phase and improved
margins in
of our strategy which we believe will drive accelerated growth new
and development for the group. The strategy focuses on taking
greater responsibility for
markets have
driven an
overall
managing risk on behalf of our customers - extending from our margin
improvement of
core capabilities to develop total risk 0.2%
management and secure outsourcing solutions across our service across the
range and geographies. group.
In order to achieve this, we need to invest in building our own a160 OUR
BUSINESS MODEL IS
capabilities and expertise by continuing to share best practice,
by developing our senior management population and by acquiring
businesses and individuals who
ROBUST
AND DEFENDABLE
bring expertise to We have already announced a number of and our
future
the organisation. acquisitions which help us drive build upon strategy
will
our key strengths
the strategy forward, the most significant being Global Solutions
Ltd (GSL). to deliver enhanced Overall, the outlook for the
business is good and we are not expecting the recent economic
uncertainties to
performance.
impact our ability to continue to deliver strong results in the
future. Our business model is robust and defendable and our
future strategy will build upon our key strengths to deliver
enhanced performance.
10
G4S IS A TRUSTED PARTNER OF COMMERCIAL
ORGANISATIONS AND GOVERNMENTS AROUND
THE WORLD AND WE ARE EXPERTS IN
UNDERSTANDING RISKS AND DEVELOPING
SECURITY SOLUTIONS TO MANAGE THEM.
SECURITY SERVICES
* At constant Turnover PBITA Margins Organic
exchange rates £m £m Growth
2007 2006 20072006 2007 - 2007
-
-
6
Europe* 1,671.31,534.1 109.9101.2 6.6% - 6.3%
-
-
%
North America* 1,043.8970.8 61.558.2 5.9% - 7.3%
-
-
%
New Markets* 788.7589.2 63.445.3 8.0% - 17.0%
-
-
%
Total Security Services* 3,503.83,094.1 234.8204.7 6.7% - 8.7%
-
-
%
Exchange differences -106.7 - 6.8
At actual exchange rates 3,503.83,200.8 234.8211.5
The security services businesses continued to perform well in 2007 with good
organic growth of 8.7% and margins improving to 6.7%.
Europe
* At constant Turnover PBITA Margins Organic
exchange rates £m £m Growth
2007 2006 20072006 2007 - 2007
-
-
6
UK & Ireland* 593.0539.7 48.444.1 8.2% - 6.0%
-
-
%
Continental Europe* 1,078.3994.4 61.557.1 5.7% - 6.5%
-
-
%
Total Europe* 1,671.31,534.1 109.9101.2 6.6% - 6.3%
-
-
%
Organic growth in Europe was 6.3% compared to 5.0% in the same period last year.
Margins were maintained at 6.6%.
There was good organic growth of 6.0% in the UK & Ireland and margins remained
strong at 8.2%. Customer retention rates in the security business were high at
around 95% and there were a number of significant contract wins in the year.A
new contr act to assist passengers with restricted mobility at London Gatwick
Airport will commence in April 2008. Good growth continues in the electronic
monitoring contract and Parc prison at Bridgend continues to expand.
Operating
& Financial
Review
(continued)
G4S plc | Annual Report & Accounts 2007 11
A number of acquisitions were made in the region aimed at a160 THERE WAS
GOOD
increasing the expertise of the group in key sectors in line ORGANIC
with the group strategy. The acquisition of GSL was
announced
GROWTH OF
6.0%
in December 2007 and this should complete within the first in the UK &
Ireland
half of 2008. margins remained strong The Netherlands had a and
strong year,increasing revenue and achieving ver y strong
margins.
at 8.2%.
The company successfully retained the Schiphol airport
contract for a fur ther 5 years. Capability-building
acquisitions were made in the fire and safety training
sector consolidating
a160 IN THE
BALTICS,GROWTH
its market leading position as a safety and security WAS OVER 20%
solutions provider in the country.
In the Baltics, growth was over 20% and margins improved and margins
significantly on the prior year improved
due to strong price increase programmes across all significantly on the
prior
services and the completion of lar ge year.
systems installation projects at Tallinn airport, Riga port a160 IN ROMANIA THE
and for the Lithuanian customs service. BUSINESS
ACHIEVED
EXCELLENT
There was good growth and strong margins in Denmark despite GROWTH,
the business incurring
significant re-branding costs. Growth in Belgium was slow, but largely as a
result
there was a significant improvement in margins from the systems of
business and through performance management
outsourcing by
the
improvements across the business. Romanian post office.
In Sweden, margins were impacted negatively by a160 IN MARCH 2008
restructuring and the loss of the Arlanda airport
contract in Febr uary although there were some good
contract wins in the second
we announced a
process
half of the year.2007 was a consolidation year focusing had commenced for
the
upon strengthening the management team, right-sizing the
company and developing a solid platform to execute the
new strategy.
divestment of our
security
services
businesses in
France
In Romania, the business achieved excellent growth, and Germany.
largely as a result of the outsourcing of a wide range
of security-related services by the Romanian post
office.
In Greece, business performance improved compared to the prior year as a result
of improved control of labour costs. The difficult labour environment in the
country has now stabilised. New contract wins in the security systems business
in Israel early in 2008 will add to the good organic growth achieved in 2007.
In March 2008 we announced a process had commenced for the divestment of our
security services businesses in France and Germany. These businesses are
considered to be sub- scale and with our focus on delivering the new group
strategy in 2008, the funds released will be used to bring additional
capabilities into the group.
12
SECURITY SERVICES (continued)
North America
* At constant Turnover PBITA Margins Organic
exchange rates £m £m Growth
20072006 2007 - 2007 - 2007
- -
- -
6 6
North America* 1,043.8970.8 61.5 - 5.9% - 7.3%
- -
- -
2 %
Organic growth in North America was strong at 7.3% overall and margins were
5.9%.
In the United States overall organic growth was solid at around 6%, with around
9% growth in the commercial sector,lar gely due to the start up and expansion of
the Mexican border control contract which is performing well.
There were significant contract bidding and start up costs in the government
sector in the last quarter of 2007, which meant that margins were held at prior
year levels. The government business won significant contracts towards the end
of the year which will flow through in 2008.
In Canada organic growth was strong and margins were maintained at prior year
levels despite a difficult pricing environment and tight labour markets.
New Markets
* At constant Turnover PBITA Margins Organic
exchange rates £m £m Growth
20072006 2007 - 2007 - 2007
- -
- -
6 6
Asia* 268.9221.9 22.9 - 8.5% - 17.0%
- -
- -
6 %
Middle East* 177.9115.9 14.2 - 8.0% - 19.7%
- -
- -
1 %
Africa* 183.9139.7 16.0 - 8.7% - 15.2%
- -
- -
3 %
Latin America & Caribbean* 158.0111.7 10.3 - 6.5% - 16.6%
- -
3 -
%
Total New Markets* 788.7589.2 63.4 - 8.0% - 17.0%
- -
- -
3 %
In New Markets, organic growth was strong at 17.0% and margins increased by 0.3%
to 8.0%.
Organic growth in Asia was 17.0% and margins improved to 8.5%. In Hong Kong the
business performed strongly as a result of focusing on key market segments and
improved opportunities from combined security systems and manned security contr
acts.
Macau continued to grow very strongly along with the region's increasing
reputation as a venue for conferences, events and exhibitions, resulting in
increased security spend for both permanent contracts and event security
services.
India continued to perform well with excellent growth of around 28% and strong
margins. G4S is the second largest private employer in India and we have
recently won contracts for security at four airports in Delhi, Mumbai, Hyderabad
and Cochin.
Operating
& Financial
Review
(continued)
G4S plc | Annual Report & Accounts 2007 13
In the Middle East, organic growth was very strong at a160 ORGANIC GROWTH
19.7% and margins were at 8.0%, driven by the continuing
economic boom in the region coupled with a surge in
tourism.
IN ASIA WAS
17.0%
and margins
improved to
8.5%.
In Saudi Arabia the acquisition and integration of al
Majal earlier in the year means that G4S is now the
market leading security company in the Kingdom.
a160 IN THE MIDDLE
EAST,
In Africa, organic growth was 15.2% and margins improved strongly to ORGANIC
8.7%. In South Africa GROWTH
the business is improving, largely as a result of increasing WAS VERY STRONG
efficiency in the operations. at 19.7% and margins were
The business in Kenya performed very well this year with at 8.0%.
good growth and a strong profit performance. Despite the
recent political turmoil in Kenya, the security services
business has won significant new contracts in the first
months of 2008.
a160 IN AFRICA
ORGANIC
GROWTH WAS
15.2%
Elsewhere in Africa, Botswana, DRC, Malawi, Mozambique and and margins
improved
Namibia all performed well as a result of strong organic strongly
growth.
to 8.7%.
In the Latin America & Caribbean region, growth was strong at a160 IN THE LATIN
16.6% and margins improved to 6.5%. AMERICA
& CARIBBEAN
REGION,
Argentina improved significantly from 2006 through a targeted GROWTH WAS
STRONG
effort to increase cost recovery from customers and from an
expansion into the security of gas and oil facilities in
at 16.6% and
margins
the southernmost part of the countr y. improved to
6.5%.
In Chile we reported our first full year of results from the acquisition made in
late 2006 where the acquired company performed well. Guatemala continues to post
strong margins despite increased competition and the continued shortage of
labour.
The various businesses within Colombia performed extremely well in comparison to
2006. The improved security situation and increased market share within our
various markets contributed to a strong result.
We entered seven new countries in new markets in 2007 - Mauritius, Mauritania,
Guinea, Cambodia, Madagascar,Mali and Sri Lanka.
14
G4S HAS UNRIVALLED EXPERTISE IN THE CASH
MANAGEMENT SECTOR AND CONTINUES TO
LEAD THE MARKET IN DEVELOPING CASH
SOLUTIONS FOR A RANGE OF CUSTOMERS
AROUND THE WORLD.
CASH SERVICES
The cash services businesses performed very strongly in 2007, with excellent
organic growth of 10.6% and margins of almost 11%.
* At constant Turnover PBITA Margins Organic
exchange rates £m £m Growth
20072006 2007- 20072006 2007
-
-
6
Europe* 706.3629.7 77.4- 11.0%10.9% 11.6%
-
-
4
North America* 78.083.0 0.6- 0.8%2.3% (6.0)%
-
9
New Markets* 202.3116.4 29.7- 14.7%13.8% 17.0%
-
-
1
Total Cash Services* 986.6829.1 107.7- 10.9%10.4% 10.6%
-
-
4
Exchange differences - 6.9 --
-
6
At actual exchange rates 986.6836.0 107.7-
-
-
0
Europe
Organic growth in Europe was excellent at 11.6% with strong margins of 11.0%.
In the UK & Ireland region there was solid revenue growth and positive margin
enhancement as a result of strong performances in the ATM and cash management
businesses. In the last quarter of 2007, the UK business won a substantial
contract with HBOS for out of hours bank branch servicing and it continues to
win business from competitors as they cope with operational issues. In Ireland
there was good growth and margins should improve in 2008 due to the
implementation of a post office outsourcing contract.
There was slow growth but strong margins in the Netherlands as a result of
strong operational controls. The implementation of the Swedbank ATM management
contract contributed to substantial revenue growth and strong margins in Sweden.
In Belgium there was good growth in ATMs and cash management,lar gely from
expanding existing customer contracts. In the Czech Republic and Hungary there
was solid revenue growth and improving margins.
The implementation of the post office outsourcing contract in Romania
has driven extremely strong growth and margin improvements. Further
phases of this project will be
Operating
implemented in 2008. The successful introduction of the euro in
Cyprus
and Malta contributed to strong growth and margin development.
&
Financial
Review
(continu-
d)
G4S plc | Annual Report & Accounts 2007 15
North America a160 THE CASH SERVICES
BUSINESS
PERFORMED VERY
STRONGLY
There was negative organic growth in Canada and margin in 2007, with
organic
performance was affected by the loss of two significant growth
contracts. A new CEO joined the business in 2007 and is
already
of 10.6% and
margins of
beginning to have a positive impact. almost 11%.
New Markets a160 ORGANIC GROWTH IN
Organic growth in New Markets was very strong at 17.0% with EUROPE WAS
EXCELLENT
margins improving to at 11.6% with strong margins 14.7%.
There were excellent results across the regions in Asia,
Middle East, Africa and
of 11.0%.
Latin America.
Cash outsourcing opportunities are beginning to develop in a160 THERE WAS
NEGATIVE
Malaysia and Indonesia as financial institutions and ORGANIC
central banks are focusing on their core services and
driving
GROWTH IN CANADA
efficiencies in the cash and margin
performance
cycle. was
affected
by the loss
of two
In Hong Kong pricing pressure remains in the market, but there
significant contracts.
are opportunities for growth from the deployment of self
service terminals in the banking sector.
a160 ORGANIC
GROWTH IN NEW
In the UAE, the business has extended its cash management offer MARKETS
WAS VERY
into credit card management and distribution services and STRONG
India has been awarded the at 17.0%
with margins
contract for
distribution of the new national ID cards. In Thailand, a new improving
to 14.7%.
state-of-the-art cash centre has allowed the business to expand
rapidly.
G4S entered the cash services market in South Africa in the first quarter of
2007 through the acquisition of Fidelity Cash Management. The business is
performing well with good growth, particularly in the ATM sector,and strong
margins.
There was very strong organic growth in Kenya as a result of further outsourcing
in the financial services sector. The introduction of new technology has
provided the business with a unique competitive advantage in the market.
The continued improvement of the internal security situation within Colombia has
resulted in increased economic activity and movement of funds within the
country. Accordingly,the cash services business has benefited greatly from the
increased activity during the whole of 2007.
16
PROFIT FOR THE YEAR WAS £160.6M, COMPARED TO £109.9M IN 2006.
THE PRINCIPAL REASONS FOR THE INCREASE IN PROFIT WERE THE
£37.7M INCREASE IN PBITA LESS THE £14.8M INCREASE IN NET
INTEREST COST,PLUS THE £33.0M DECREASE IN LOSS FROM
DISCONTINUED OPERATIONS.
Trevor Dighton
Chief Financial Officer
FINANCIAL REVIEW
Basis of accounting The financial statements are presented in accordance with
applicable law and International Financial Reporting Standards, as adopted by
the European Union (“adopted IFRSs”). The group's significant accounting
policies are detailed in note 3 on pages 52 to 59 and those that are most
critical and/or require the greatest level of judgement are discussed in note 4
on pages 59 and 60.
Operating results The overall results are commented upon by the chairman in his
statement and operational trading is discussed in the operating review on pages
6 to 15. Profit from operations before amortisation of acquisition-related
intangible assets (PBITA) amounted to £312.1m, an increase of 13.7% on the
£274.4m in 2006 and an increase of 16.8% at constant exchange rates.
Associates Included within PBITA is £3.0m (2006: £2.8m) in respect of
the group's share Operating of prof it from associates, principally
from
the business of Space Gateway in the US which
provides safety services to NASA. Cash flow from associates was
£1.0m,
compared to & Financial
£2.7m in 2006.
Review
(continued)
G4S plc | Annual Report & Accounts 2007 17
INVESTMENT IN ACQUISITIONS IN THE YEAR AMOUNTED TO £217.6M,
OF WHICH £151.6M WAS A CASH OUTFLOW.
Acquisitions and Also included within financing are a160 NET
INTEREST PAYABLE
acquisition-related other net interest costs of £1.3m
intangible assets (2006: net income of £2.2m),
Investment in acquisitions on net
debt was £57.4m.
in the year amounted to
£217.6m, of which £151.6m
was a cash outflow,
including the unwinding of the This is
an increase of
discount on put £1.0m is deferred 36%
consideration and £65.0m the
options over minority interests, and over
2006.
a net income of recognition of put
options over their interests held
£5.0m (2006: £1.0m) in respect of
movements in the by minorities. This
investment generated goodwill of
group's net retirement benefit a160 THE
TAXATION CHARGE
obligations.
£179.2m and other of
£71.1m provided upon
acquisition-related
intangible
assets (customer-related) of Taxation The taxation charge of PBITA
less interest
£37.2m. Larger £71.1m provided
represents
acquisitions included the upon profit from operations before a tax
rate of 27.5%
purchase of controlling amortisation of compared
interests in Fidelity Cash acquisition-related intangible to 28.6%
in 2006.
Management in South Africa assets less net interest
and the business of al Majal Facilities represents a tax rate of 27.5%,
compared to
Management 28.6% in
in Saudi Arabia, the purchase of 2006. The group believes that an effective
tax
RIG, a police rate of
recruitment business in the UK, and the around this level is sustainable going
recognition forward. The
of put options that increased to 100% amortisation of acquisition-related
intangible
the group's assets
interest in the multi-service businesses gives rise to the release of the
related
in the Baltic proportion of
states. The contribution made by the deferred tax liability established
when
acquisitions to the the assets
results of the group during the year is were acquired, amounting to £14.9m,
shown in note including the
17 on page 70. adjustment of the deferred tax
liability for
the
forthcoming reduction in the UK
corporation tax
The charge for the year for the rate from 30% to 28%. In addition, a
tax credit
amortisation of acquisition-related of £0.3m has been included within the
results
intangible assets other than goodwill from discontinued operations. Potential
tax
amounted to £41.6m. Goodwill is not assets in Acquisition-related
intangible assets
amortised.
respect of losses amounting to £107.2m
have not
included in the balance sheet at 31
December
2007
been recognised as their utilisation is
uncertain.
amounted to £1,332.4m goodwill and
£219.9m other.
Disposals and discontinued operations
On 2 July
2007 On 18 December 2007 the group
announced
the
the group disposed of its French cash
services
business acquisition of Global
Solutions, a
provider of a range
and during the year disposed of a
number of
small of support ser vices to
governments,
public
businesses, mainly in Latin America. At
31
December authorities and the private
sector,
for a total
2007 the group was in substantive
negotiations
for the consideration of £355m. This
acquisition is subject to
disposal of its security services
businesses in
France and approval from the European
Commission and is
Germany,pr incipally comprising Group 4
Securicor
expected to complete following receipt SAS, G4S Sicherheitsdienste GmbH and
G4S
of such
approval during 2008. Sicherheitssysteme GmbH. It is
anticipated that
these
disposals will be concluded during
2008. The
assets and On 20 March 2008 the group
announced
a cash
liabilities of these businesses have
therefore
been
offer of approximately £43.6m for the classified as held for sale and their
results
shares of ArmorGroup International plc, have been included within discontinued
a leading provider of defensive, operations. The result from
discontinued
protective security services. operations comprises a loss of £12.0m
in
respect of post-tax trading losses of
Financing items Finance income was
£92.6m and
finance costs £146.3m, giving a net discontinued businesses, a profit of
£9.1m in
finance cost of £53.7m. Net interest respect of disposals made in the
current year
payable on net debt was £57.4m. This is and a profit of £2.9m in respect of
adjustments
an increase of 36% over the 2006 cost to prior year disposals.
of £42.1m due principally to the rising
costs of borrowing and the increase in
the group's average
Businesses disposed of in 2006 included
G4S
Geld- gross debt. The group's average
cost of
gross
und Wertdienste GmbH, the cash services
business
borrowings in 2007 was 5.7% compared to in Germany, and the US transportation
business,
4.6% in 2006. The cost based on
prevailing interest rates at
being the remaining business of Cognisa
Security, Inc. 31 December 2007 was
5.7%
compared to 5.2% at
31 December 2006.
18
FINANCIAL REVIEW (continued)
a160 BASIC The loss from Cash flow The primary cash generation focus
of group management
EARNINGS discontinued operations is on the percentage of operating
PER SHARE in 2006
was 11.5p comprises £19.0m in
compared respect of trading
to 7.6p losses of
for 2006.
both the 2006 and the profit converted into cash. For 2007, the
group's in respect of
2007 disposals and disposal losses, offset by a £5.2m
£19.2m a160
target conversion rate was raised from 80%
to 85%. OVERALL
OPERATING
adjustment in respect Operating cash flow, as defined for
management
of prior periods.
CASH purposes, was as follows:
GENERATION
for the The net cash proceeds
2007 2006
year was from business disposals
good.
Operating received in 2007 were
£m £m
cash flow £7.9m, comprising
as a payment of £12.4m in
respect of the cash
services business in
percentage PBITA
312.1 274.4
of group
PBITA
was 89%. Germany, and receipt of Less share of profit from associates
(3.0) (2.8)
£20.3m in respect of
the PBITA before share
of profit from
cash services business
in France.
associates (Group PBITA)
309.1 271.6
The contribution to the Depreciation and amortisation
turnover and operating
profit of the group
from discontinued
operations is shown
of intangible assets other than
in note 6 on pages 61 acquisition-related
99.6 92.7
to 64 and their
contribution
to net profit and cash Profit on disposal of property, plant
flows is detailed in
note 7 on and equipment
(14.4) (1.6)
pages 64 and 65.
Increase in working capital and
Profit for the year provisions before exceptional items
(8.9) (45.8)
Profit for the year was
£160.6m,
compared to £109.9m in Net cash flow from capital expenditure
(109.0) (82.5)
2006. The principal
reasons
for the increase in Operating cash flow
276.4 234.4
profit were the £37.7m
increase in PBITA less
the £14.8m increase in
net interest cost,
Operating cash flow as a percentage
plus the £33.0m of group PBITA
89% 86%
decrease in loss from
discontinued
operations.
Working capital increased in both 2007 and
2006 Minority
interests Profit attributable to minority
due principally to the growth in
turnover,but this interests was
£13.4m in 2007, the same as in 2006,
increase was restricted in 2007 as a result
of the reflecting
minority partner shares in the group's
organic
commencement of a programme of billing
process
and acquisitive growth, improvements that is being rolled out across
the group. Capital
less a reduction in expenditure relative to the depreciation
charge can vary
minority share
consequent upon the
recognition as
liabilities of the
group of certain put
options held by
minorities.
from year to year due
to the timing of asset replacements. It was
109% of Earnings per
share Basic earnings per share from
depreciation in 2007, compared to 91% in
2006. continuing and
discontinued operations was 11.5p
Overall operating cash generation for the
year was compared to
7.6p for 2006. These earnings are
good, as a result of the maintenance of
financial unchanged when
calculated on a fully diluted basis,
discipline across the organisation.
which allows for the
potential impact of
outstanding share
options.
The management operating cash flow
calculation is
reconciled to the net cash from operating
activities Adjusted
earnings, as analysed in note 16 on pages
as disclosed in accordance with IAS7 Cash
Flow 68 and
69, excludes amortisation of acquisition-
Statements as follows:
related intangible
2007 2006
assets and retirement
benefit
obligations financing
£m £m
items, both net of tax,
and better
allows the assessment Cash flow from operating activities
of operational
performance,
the analysis of trends (IAS7 definition)
291.3 197.1
over time, the
comparison of
different businesses Net cash flow from capital expenditure
(109.0) (82.5)
and the projection of
future
performance. Adjusted earnings Add-back cash flow from exceptionalitems and
per share was 13.4p, discontinued operations1.825.3
an increase of 10.7% over 12.1p Add-back additional retirement
for 2006. Dividends The directors benefit
recommend a final dividend
contributions 26.1
24.2
of 2.85p (DKK 0.2786) per share. Add-back tax paid 66.2
70.3
This represents an
increase of 13.1% upon the final Operating cash flow (G4S 276.4
234.4
dividend for the year definition)
to 31 December 2006 of 2.52p (DKK The group's free cash flow, as defined by
management,
0.2766) per share. The interim is analysed as follows: 2007
dividend was 2.11p (DKK 0.2319)
per share and the total dividend,
if approved, will be
2006
4.96p (DKK 0.5105) per share , £m
£m
representing an Operating cash
flow
increase of 17.8% over the 4.21p 276.4
234.4
(DKK 0.4629) per share total
dividend for 2006.
Net interest paid (55.0)
(47.8)
T ax paid (66.2)
(70.3)
The proposed dividend cover is New finance leases (10.3)
(19.6)
2.7 times (2006:
2.9 times) on adjusted earnings. Free cash flow 144.9
96.7
This is in accordance Review with
the group' s reaffirmed intention
to increase
dividends so as to reduce
dividend cover to around
(continued)
2.5 times b y 2008.
G4S plc | Annual Report & Accounts 2007 19
Free cash flow is reconciled to the total The proceeds of the issue were
used to
movement in net debt as follows: 2007 reduce drawings against the
revolving
credit facility. At the 2006
time of receipt the group had,
in
accordance with £m
£m £m
treasury policy, converted 55%
of its US
dollar Free cash flow
144.9 96.7 interest exposure from
floating rates
into fixed rates
Cash flow from
exceptional items and
discontinued (1.8) (25.3) through interest rate swaps.
Therefore,
operations the fixed
Additional interest rates payable on the
notes were
retirement swapped (26.1)
benefit
contributi- (24.2) (24.2) into floating rates
for the term of the
ns notes, at an (95.7)
Net cash outflow on (162.9) average margin of 0.60% over
Libor,so
acquisitions that the 9.9
Net cash inflow 7.9 proportion of group debt held
under
from disposals fixed interest 2.7
Net cash flow 1.0 rates remained at 55%.
from associates
Dividends paid to (3.8) (3.0) On 7 March 2008 the group
signed
minority interests committed bank facilities
amounting to
£350m. These facilities expire
Loan to minority (13.3) -
interests
Share issues (2.2) 6.0
less share
purchase
on 31 December 2008, although
the group
can Dividends paid to equity
holders of
the parent (59.3) (49.8) exercise an option to extend
the
facilities to 30 June
Net cash flow from 2009. The margin is 0.35% over
Libor.The
hedging financial pur pose (4.3)
instruments 11.8 11.8 of these facilities is to
provide the
group with (70.9)
Movement in net debt in(119.9) headroom whilst assessing
options in the
the year capital
Foreign exchange markets. The group does not
expect to
translation draw down (12.2)
adjustments to 55.4 55.4 on these facilities.
net debt
Net debt at (672.8) (657.3)
1 January
The group has other short-term
committed
facilities
Net debt at 31 (804.9) (672.8) of £30m and uncommitted
facilities of
December £411m.
Net debt represents the group's total borrowings The group's net debt at 31
December 2007
less cash, cash equivalents and liquid of £804.9m represented a
gearing of 72%.
investments. The The group has
components of net debt are detailed in note 39 sufficient capacity to finance
current
on page 93. investment plans.
Interest rates The group's
investments
and
Financing and treasury activities borrowings at 31 December 2007
were,
The group's after taking into account the
swap in
respect of the loan notes
treasury function is responsible for ensuring
the
availability of cost-effective finance and for issued in March, at variable
rates of
managing interest linked to Libor and
Euribor,
with the group's exposure
being
the group's financial risk arising from currency
and interest rate volatility and counterparty
credit.
predominantly to interest rate
risk in
US dollar and Treasury is not
a profit
centre and is not permitted
euro. The group's interest
risk policy
requires treasury to speculate
in
financial instruments. The
treasury
to fix a proportion of net
debt on a
sliding scale, with
department's
policies are set by the board.
Treasury
a maximum of 80% short term
debt held at
fixed is subject to the
controls
appropriate to the risks it
rates, reducing to a maximum
of 20% of
medium manages. These risks
are
discussed in note 33 on
term debt held at fixed rates,
utilising
interest rate pages 82 to 84.
swaps. The maturity of these
interest
rate swaps at Financing The
group's
primary source of finance
31 December 2007 was limited
to five
years. The is a £1,000m
multicurrency
revolving credit facility
market value of the loan note
related
pay-variable provided by a
consortium of
lending banks at a
receive-fixed swaps
outstanding at 31
December
margin of 0.225% over Libor.Dur ing 2007, the 2007, accounted for as fair
value
lending banks exercised their options to extend hedges, was a gain of £14.3m.
The market
the term of this facility to 28 June 2012. An value of the pay-fixed
receive- variable
additional £87m facility with another bank on swaps outstanding at 31
December 2007,
the same terms was added on 1 February 2007. accounted for as cash flow
hedges, was a
loss of £5.1m.
On 1 March 2007, to further diversify its Foreign currency The group has
many
sources of funding and lengthen the maturity of overseas
its debt, the
subsidiaries and associates
whose
results and net
group completed a $550m private placement of assets are denominated in
various
different
unsecured senior loan notes, with maturity and currencies. Treasury policy is
to manage
significant
interest as translation risks in respect
of net
follows: operating assets and income
denominated
in foreign currencies by using
Intere-
t
Value rate Maturity
$m % date date borrowings denominated in
foreign
currency
supplemented by forward
foreign exchange
contracts.
Series “A” 100 5.77 March 2014
Series “B” 200 5.86 March 2017
Series “C” 145 5.96 March 2019
Series “D” 105 6.06 March 2022
20
FINANCIAL REVIEW (continued)
The most significant currency movements The valuation of gross liabilities was
during broadly
both 2007 and 2006 were the in the US unchanged from 2006, with the charge
of the
dollar. The average rate for the dollar year's finance cost being offset by an
during 2007 was $2.00=£1 compared to increase in the appropriate AA
corporate bond
$1.85=£1 for 2006. However, the rate at rate from 5.2% to 5.8%. The value of
the
31 December 2007 of $1.99=£1 was closer assets held in the funds increased by
£77m
to the rate of $1.96=£1 at 31 December during 2007, assisted by additional
company
2006. This variance has impacted the contributions of £26m.
group's dollar- denominated assets and
assets denominated in New Market
currencies that follow the dollar. In
contrast,
The group believes that the short-term
volatility in
the average rate for the euro reported retirement benefit obligations, in
during 2007 of response to
€1.46=£1 was very close to the movements in asset prices and financial
average for 2006 circumstances,
of €1.47=£1. But the rate for is of limited relevance in the context of
December 2007 of liabilities which
€1.36=£1 was significantly below the are exceptionally long-term in nature and
rate of furthermore
€1.48=£1 at 31 December 2006. This that, over the long term, investment
returns
variance has on the
impacted the group's euro-denominated retirement benefit scheme assets will be
assets and sufficient to
assets denominated in European fund retirement benefit obligations.
currencies that However,in
follow the euro. Exchange recognition of the regulatory obligation
upon
differences on the pension
translation of foreign operations fund trustees to address reported deficits
if
included in the they arise ,
statement of recognised income and the group anticipates that additional cash
expense contributions
amount to gain of £18.4m (2006: loss will continue to be made at a similar
level to
of £31.0m). that in
These differences include 2007. This level of contributions
will be reviewed
a £12.2m loss (2006:
a160
£55.4m gain) on the annually and formally reassessed at
the next
retranslation of net debt, actuarial valuation dates, which are
5 April 2009
a THE GROUP OPERATES in respect ofaglobal cash management
£4.3m cash outflow (2006:
£11.8m inflow) from
forward exchange contracts and a the Securicor scheme and 31 March 2010 in
£19.0m loss respectsystem.
(2006: £11.6m gain) on the of the Group 4
market valuation of THE GROUP'S scheme.a160
RETIREMENT
outstanding forward contracts. Corporate governance The group's
policies
regarding
BENEFIT The market value of forward risk management and corporate
governance are set
OBLIGATIONS contracts outstanding at
FUNDING
SHORTFALL
31 December 2007 was a loss of out in the Corporate Governance
Statement onwas
£13.6m. pages 34 to 36. £136m before tax Cash management
To assist the
efficient management
or £98m
after tax.
of the group's interest costs Going concern The are
confident that,
and its short term directors after
deposits, overdrafts and revolving making enquiries and on the basis of
current
credit facility financial
drawings, the group operates a projections and available facilities, they
global cash have a
management system. At 31 December reasonable expectation that the group has
2007, 83 adequate
group companies participated in the resources to continue in operational
pool, with the existence for
number continuing to grow.Debit the foreseeable future. For this reason
they
balances of continue
£82.9m and credit balances of £84.5m to adopt the going concern basis in
were held preparing the
within the cash pool. IFRS does not permit the financial statements.
netting off of these balances, which Risks All businesses are subject to
risk and
are therefore disclosed gross within many individual risks are
macro-economic or
current assets and current liabilities. social and common across many
businesses.
Many risks are to a
Retirement benefit obligations The greater or lesser extent controllable,
but
group's primary some are
defined benefit retirement benefit not controllable. Through its internal
risk
schemes are those management
operated in the UK, but it also process, the group identifies
business-specific
operates such schemes risks. It
in a number of countries, particularly classifies the key risks as those which
could
in Europe and materially
North America. The latest full actuarial damage the group's
business,
assessments of strategy,reputation,
the UK schemes were carried out at profitability or assets and these risks
are
31 March 2007 listed below.
in respect of the Group 4 scheme This list is in no particular order and
is
(approximately not an
8,000 in total) and at 5 April exhaustive list of all potential risks.
Some
members 2006 in risks may be
respect of the Securicor scheme unknown and it may transpire that others
(approximately currently
20,000 in total). These considered immaterial become
material.
members assessments and
Operat- those of the group' s other schemes 1. Price competition
ng have been The security industry
comprises a number of ver y
updated to 31 December 2007,
including the review of longevity
assumptions. The group's funding
competitive markets. In
particular, manned
security
&
Financ-
al
shor tfall on the valuation basis markets can be fragmented with
relatively
specified in IAS19 Employee Benefits low
was £136m before tax or £98m
economic barriers to entr y and
the group
competes after tax (2006: £226m
and £158m
respectively).
Review with a wide var iety of operators
of
varying sizes.
Actions taken by the group's
competitors
may place pressure upon its
pricing,
margins and profitability.
(conti-
ued)
G4S plc | Annual Report & Accounts 2007 21
2. Major changes in market dynamics for which the group is contracted to
provide
security,
Such changes in dynamics could they could result in brand and
reputational
include new damage and so affect earnings and
profitability.
technologies, government legislation
or customer
consolidation and could, particularly
if rapid or
unpredictable, impact the group's 10. Regulatory requirements
revenues and
profitability. Security can be a high-profile industry.
There
is a wide
and ever-changing variety of regulations
applicable to
3. In-sourcing by customers the group's businesses across the world.
Failure to comply with such regulations
may
adversely affect the
Outsourcing activities carried out by
the group
include cash processing and cash group's revenues and profitability.
management
functions on behalf of financial
institutions, manned
security on behalf of a range of The group has a robust risk assessment
and
different customers control
and justice services on behalf of process in place to identify and
mitigate
government the
institutions. If the trend towards such controllable risks faced by the a160
THE GROUP HAS A ROBUST
outsourcing organisation. Mitigation
were for any reason to be reversed, the measures include:
RISK ASSESSMENT AND
group's CONTROL PROCESS IN PLACE
revenue and profitability may be adversely1. The group's diversity
to identify and
affected.
mitigate the
4. The group operates around 150
controllable risks
businesses across
faced by the
Were the group to make acquisitions or over 110 countries and across a
organisation.
capital range of product
expenditures that were inappropriate to areas. Most of the risks detailed
above are
its strategy market-
or over-priced,or to take on onerous contr specific and, therefore, any
a160 THE GROUP IS
actual particular issue is likely to
COMMITTED
obligations, the group's profitability and impact only part of the group's
to a policy of
returns on operations.
proactive
engagement with
customers,
capital may be adversely affected. 2. Management structure
industry
associations,
5. The group operates a management
government
structure that is
regulators and
The group is responsible for the cash held onappropriate to the scale and
employee
behalf breadth of its activities.
representatives.
of its customers. Increases in the value Business performance and strategies
are
of cash lost reviewed
through criminal attack may increase the continuously by regional, divisional
and
costs of the group
group's insurance. Were there to be management. Potential issues requiring
failures in the management
control and reconciliation processes attention are therefore identified and
there
in respect to is a wide
customer cash these could also adversely range of expertise available
throughout
affect the the
group's profitability. organisation, which is utilised as
necessary to
address
these issues.
6. IT systems
The group makes widespread use of IT 3. Authorisation procedures
systems both
for operational management, including The group has clear authorisation limits
and
tasks such as procedures
scheduling and route-planning, and for which are cascaded throughout the
financial organisation. For
management, including calculating example, all acquisition proposals have
to be
employee wages and submitted
billing customers. Failure in these for approval to the group capex
committee,
systems, including the assessed
failure of business continuity against the group's return
requirements,
procedures in the event evaluated for
of physical damage to or inaccessibility of risk and subject to appropriate due
day-to-day diligence.
operating systems, 4. Group standards
could result in
reputational damage
and the loss of Each of the group's businesses applies systems
and
revenue and
profitability.
7.Deterioration in procedures appropriate to its size and complexity.
labour relations
The group's most significant asset is its However,the group requires that these
large and conform to
committed work force. Were the good group standards in respect of matters
relationships such as
between the group and its employees operational and financial controls,
financial
to become reporting,
strained, the group's operational business continuity planning and
project
performance and management
reputation may be adversely techniques. Further standards, particularly
in
affected. respect of
IT systems, are applied on a divisional or
regional basis. 8. Defined benefit pension
schemes A prolonged period of poor asset
returns
and/or
5. Internal audit
unexpected increases in longevity The Internal Audit department operates
under
could require a wide
increases in the current levels of remit, which includes ensuring
adherence to
additional cash group
contributions to defined benefit pension authorisation procedures and control
schemes, standards.
which may 6. Market engagement
constrain the
group's
ability to
take advantage
of growth
opportunities.
Most of the risks to which the group is exposed are
9.Terrorist market risks. So as to better understand and
attacks
The group operates in an industry influence the market, the group is
committed
which is to a
sometimes involved in seeking to policy of proactive engagement across its
protect its geographic
customers against acts of terrorism. Were range, with customers, industry
terrorist associations,
incidents in the future to involve government regulators and employee
premises or events representatives.
22
OUR EMPLOYEES ARE THE PUBLIC
FACE OF G4S AND WE RECOGNISE
AND RESPECT THE VALUE THEY
ADD TO THE BUSINESS BY
DELIVERING EXCELLENT SERVICE
DAY AFTER DAY.
OUR PEOPLE
a160 WE Investing in the workforce - we Programmes such as these
ensure that we grow our
ARE place great focus on attracting talent from within local
communities alongside an
INVESTING and retaining the right talent
at all levels, to
in regional and
country
level employee
development
ensure the continued success of internationally mobile team
of top managers,
the organisation. helping
programmes us to develop markets, create
new businesses and
around Our international spread
requires great strength
and
the world. operate consistently in often
challenging
circumstances.
depth in management to allow us
to continue a160
Succession planning at the
most senior lev els
also WE CONTINUE TO INVEST
operating and growing ensures that our group can
continue to lead the
throughout diverse markets. In addition to our
award-winning international
in industry on a
global scale, and
practical helps
build our
training
reputation as the
employer of choice in our
industry.
programmes to leadership development
help refine programme, we are investing
the skills and in regional level employee
capability of and country development
our staff. programmes around the world, At front line level too, we
continue to invest in
service such as:
delivery
a160 pr actical training
programmes to help refine the
skills >
AS ONE OF THE Asia Pacific - tailor-made and capability of our
Through
WORLD'S programmes service delivery staff.
largest private supporting competency the commitment of our
international training
sector development and
employers, we reinforcing the G4S values community,we share best
practice , training
place great have been introduced materials
value on creating in China, Hong Kong,Taiwan and approaches around the
world, ensuring that
sustainable and across the region. > our Sub Saharan Africa - the
region is launching
an
employment in employees benefit from the
most appropriate
diverse training
markets. advancement programme for to enable them to deliver a
great service to our
talented African
managers in association with customers.
a premier South
African business school.
> UK - the cash services Raising standards - as one of
the world's largest
business is using an on-
private sector employers, we
place great value on
line learning portal to
suppor t continual personal
development and assist
managers at various
creating sustainable
employment in diverse
markets,
levels to achieve recognised thereby contributing to the
communities in which
management
qualifica- our employees live.
ions.
> Global Learning Portal - this
portal facilitates
the sharing of learning and Our success has brought with
it the
expertise between responsibility
businesses on a global basis. The group to lead employment practices wherever
we
has many operate,
centres of excellence for operational, setting the standards to which other
supervisor y employers in
and management learning within G4S and these our industry aspire.
centres have provided materials for We are committed to continually
raising
the portal. these
For example, Wackenhut in the US is already high standards and
ensuring that
the way we
Operat-
ng
ackno wledged for the quality of operate delivers both commercial
returns
training it provides for employees and a
and our business in India
positive result for our employees
and their
families. & Financial
is ab le to share many of its
specialist programmes.
Review
(continued)
G4S plc | Annual Report & Accounts 2007 23
This commitment to being a good employer means we also a160 RIGOROUS PRE-
AND POST-
insist that new recruits have the necessary qualities to
be trustwor thy and reliable, helping safeguard the
safety of their
EMPLOYMENT
SCREENING
colleagues as well as our customers. practices are
embedded.
Rigorous pre- and post-employment screening practices are a160 A NUMBER OF KEY
therefore embedded throughout our businesses, and we INITIATIVES
continue to work with governments and industry bodies
were launched at
our
to drive up standards in many countries around the world. European Works
Council
Employee representation - our drive to improve performance to ensure that
we
across the industry is aided work
by our positive relationships with trade unions and other cooperatively on
the
employee representatives. that can affect our staff most matters
We are proud that we are able to work hand in hand with of all.
these bodies to positively influence the whole sector,as
well as working together on employee relations programmes
within G4S.
a160 ACROSS THE
GROUP
WE ENGAGE
For example, in 2007 a number of key initiatives were in genuine and
active
launched at our European Works Council to ensure that we social
work collaboratively on the matters that can affect our
staff most
dialogue with a
wide range
of all, such as training, health & safety and employee of social
partners.
engagement.
Our commitment to building constructive relationships with union and other
employee representatives is further demonstrated by our public commitment to the
ILO Declaration on Fundamental Principles and Rights at Work. Thus, in
accordance with local legislation and practice, we respect freedom of
association and the right to collective bargaining, employment is freely chosen,
with no use of forced or child labour,and we do not discriminate on the basis of
gender,colour, ethnicity,culture , religion, sexual orientation or disability.
Across the group we engage in genuine and active social dialogue with a wide
range of social partners, and have over 70 formal relationships currently in
place with trade unions around the world. We are proud of our position as the
most unionised private sector business in the UK and regularly negotiate new
trade union agreements which are in the interest of our employees, our customers
and our organisation.
In a people intensive business such as ours, having a motivated, capable
workforce who are proud to work for G4S will continue to be one of our group's
aims. We have made great strides forward in these areas over recent years and
will continue to build on the excellent people management practices which are in
place across the group.
24
G4S RECOGNISES ITS ETHICAL
RESPONSIBILITIES TOWARDS
EMPLOYEES, CUSTOMERS,
INVESTORS, LOCAL COMMUNITIES
AND OTHER STAKEHOLDERS.
CORPORATE
CITIZENSHIP
Background As a major global This policy is communicated to managers
organisation, G4S throughout
plays a significant role in the lives the group and, on an annual basis, they
are
of hundreds of thousands of people - required to declare individually their
both directly through employment and personal commitment by endorsing the
policy
indirectly through its approach to the and confirming compliance within their
own
communities in which it operates. area of responsibility.
We take that role very seriously and Strict adherence to the principles of
the
encourage all of our businesses to business ethics policy is required of
all
actively raise standards and invest in group employees. Compliance with the
policy is
the communities in which they operate. monitored through our internal and
external
At a group level, we also invest in audit functions and through the group's
programmes which contribute positively whistle-blowing facilities.
to the community and environment and we
set international standards and
policies to which our businesses must
operate.
We take our responsibilities in this
area very
seriously and take swift and robust
action
against any Business Ethics G4S is
committed
to operating to
non-compliance.
the highest levels of business ethics
throughout its operations. We have an
extensive business ethics policy which
describes the company's minimum
expected standards in a wide range of
areas such as:
> Human rights
> The environment
> Community involvement
> Bribery and corr uption
> Compliance with the law
> Accounting standards
> National regulations and guidelines
> ILO Declaration on Fundamental Principles and
Rights at Work
> Equal opportunities
> Health & safety
Operating
> Whistle-blowing and complaints
& Financial
Review
(continued)
G4S plc | Annual Report & Accounts 2007 25
Environment Whilst the service industr Employee Welfare & Support The group has
established
y is not a sector which has a major an employee trust fund which offers
monetary suppor
impact on the environment, we do t, at the discretion of the fund's
trustees, to
realise that G4S has a responsibility those employees and former employees in
need of
to ensure that we play our part in urgent financial assistance.
protecting and preserving the
environment for future generations.
We already comply with the relevant During 2007, the fund was utilised in
a number of
standards on vehicle emissions and, to ways to provide emergency assistance
to employees
date, fuel conservation has been across the group in areas such as:
achieved through enhanced vehicle design
and regular maintenance. We also make
use of environmentally- friendly
products and services wherever possible.
We are committed to
> Victims of political turbulence and
violence in
Kenya
recycling of materials where possible > Employees affected by severe
flooding in the UK
and where the means to recycle
materials exist. This includes the > Staff who have suffered injury or
attack whilst
recycling of cash bags, uniforms, toner on duty
cartridges, paper and paper-based > Colleagues diagnosed with
life-threatening or
products. debilitating diseases
> Families of employees who have died
whilst
carrying our their duties >
We have recently established a working Relief from the effects of natural
disasters in
group which is responsible for Peru and Jamaica Investing in the
Community -
delivering a number of projects related Local Initiatives G4S encourages its
to the group's “integrity” value. One
such project is to create a G4S
international environmental strategy
during 2008. colleagues around the world to invest
time and
energy in local projects in
the communities in which they live and
work. We are
very proud of the We have started this
process by
researching what we believe to be the
work they do in areas such as:
area where the group generates the
majority of its carbon emissions,
largely due to its relatively large
heavier vehicle fleets compared to the
In Guam & Saipan, G4S employees have
been involved
in a number of
rest of the group - our cash services education initiatives; adopting a
public school
businesses. This part of the and carrying out
organisation represents 43,000 renovations and cleaning; and providing
much
employees, 9,000 vehicles and 22% of needed equipment such as
group revenues. desks and cabinets for a high school that
sustained
significant fire and
smoke damage.
We have estimated that, in 2007,
the carbon emissions of the group's
cash services businesses amounted
to some 153t CO
G4S Uganda took part in the Habitat for
Humanity Uganda
initiative and2emissions per £1m of
revenue. helped to build homes for orphans and
widows who had
been caught up Uganda. So relentless
were the efforts
in the rebel activities
in Northern
In 2008 we will select a partner of the G4S team, they made one
family's dream come
organisation, with strong environmental true by building them a home in just
four months.
credentials to assist us in accurately
establishing the carbon footprint of the
group and developing plans and processes
for reducing carbon emissions across the
organisation.
During 2007 the employees of G4S
Canada have
contributed over CAN$110,000 to a
number of child
centred charities across the country,
We will aim to
set targets and milestones for the
group as a whole
and
giving up their free time to take
part in fundraising
events and improving will report
regularly on our
progress against those targets.
We the lives of thousands of sick or
disadvantaged
expect children.
our strategy to cover key areas
such as:
In India, G4S supports a wide range
of community
projects. One of >
Fuel consumption these, Future Hope, is a centre which
provides a
home, education, Energy consumption
> medical aid and opportunities for
street children in
Kolkata. Water usage
>
> Recycling
> Use of
environmentally-friendly
products
> Use of modern communications to reduce
the need for air travel
26
CORPORATE CITIZENSHIP (continued)
During August 2007, the employees of Training will continue with further
family
G4S Greece provided vital assistance to members
the community of
recruited from the villagers - the
overall aim
is that Peloponnesus when ferocious
forest
fires took hold
those trained will pass on their
learning to
others of great areas of the country.
G4S
organised a
year on year allowing this project to
last a
lifetime. support mission, providing
clothing,
first aid, food supplies and toys for
children. During one
Jamaica - G4S Gifts for Schools Project
- G4S
Gifts
14-day period over €14,000 was raised for Schools aims to make life a little
easier
and 80 boxes for young
of supplies gathered through the generosity people living in some of the most
of G4S deprived
employees. communities in Jamaica by providing
them
with
equipment and toys, and ensuring that
repairs to In the USA, amongst a
whole
range of charitable
their accommodation take place.
activities, G4S Wackenhut employees take
an active
role in mentoring disadvantaged high G4S Jamaica has provided support to a
range
school students of
through a community programme “Take institutions for young people during 2007,
such
Stock in as a
Children”. The employees meet with the boys' home in a remote area of the
country, a
students hostel
weekly to review their academic progress for young mothers suffering from HIV,
and and
encourage them to study and continue community housing for both able-bodied
and
to college. disabled children.
Investing in the Community - Major
Initiatives
In 2006 G4S plc commenced five major One such facility,the Little Angels
Basic
community School, has
projects in key markets. Managers and seen some substantial improvements
through
staff in our its
developing markets selected projects involvement with G4S. G4S Gifts for
which they Schools is
believed would benefit greatly from G4S renovating two school buildings used
to
central teach
funding and local G4S business physically and mentally
handicapped children.
support. New
classrooms have been built,
undertaken to the
repairs
The main aim of these projects was roof, electrical repairs have
been made and
to engage our workforce in their existing
local community,give something
classrooms and walls are receiving
a much
needed back to the communities in
which we
operate and
coat of paint. This project has
involved G4S
employees provide a long-term
stable commitment
to key issues.
along with local and the
staff who
contractors run
the facility. The whole community
is joining
together We are very proud of our
community
projects and
to make a difference to the lives
of young
people. the time and commitment
invested in the
projects by
our colleagues in the different India - G4S School for Under
Privileged
countries. Children -
The aim of the G4S School for
Under Privileged
Malawi - G4S Community Trees in
Malawi - Malawi
Children is to provide free
education, food and
has low levels of energy available
to the rural
and
uniforms to children of working
parents
allowing
urban population, and as a result them to continue to work whilst
their children
timber is the main source of energy are in a place of safety.
for heating and cooking. In Malawi
over 1.5 million trees are cut down
each year and over a million trees
are used to convert into
In 2007, G4S India engaged with a
national NGO,
approximately 150,000 tonnes of
charcoal.
The Hope Foundation, a charitable
organisation
involved in providing sustainable
education for
G4S Community Trees in Malawi was children. The school will be
located in the
developed to provide a sustainable Papankala area of New Delhi. This
area has
forestry farming project which about 1,500 homes populated by
about 15,000
provides for own-grown fuels to people, with a child population
above 3,000.
Malawians living in a rural areas in Many of these children are not
currently at
the Karonga region of Nor thern school and the G4S School for
Malawi.
50,000 acacia saplings were placed
in the plantation area in 2007. With
the saplings safely in place, the
Under Privileged Children will
provide their
best
project's employees were given hope of an education.
training in planting
trees, transplanting trees, how to A building has been located and is
being
irrigate the soil, how to tend to redesigned and refurbished to
transform it into
the trees that were not faring so a school. G4S India will provide
books and
well and finally how to use crop other school equipment, along with
teachers to
rotation in order to grow staple provide a structured curriculum of
education
foods, such as maize, at the same for the children. The
schoolOperating
time as the trees.
The villagers involved in the
project are earning a recurring
living wage from the G4S Community
Trees
will provide education facilities
for up to 300
students. project and their
training in the
maintenance and
The school's seven classrooms will
each
accommodate
& care of the tress is ongoing, making 30-35 pupils. Additional
facilities will
Financ- a real difference staff room, an incorporate a
al administration block, a principal's
office,
to the lives of the villagers
involved in the project. a media
room and a computer lab for
students. The
Review Plans are already underwa y to plant aim is to open the school in the
second half of
a new crop of 2008.
trees in 2008 to ensure the
plantation grows further.
(continued)
G4S plc | Annual Report & Accounts 2007 27
China - G4S China Jifu Action Project - The G4S 4teen programme was developed
to provide
G4S Jifu Action is an educational support to aspiring young athletes from
developing
project in Shanghai, which aims to markets, with a view to them achieving
their
provide a purposeful learning sporting dream of competing in a future
Olympic
environment for the children of the Games.
Nanhui Taoyuan Orphans' Foster Home
Center and improved educational
facilities for local orphans in Nanhui.
We worked closely with the National
Olympic
Committees from 13 countries
(Bangladesh, Botswana,
Chinese Taipei,Colombia, Estonia, The
G4S Jifu
Action Project was launched at the end
of 2007. In
its first
Guatemala, India, Kazakhstan, Kenya,
Macau, Nigeria,
South Africa,Thailand) term of
education the project
enrolled 12 disabled children. Two
teachers
to select 14 young people who would
benefit from the
programme. employed by the project
provide the
children with eight courses including
Chinese,
mathematics, physical education and
handicrafts. The
number of
As well as providing financial and
other support to
the 14 selected
children who are offered this athletes, G4S is proud to have
attracted a global
structured education will increase over sporting icon to act as
the
life of the project with over 80 children a project ambassador and a mentor
to the G4S
benefiting from the G4S Jifu 4teen members.
Action Project education Haile Gebrselassie is a double gold medal winning
programme. Olympian and the
Russia - G4S for Children Project - The current world record holder for the
Marathon
G4S for Children Project has following his win at the
found a positive way of helping support the work of Berlin Marathon in
October
two children's 2007.
homes, which are known as “Internats”, Haile has provided inspiration and
practical
in the Moscow region, both of which care support to the athletes, offering his
advice to
for children with disabilities; the two some of the 4teen to help them
overcome the
beneficiaries are the Municipal barriers they have faced during their
training. He
Institution, Special Secondary School - is a national hero for Ethiopia and in
the world of
Internat for Children with Sight sport and has become an inspirational
member of the
Disabilities, and the Specialised School G4S global family.
- Internat for Orphans with Health or
Physical Development Disabilities.
The aim of the G4S for Children Project Future Development - launched to the
world in June
is to improve the lives of the children 2007, the G4S 4teen programme continues
to grow
living in the Internats through the from strength to strength. Many of the
4teen have
provision of specialist education, achieved great success at major
sporting
general equipment and sporting competitions around the world, some
have won
equipment for the children at the national sporting awards, and we
specialised school.
G4S for Children has provided for expect at least four of the 4teen to
represent
three classrooms in the special their countries in the
secondary school and equipment such as interactive Olympic Games in Beijing
in
white boards, 2008.
projectors and computers - all of which In addition to financial support,
some of the
were installed in time for the athletes have received very
practical support from their
local G4S businesses, such as
computer skills
school's 70th anniversary celebrations in
March 2008.
G4S Russia hopes its community project training, English language lessons,
mentoring and
will throw a lifeline to many media training -
children, giving them the opportunity to all of which have helped them prepare
themselves
pursue lives as adults that are to compete on the
promising and rewarding. international stage.
Developing Young People - G4S 4teen - G4S has played a significant role in
helping
Engaging a large international these young people to
workforce in a major global brand is a become the best they can be in their
chosen
challenging target. In 2007, we sport during 2007 and
launched an international sporting aimed is fully committed to continuing to
provide
programme for young people, practical and financial help
at inspiring G4S employees throughout to our very special 14 talented
sportsmen and
the world and making them women for the next
proud to be a part of G4S - in a way which is not limited to a par five
years.
ticular
language, race or religion.
28
Alf Duch-Pedersen (61) Nick Buckles (47)
CHAIRMAN CHIEF EXECUTIVE
Alf was appointed to the board in May Nick was appointed to the board in
May
2004 and became chairman of the board in 2004 and was the company's deputy
chief
June 2006. He is also chairman of the executive and chief operating
officer.
Nomination Committee. Alf's career has involved
He became chief executive in July
2005.
managing multi-national companies Nick joined Securicor in 1985 as a
covering projects accountant. In 1996 he was
appointed
a range of industries from manufacturing
and
financial services to food and food managing director of Securicor Cash
products.
He was president and chief executive of Services and became chief executive
of
the
Tryg-Baltica A/S from 1991 to 1997 and security division of Securicor in
1999.
He
fulfilled the same roles at Danisco A/S was appointed to the board of
Securicor
from 1997 to 2006. He is now chairman of plc in 2000 and became its chief
the board of Danske Bank A/S, a member of executive in January 2002. Nick is a
the board of the Technical University of non-executive director of Arriva plc.
Denmark, chairman of the British Chamber
of Commerce in Denmark and chairman of
the Danish government's committee to
modernise Danish corporate legislation.
Trevor Dighton (58) Grahame Gibson (55)
CHIEF FINANCIAL OFFICER CHIEF OPERATING OFFICER
Trevor was appointed to the Grahame was appointed to the board in
board in May 2004. An
accountant, he joined
Securicor in
April 2005. He joined Group 4 in 1983,
1995 after
a previous career which included
starting as finance director (UK) and
then
posts in both the accountancy deputy managing director (UK), followed
by
profession
and in industry, including a number of senior group roles,
including
five years in Papua New
Guinea, three years in Zambia
and
vice president (corporate strategy),
vice
seven years with BET plc. He president (finance and
joined
administration), vice
Securicor's vehicle services president operations & South
division in 1995, (UK, Central
was appointed finance Eastern Europe) and, in 2000, chief
operating
director of its security
division in 1997 and became officer of Group 4 Falck. In July 2004,
he became
its deputy the company's divisional president
group finance director in
2001. He was
appointed to the board of for Americas & New Markets. Grahame
Securicor plc as group
finance director in June
2002. Trevor
became the company's chief operating
Board of became the compan y's chief officer in July 2005.
financial officer
in July 2004.
Directors
G4S plc | Annual Report & Accounts 2007 29
Thorleif Krarup (55) Sir Malcolm Williamson (69) Mark Elliott (58)
NON-EXECUTIVE DIRECTOR SENIOR INDEPENDENT DIRECTOR NON-EXECUTIVE
DIRECTOR
Thorleif was appointed to Malcolm was appointed to the boardMark was appointed
to the board
the board in May 2004 and in May 2004 and is the senior in
is chairman of the Audit independent director
September 2006 and
is a member
of the Committee.
A former
chairman of TDC
and a member of the Audit and Remuneration
Committee. Until he
Nomination (Tele Danmark retired
Corporation) and former
Committees. After a 28-year careerin April 2008,
Mark was General
with Manager,
group chief executive of Barclays Bank plc, he became Global Solution
Sales, for IBM.
Nykredit A/S, managing Based in the USA,
he joined IBM
in 1970 and
occupied a
Unibank A/S and Nordea director of Girobank plc and a
AB,Thor leif is member of the UK Post Office board
in 1985. In 1989
currently chairman of number of senior
management
Exiqon A/S and Sport positions in
One Danmark A/S. He is alsohe joined Standard Chartered plc, that company
including General
deputy being Manager,
chairman of H. Lundbeck group chief executive from 1993 toIBM Europe, Middle
East and
A/S, ALK-Abello 1998. Africa where
A/S and LFI A/S and a Between 1998 and 2004 he was he was responsible
for that
director of Bang & Olufsen president company's
A/S, Brightpoint Inc. and
the
and CEO of Visa International, operations in over
120
Inc. He is Lundbeck Foundation. countries. Mark
chairman of Group plc, CDC non-executive
director of Reed
Group Elsevier PLC
plc, National Europe and Reed Elsevier
NV and serves
Australia Group on the
and Clydesdale Bank plc, deputy Dean's Advisory
Council and the
chairman of Technology
Resolution plc and a non-executiveAdvisory Council
at Indiana
director University.
of National Australia Bank Ltd and
JP
Morgan Cazenove
Holdings.
Lord Condon (61) Bo Lerenius (61) Mark Seligman (52)
DEPUTY CHAIRMAN NON-EXECUTIVE DIRECTOR NON-EXECUTIVE DIRECTOR
Lord Condon was appointed to Bo was appointed to the Mark was appointed to
the board in
the board in May 2004. He board in May 2004 and is January 2006 and is a
member of the
became deputy chairman of the a member of the Audit andAudit and Remuneration
Committees.
board in September 2006 and is Remuneration Committees. Having qualified as a
chartered
chairman of the Remuneration After a diverse early accountant with Price
Waterhouse,
Committee and a member of the business career, he Mark
Nomination Committee. Paul served as chief executive
of Ernstromgruppen, a
Swedish
spent 12
years with
joined the Metropolitan Police building materials SG Warburg before
joining BZW in
in 1967 and, business, between 1985 1995
after holding various senior and 1992 when he joined and then, following the
takeover of
appointments in Stena Line where he was BZW,
chief executive and vice
chairman.
the police force, including a becoming head of UK
Investment
period as Chief Constable of Banking at
Kent, served as Commissioner of
In 1999 he became group CSFB and subsequently
deputy
chief executive of the chairman of
Metropolitan Police
between 1993 and
Associated British Ports CSFB Europe. In 2003 he
became
Holdings chairman
2000. He was created a life non-executive director ofof UK Investment
Banking for CSFB
peer in 2001 and is President Land Securities and in 2005 became a
senior adviser
of the British Security to Credit
Industry
Group plc and Thomas Cook
Group plc,
Association, an advisor to chairman of the Swedish Suisse Europe. He is an
alternate
international sports Chamber of member
governing bodies, a director ofCommerce for the United of the Panel on
Takeovers and
Tenix Kingdom and an Mergers and is a
director of the
Industrial Development
(Holdings) UK Limited and a advisor to the
member of the advisory board ofinfrastructure fund of
Vidient Systems Inc. Swedish
venture capital group, Advisory Board.
EQT.
30
Nick Buckles Grahame Søren Lundsberg-Nielsen
Gibson
CHIEF EXECUTIVE COO & DIVISIONAL GROUP GENERAL COUNSEL
PRESIDENT -
Nick has worked in SECURITY Søren began his career as a lawyer
in Denmark and since 1984
the security SERVICES he has had a wide range of legal
industry for 23
years, focusing
throughout this time
on the
Grahame has been involved
in the security
commercial and industry for 25 years, experience as general counsel for
international
strategic aspects ofhaving joined Group 4's
all areas of UK operating company in
security services. 1983 as finance director.
groups in Denmark, Belgium and the
US before joining Group 4
Falck in 2001 as general counsel.
After a variety of
commercial roles throughout
Since that time, Grahame
has held a number of
Søren has been involved
in a wide range of the
group, he was responsible
for driving
operational, management
and board positions in
significant profit the UK, Denmark, the successful mergers and
acquisitions during his
improvements in manyNetherlands and Austria.
Securicor
businesses His broad experience of career,including the acquisition
of
throughout the 1990sthe security industry and
as a business
unit managing management of businesses the merger of Group 4 Falck
and Securicor. Søren
director and across a diverse range
divisional chief
executive of the of cultures has been now has overall responsibility for
all internal and
security division. invaluable to the group
He was also
instrumental in the throughout its external legal services for G4S as
well as the
development of development. Grahame
Securicor's joined the
security sector board of Group 4 group's insurance programme.
focus and in Securicor in April 2005.
bringing together
Group 4 Falck and Grahame is a board memberSøren is a member of the Danish
Bar and Law Society,a board
Securicor to create of the Ligue member of the Danish Blood
the new combined Internationale des
group. Nick became Societes de Surveillance.
chief executive of Donation Society and
G4S in July 2005. author of the book
“Executive
Management
Contracts”,
published Nick is
chairman of the
Ligue Internationale
des
in Denmark.
Societes de
Surveillance, the
international
association of
leading security
companies.
Trevor Dighton Ken Niven Irene Cowden
CHIEF FINANCIAL DIVISIONAL PRESIDENT - GROUP HR DIRECTOR
OFFICER CASH SERVICES
Trevor has worked inKen has 12 years' Irene has spent her career in HR
management, specialising in
the security experience in the employee relations, organisational
development, talent
industry for 22 security industry, havingmanagement and compensation
issues. She has been involved in
years. After severaljoined Securicor in 1996 major change projects including
the cultural and integration
years in both the as operations director ofaspects of mergers and
acquisitions as
accountancy the UK cash services
profession and business where he was
commerce working in later promoted to
the finance functionmanaging director and was
and general instrumental in the
management, he development of new
joined BET in 1986 product areas, including
as finance director cash well as large scale
of their Security organisational change
and Communications involving independent ATM
Division. centre network.
outsourcing and
establishing
Securicor's Trevor
joined Securicor in
1995 and,following a
workforce restructuring, working
in partner ship
number of years as with major trade unions.
finance director of
the security
division, he was
appointed to the
board
Ken was appointed to his
current role in July of
Securicor plc in June
2002 as group finance
2004 and is responsible Irene has worked in the security
industry for services
for the group's cash division, which includes all of
the major
director.He became chief
financial officer of G4S
30 years and has held director
level positions at in July
2004.
cash services business business unit, divisional and
corporate level. She
units, and for sharing
cash services best
practice throughout the
entire
was appointed to the Board of
Securicor plc in Trevor is a
member of the Chartered Institute
organisation. Ken joined 2002 as Group HR Director.
the security industry
of Management following a successful
Accountants. career within the
logistics
managementwhere he held Irene is a member of the Chartered
Institute of
industry senior roles
at Express Foods, Excel Logistics and Coca Personnel and Development
(MCIPD).
Cola.
Ken is president of ESTA,the European cash
services association and is a member of the
Chartered Institute of Logistics and Transport.
Executive
Management
Report of the Directors
3 1
For the year ended 31 December 2007
The directorstatements of that compans have pleasure in presenting their y and
its subsidiaries,Annassociated underual Report
together with the audited ftakings and joint ventures (“the group”) financial
statements of G4S plc and the consolidated for
the year ended 31 December 2007.inancial G4S plc has its primary listing on the
London Stock Exchange and a secondar y listing
on the Copenhagen Stock Exchange. 1
G4S plc is a parent companPrincipal activities of the gry
with subsidiaroupies,associated undertakings and
joint ventures. The prsystems) and the management and
trincipal activities of the group compransporise the
protation of cash and valuabvision of security serles.vices
(including manned security services,justice
services and security
2 The consolidated result fGroup resultsor the year
is shown in the consolidated income statement on
page 48.
Details of major binformation which fulfusiness activities
during the year,future developments,principal
risks and uncertainties and prospects of the group and
incorporated in this reporills the requirements of
the Business Review are contained in the Opert by
reference.The group'ating and Financial Review on pages 6
to 27 and areand its exposure to price,s financial risk
management objectives and policies in relation to
its use of financial instruments, on pages 82 to 84.
credit, liquidity and cash-flow risk, to the extent
material, are set out in note 33 to the
consolidated financial statements
3 The directorDividendss propose the following net
dividend for the year:
>>InterFinal dividend of 2.85p (DKK 0.2786) per share paim
dividend of 2.11p (DKK 0.2319) per share paid on
16 Noyable on 6 June 2008.vember 2007.
Shareholdercertificated fs on the Danish s by no later than 30 orm
will receiv VP register will receive their dividends in
Danish Kroner.Shareholder s who hold their shares
through CREST or in Registrar
e their dividends in sterApril 2008.ling unless they
prefer to receive Danish Kroner,in which case they
should apply in writing to the
4 In business
Jan-
ign-
fic-
nt
In 2007, 50% of Security and Management Services
Feb- (PVT) Limited in Pakistan was acquired.
uary
In March 2007, 49% of al Majal Servicemaster was
acquired in Saudi Arabia. In March 2007, 50.1% of
Fidelity Cash Management Services (Pty) Limited in
South Africa was acquired. In March 2007, 50% of
Alfa-Segurança in Mozambique was acquired,
bringing G4S's holding in this company to 100%. In
April 2007, the manned guarding business and
related assets of Protección Patrimonial in Mexico
were acquired. In April 2007, Meldetechnik
Vagyonvédelmi és Villamossági Kft was acquired in
Hungary. In May 2007, SSI, a group providing
security services in Malawi, Mozambique,
Madagascar,Zambia, Mali, Guinea and Ghana, was
acquired. In May 2007, Creco N.V.was acquired in
Belgium. In May 2007, 19.05% of Hashmira Company
Limited, the Israeli security services company,
was acquired, bringing G4S's holding in this
company to 90.05%. In July 2007, G4S Cash Services
(France) SAS was disposed of. In July 2007,
General Private Services was acquired in Morocco.
In July 2007, 84.3% of Bell Communications Limited
was acquired in Ireland, bringing G4S's holding in
this company to 100%. In JulSecury 2007,ity
GroupA.1 Omada Limited,,were acquired in
Ireland.together with the manned security and fire
suppression business and related assets of the
Omada Fire and
In August 2007, Ridderikhoff Group B.V. was
acquired in the Netherlands. In October 2007,
RIG-PR Limited was acquired in the UK. In October
2007, Colsecurity S.A. was acquired in Colombia.
In December 2007, Prosec Security and
Communications Limited was acquired in Papua New
Guinea. In December 2007,Completion remains
subject to regulatoran agreement to acquire De
Facto 1119 Limited,y approvals.the holding company
of the Global Solutions group,was entered into.
In January 2008, Travel Logistics Limited was
acquired in the UK.
32 Report of the Directors (continued)
For the year ended 31 December 2007
4 In March 2008,Significant business acquisitions,the Rock Steady group of
companies was acquired in the UK.disposals and developments (continued)
In March 2008, G4S announced an offer for the shares of ArmorGroup
International plc. In March 2008,G4S's holding in this compan25% of
Aktsiaselts G4S Baltics,y to 90%.the holding company of the G4S subsidiaries
in Estonia,Latvia and Lithuania,was acquired,bringing
In March 2008, MJM Investigations, Inc. was acquired in the US. In April 2008,
RONCO Consulting Corporation was acquired in the US.
5 The authorCapital There were 1,281,190,738 shares in issue as at 7 ised and
issued
share capital of G4S plc at 31 December 2007 is set out on page 91 (note 37
to the
consolidated fApril 2008.inancial statements).
Information concerning the company's shares held under option is set out on
pages 91
and 92 (note 37 to the consolidated financial statements). Resolutions
grproposed at
the compananting the directory's power,subject to certain conditions,to allot
and
make market purchases of the company's shares will be
provided on s annual general meeting. The resolutions are set out in the
Notice of
page 110. Meeting on page 107 and further explanation is y does not hold
any
treasury shares as such. However the 5,209,320 shares held within
the
Group 4 Securicor Employee Benefit Trust
The
compan(“T-
e Tr
waived its rust”) and refight to receiverred to on page 92 (note 37 to the
consolidated fe dividends in respect of the company's shares which it held
durinancial statement) are accounted fing the period under reviewor as
treasur.y
shares.The Trust has
6 Research in connection with the devResearch and development e carried out
continuously. Research and development of new ser
xpenditure
elopment written off to profvices and products and the improit and loss during
the yvemeear amounted to £2.1m (2006:nt of those currently provided b£1.4m).y
the group is
7 It is the companPayment of suppliers normally made toy' sthand the group'ose
suppliers msepolicy to paeting their oybsupplierligations.sThe companin
accordance with the pay and the group do not fyment terolloms negotiated with
them.w any formal code or standard on paThus,prompt payment pryment isactice.
At 31 December 2007 the trade creditors of the company represented 23 days
(2006: 13 days) of annual purchases. At 31 December 2007 the consolidated
trade creditors of the group represented 50 days (2006: 40 days) of annual
purchases.
8 InEmplo supporvolving the group'
yees
ts ongoing consultation and comms employees in the success and future plans of
the bunication with employees by helping spread best prusiness is a key strand
of its approach to retaining the best peopleactice among local management
teams,.G4Sdirect comm the most effectivunications with ke processes and tools
to estabey internal stakeholderlish prs and ensuractical and effing its
oective emploverall policies and stryee invategies support this commitment.
Business units use managing direct employee communication approaches alongside
consultation with trade union and other emploolvement within the local context
and adopt a ryee representatives as appropriateange of. Attrmeet its
customeracting and retaining talented individuals continues to be essential to
the success of G4S,and the diversity of the group's workforce helps it
devthe group also aims to retain existing emploelops employees in accordance
with their talents and aptitudes,s'expectations.The overall approach of the
group to diversity and inclusion therefore ensures that G4S appoints,promotes
andyees who become disabregardless of anled wherever possiby disabilityle.,and
to encourage loyalty and retain employees'skills
9
the yThe group remains committed to the suppor Political and charitable
contributions
ear amounted to £311,000 (2006: £94,000).tof charities,the community,job
creation and training.Charitable contributions by the group during There were
no political contributions requiring disclosure under the Companies Acts.
33
10 The directorSubstantial holdingss have been
notified of the following substantial shareholdings
at 7 April 2008 in the ordinary capital of G4S plc:
INVESCO LimitedSkagen Stichting 171,939,961 (13.42%)Legal
and General Group
Administratiekantoor Plc63,004,626
(4.92%)51,880,641 (4.05%)
11 AAuditor directorresolution to re-appoint KPMG s will be submitted to the
Audit PlcAnnual Gener,charal Meeting.tered accountants,as auditor to the
company and for their remuneration to be fixed by the
12 DirThe directorectorss,biographical details of whom are contained on pages
28 and 29,held office
throughout the year. s operations, that they continueMalcolm
The directorthemselves for re-election.s retiring by rotation are
GrThe board believahame Gibson,es that they possess experBo
Lerenius and Sir Malcolm ience and experWilliamson.tise relevant
to the companMessrs Gibson and Lerenius,y'being eligible,offer to
be effective, Williamson has decided not to seek re-election and
will therefthat they are committed to the success of the company
and that they should be re-elected at the ore retire on 29 May
2008 at the end of the AnnAnnual Generual General Meeting.al
Meeting.Sir Of those directortermsince it is not fs proposed for a
fixed teror re-election,m.Mr Lerenius does not have a contract of
service and Mr Gibson's contract of service has no unexpired The
contracts of service of the executive directors are terminable at
12 months' notice. None of the non-executive directors has a
contract of service. The compancapacity as directory has executed
deeds of indemnity for the benefit of each of the directors in
respect of liabilities which may attach to them in their and have
been in effs of the companect since 3 Novyember 2006..These deeds
are qualifying third party indemnity provisions as defined by
S.309 B of the Companies Act 1985maintained a directors'and
officers'liability insurance policy throughout the yA copy of the
form of indemnity is aear under reviewvailable on the compan.y's
website.The company has
Details of directorpages 37 to 44.s'interests (including their
families'interests) in the share capital of G4S plc and of the
directors'remuneration are set out on The directorinformation of which the
compans who held office at the date of approy's auditor is unaval of this
directors'report confirm that,so far as they are each aware,there is no relevant
audit himself aware of any relevant audit information and to estabware and each
director has taklish that the company'en all the steps that he ought to has
auditor is aware of that information.ve taken as a director to make None of the
directors had a material interest in any contract significant to the business of
the group during the financial year.
By order of the board
PSecretareter David
7 April 2008y
The ManorManor Ro
Cr yalWest Sussex RH10 9UNawley
34 Corporate Governance Statement
The board'in June 2006 (“the Combined Code”).s statement on the company's
corporate governance performance is based on the Combined Code on Corporate
Governance published The Combined Code requires companies to disclose
hoor,where they do not comply,to provide an explanation.w they apply the
code's principles,and to confirm that they comply with the code's provisions
(a) The board comprApplication of Combined Code principles directors, the chief
exises the non-executive (Nick Buckles),ecutive chairthe chief fman (Alf
Duch-Pinancial offedericer (Tsen),reva non-exor Dighton) and the chief
operecutive deputy chairman (Lord Condon),ating officer (Grahame Gibson).five
other non-exTheecutiveboard considers all the non-executive directors to be
independent.The senior independent director is Sir Malcolm Williamson. All
continthemselves fuing directoror re-election at least evs are subject to
election bery three yeary shareholders.s at the next Annual General Meeting
following their appointment and will submit Membership of the three board
committees is as follows: Audit CommitteeThor Bo Lereniusleif Krarup
(chairman)Mar Sir Malcolm k SeligmanWilliamson RemLord Condon (chairuneration
Committee Mark Elliott (joined March 2007)man)Bo Lerenius Mark Seligman
Nomination Committee Lord CondonAlf Duch-Pedersen (chairman)Sir Malcolm
Williamson
Mr Elliott joined the Remfinancial experience.The terunerms of refation
Committee in March 2007.erence of each of the abovMr Seligman is the member of
the e committees are available on the companAudit Committee with recent and
relevanty's website. It is intended that the chairopportunity for communication
betwmen of the three committees will be aeen the board and
shareholdervailabs,parle to answer questions at the Annual General Meeting which
is an important General Meeting, the meeting is informed of the numbers of proxy
votes cast and the same infticularly private shareholderors.Following each
resolution at the Annualcompany's website.mation is subsequently published on
the
There wsession,ere ten board meetings during the year ended 31 December 2007.One
of the meetings was an extended,two-day,board and strategy bthe UK,usiness plan
and its commercial and HR strat which presentations on some of the group'the
other in South Africa, to facilitate greater interategies were discussed.skey
businesses w-action betwTween the board and the group'o of the board meetings
were made to the board by senior exere held at subsiecutives and at which the
group'ss businesses.Thordiary companies'leif Krarup was absent fromoffices,one
in one board meeting and Sir Malcolm Williamson and Mark Seligman were each
absent from two meetings.
At each meeting,includes summaries of devthe board receivelopments on HR
matteres reports from the chief exs and an inecutivvestor relations repore,the
chief financial officer and the company secretary,an HR report which from major
shareholderto the board on the matters since the previous board meeting.s
considered by each committeeAfter meetings of the board committees,t which
includes anal.In addition,the board receives monthly management accounts.the
respectivysts reviews and ane committee chairy comments receivmen reporedt
There are nine board meetings scheduled for the current year,including a one-day
strategy session.
35
(a) There is a detailed schedule of matterApplication of
Combined Code principles (contin (2) Operations; (3) Finance;
(4) Business control;s reserved to the board which are set out
under f ued) and (5) Secretarial. By way of example ive separate
categories: (1) Board and management;investments and capital
projects exceeding £4m;(b) any changes to the group',board
approval is required for (a) acquisitions,disposals,
and cash flow budgets. s business strategy; and (c) the annual
trading, capital expenditure
In the yAll memberear under review,the Audit Committee met three times, the
Remuneration Committee five times and the
Nomination Committee once. Mark Seligman who was absent from one meeting of the
Rems attended each of the meetings
except for Sir Malcolm uneration CommitteeWilliamson who was absent from one
meeting of the .
Audit
Committee and
The perfperformance of the board as a whole was conducted and the formance of
the board and its committees has been
evaluated in a nindings havumber of ways.A questionnaire-based self-assessment
of the steps are to be taken to review
the manner in which the board communicates with its stake been considered
dureholdering the ys and the near under
review.Based on this feedback,and the wa ormance of each of the directory in
which reports are givs and his fen to the
board has been review umber of board meetings to be held
perf indings have been discussed bed.In addition,y
the board.the chairman has conducted
individual evaluations of the
The chairby the non-exman held meetings with the non-executive
directors,without the chairecutivman present,e
directors without the exwas led by the senior independent directorecutives
present and a review of the perf.ormance of
the chairman Both the of the Audit CommitteeAudit and Rem,uneration Committees
have evaluated their performance by
questionnaire-based self-assessment,completed,in the case reviewed by the
committees concerby both the committee'ned
and some areas fs members and by the regular attendees of its meetings.The
results of the assessments weremore
systematic exteror improvement were identified.As a result,some committee
members will undertake
presentations will be made to the nal training, an additional audit committee
meeting will be held at a time not
related to a board meeting and moreAudit Committee by regional finance managers
and others. The chief exfinancial
perforecutivmane and the chief fce,although price sensitivinancial offe inficer
hold regular meetings with individual
institutional shareholderormation is never divulged at these meetings.s to
discuss the group's strategy and company's
Annual General Meeting and will be available to answer questions from
shareholderIt is intended that all the
directors.s will attend the The Nomination Committee is responsibexperience on
the board and its committees.le for
making recommendations on board appointments and on maintaining a balance of
skills and
companAudit Committee meetings are attended by secretaryyrepresentatives of the
group auditor,the chief financial officer,the head of internal audit and
thef.The committee considers the group's annual and interim financial statements
and any questions raised by the auditor on the interinancial statements and fnal
controls.inancial systems.It also reviews,amongst other matters,whistle blowing
arrangements,risk management procedures and The of the audit is not
compromised.Audit Committee has established a policy on the provision by the
external auditor of non-audit services,
repor gers and acquisitions, Besides the faudits of emploormal audit function,
Committeeting standards and coramajor transf.The value of non-audit serporate
tax serormation deal.The auditor has wrvices provices.The auditor is prohibited
from proitten to the vided by the auditor mAudit Committee confust not exceed
the fviding other serirming that,ees charvices without specifin its opinion,ged
for the statutoric permission from the Auditit is independent.y audit,save in
the event of
The work of the Remuneration Committee is more fully described in the Directors'
Remuneration Report which appears on pages 37 to 44.
(b) The companCompliance with pry complied throughout the yovisions of Combined
Codeear under review with the provisions set out in Section 1 of the Combined
Code.
36 Corporate Governance Statement
(co-
tin-
ed)
(c) The directorRisk mana
to
man-
ge
rat-
er
than
eli-
ina-
e
the
rs
ack-
o
gement and internal contrwledge their responsibility f
isk of failure to
achievor
the group'
ol
e bs system of
interusiness objectivnal control and for
reviewing its
effectiveness.The system is designedagainst
material misstatement or
loss.es and can only provide
reasonable and not
absolute assurance The rgroupisks associated
with the group's
activities are review be considered b.Policies
and procedures,y the
board to present signifwhich are
reviewicant exposureed
and monitored b ed regularly b
. y the head of inter
y the board, which considernal
audit,are in place
to deal with ans major risks and
evaluates their
impact on they matters which may
The key features of the group's risk management process
are:
> A common robjectives.isk management framework* is used to provide a
profile of those risks which may have an
impact on the achievement of business > Each signifensure that intericant
risk is documented,nal audit reviews of
the adequacyshowing an over,application and effview of the risk,how the risk
is managed,and any improvement
actions.The risk profiles key risks.
ectiveness of risk
management and internal controls are
targeted on the >
Risk management committees hathe divisional and group committees meet quarve
been established at regional, profiles
are reviewed and updated at each meeting.terly.A standard agenda co
divisional and group levvering risk and control
issues is considered at each meeting and rel.The regional committees meet at
least annually andisk
> Risk and control self-evaluation exprof
risk evaluations are assessed biles are prepared.Similar
ex ercises are undertaken for each operating company,
for most companies at least twice a year,and updated
risk
y the regional and
divisional rercises are undertaken as parisk
management committees*.t
of the integration process for all
major acquisitions.The
results of the company The process,is
carried out under the
owhich is review ecutivver ed regularall
superly by the board in
accordance with the internal control
guidance for directors
in the Combined Code,
includes both the chief exe and the chief fvision
of the group rinancial offisk
management
committeeicer..This committee,which reports to the
Audit Committee, ts and
regular reports on risks.
The and the group rAudit Committee underisk They monitor the
actions They monitor the actions
management committee receivtakes a high level review taken to
taken to
of re internal audit reporisk management and
internal control.Both the divisional risk management
committees manage risks. The interrepor assurance
from other sources including securting system, nal
control system includes clearand written policies
and procedures.ly defined reporting lines and
authorisation procedures,a comprehensive budgeting
and monthly
ity inspections,In
addition to a wide rthird party reviews,ange
of intercompany fnal
audit reporinancial control
reviews,ts,senior
management also receivexternal audit
reports,esummaries of
whistle blowing activity,and risk and
control
self-evaluations. The board has reviewthe Audit
Committee and has taked
the group'en account of evs risk
management and interents
since 31 December 2007.nal control
system for the year to
31 December 2007 by considering reports
from
PSecretareter David
7 April 2008y
* Because subject to the same rWackenhut Services,Inc.(“WSI”) is governed
through a proxy agreement under which the group is excluded from access to
operational information,it is not processes adopted by isk management process as
is applied to other group companies.WSI.The board has however satisfied itself
as to the adequacy of the internal control
Directors' Remuneration Report 3 7
At 31 December 2007
This reporcompan
to the company's rem
t, prepared on behalf of and appro
y'uners Annation policies fual General
Meeting for the curor approrent f ved
binancial yy the board,
val by the shareholderear and,
prosubject to ongoing reviewvides details of
the remuner s.
, for subsequent f ation of each
of the directorinancial years.s
and sets out theThe report will be
put
The Remindependent,unerare Lord Condon (chairation Committee met fivman),e
times durMark Elliott,ing the perBo
Lerenius and Mariod under reviewk Seligman..The members of the committee,all of
whom are considered to be
committee is responsible for setting all aspects of the remuneration of the
chairman, the exMarecutivk Elliott
joined the committee on 1 March 2007.e directors,the three other
memberTheexecutive committee and the company
secretary.It is also responsible for the operation of the company's share
plans.Its terms of refs of the group
available on the company's website.
erence are
Tremowunerers,Pation advice to the companerrin,Forster & Crosby,Incy.*
(“T.Their terowerms of appointment are
as Perrin”) has been appointed bvailaby the committee to provide executive and
senior management been appointed
by the committee to verify the calculation of certain elements of pale on the
companyments due under the
company's website.In addition y's perfAlithos Limited (“Alithos”) hasTowers
Perrin nor Alithos has provided any
other services to the company during the period under review.
ormance share plan. Neither
Nick Buckles,was received from the group'chief executive,s HR directorprovided
guidance to the committee on
rem,Irene Cowden.Neither Mr Buckles nor Mruneration packages fs Cowden paror
senior executives within the
group.Further guidance remuneration.
ticipated in discussions
regarding their own
RemThe policy funeration policyor the remuneration of the executive
directors and the executive management team aims to achieve:
>>the ability to attra strong link betwact,een exretain and motivate high
calibre executive reward and the group's perfecutives; >>proalignment of
the interests of the exvision of incentive arrangements which fecutives
and the shareholderormance;ocus on both annual and longers;and-term
performance.
AThe perfsignificant propor
performanceormance-related element amounts to around 43% of the total
package f tion of total remuneration is related to performance, through
par
. The committee believes that the current balance is appropriate,
although it is kor tar ticipation in both shorget perf
ept under reviewormance and around 63% of the total package f t-term and
long-term
incentive schemes.
. or
stretch
irThe committee is satisfresponsible behaviour.ied that the incentive structure
for the board does not raise environmental,social or governance risks by
inadvertently motivating Bonus payments do not form part of salary for pension
purposes.
Elements of remuneration
(a) The salarBase salar significant changes in responsibilityies of the ex y and
benefitsecutive directors are reviewed with effect from 1 January each
year.Interim salary reviews may be carried out following
bof their by Towers Pusiness oerrin.The overseas and also reflect
responsibility . The
salaries take account of a benchmarking exercise based on similarly sized
companies
with a significant part
verall objective is, individual performance, internal relativities and salary
and
to achiev other market information supplied
and the proabovemarket norvision of a companms,on the delivycar (or a cash
alloery of
superior perf e salar
wance in lieu of a car),ormance
y levels which pro,through the companvide a mar health
insury'ance
and lifs incentiv ket competitive schemes.e base salary,with
the
opportunity to earn e assuranceBenef.its include pension
arrangements
* Trespectivowers Pe names in the ferrin and Alithos haorm and content in which
they appearve each given,and not withdrawn,their wr.Copies of the consent
letteritten consent to the issue of this document with the inclusion of the refs
are available for inspection at the company's registered ofference to theirice.
38 Dire- (continued)
tors'
Remu-
erat-
on
Repo-
t
At 31
Dece-
ber
2007
(b)
For
the
yPer-
orma-
ce-r
depe-
dent
on
the
atta-
nment
of
defe-
r
under
revi-
w
elat-
d
bon,-
he
exec-
tivus
sche-
e
ined
PBTe
dire-
torA
(pro-
s
parit
beft-
cipa-
ed in
an
annu-
l
perf-
rman-
e-re-
ated
bonus
sche-
e,pa-
ments
under
which
were-
tems
and
disc-
ntin-
ed
oper-
tions
and
using
cons-
ant
exch-
nge
rore
tax
and
amor-
tes.-
he
comm-
ttee
beli-
vtis-
tion)
targ-
ts of
the
grou-
es
that
PBT,-
djus-
ed
for
the
effe-
t of
any
exce-
tion-
l
business success
within the group.
For achievement
of a threshold
level of profits
which is slightl
increases on a
straight line
basis up to 80%
of base salary
for achievement
of a stretch
profable on
achievement of
the bit
target.udgeted
target and the
amount of bonusof
pre-defined key
business
objectives
approved by the
RemA further 20%
was payable on
achievement
responsibilities
and support
longer-term
business
development.uner-
tion
Committee.These
objectives vary
for each
individual
according to
theirpayable in
cash with any
excess balance
being awarded in
the forAny such
bonus up to the
value of 50% of
the executive
director's salary
was ex
The PBTconstant exchange rA budgeted tarates).gets used for the above scheme
are the same
as the company's budgeted PBTA for the corresponding period (assuming The
companRemy
performed well in 2007,with PBTA exceeding target but below maximum full
stretch tar
addition the committee agreed that the element of bonuneration Committee agreed
that the
resulting payment for this component of the bonus should be at the 75.2% of
base salar get
performance. As a result they level.In
between 16% and 20% of us dependent on achievement of pre-defined key business
objectives
base salary. should be paid at
(c) Perf
conditional
allocations of
the companThe P
ormance Sharerformance Share Plan was introduced in Jule Plan (Long-term
incentiv y's
shares which are released to them only 2004.Under the plan, e plan)
the ex y on the achievecutive directorement of demanding perfs
and certain
other senior exormance tarecutives receivgets.e Follothe plan
has
increased to twwing approval of revisions to the plan at the
company's
2007 Annual General Meeting, the maximum annual award of
shares payable
under half times base salar
o and a half times base salary. The annual award approved by the
committee for
the year under review is one and ashares under the plan vy for the ex
o
est is deter ecutivmined,e directoras to tws and one times
salarothirds of the
award,y for senior exby the companecutivy's nores belomalised earw
board levnings
per share groel.The extent to which allocations ofwth relative to the
RPI being
share prver a single three-yice groear perwth plus dividends paid)
using a
bespokiod and,as to the remaining third of the ae global group of 16
supporward,by the compant sery's rvices compananking by reference to
ies as a
comparTSR (total shareholder returator group,again ovn;asingle
three-year
period.er
In relation to arespects:half of anwards made in previous yyaward is determined
bearys,the
companthe conditions subject to which allocations of shares vy's normalised
earnings per
share growth relativest under this plan diffe to the RPI oer in a number of and
the other
half of the award by the company's ranking by reference to TSR using the
FTSE-100
constituent companies as at the date of thever a single three year periodaward
as a
comparator group,again over a single three year period.There is no provision
for retesting.
The fon 31 December 2009:ollowing targets apply to two-thirds of awards granted
in the year
under review,with the three-year EPS (earnings per share) period ending
Average annual growth in EPS Proportion of allocation
vesting
RPI + 6% per annLess than RPI + 6% per annum NilRPI + 6 - 11% per annum (18%
over
RPI + 11% per annum (33% oumver three years) three years)25% Pro rata
between 25% and
100%100%
The same targets apply to the first half of
awards granted in previous years.
39
(c) The fPerfolloormance Sharwing targets apple Plan (Long-term incentivy to
the remaining
one third of each ae plan) (continward granted in the yued)ear under review:
Ranking of the company against
the bespoke
comparator group by reference to Proportion of
allocation vesting
TSR
Below median Nil
BetwMedianeen median and upper Pro r 25%Upper quartileata between 25%
and 100%100%
quartile
The same tarFTSE-100 constituent companies as at the date of the agets apply to
the second
half of each award grward.anted in previous years,but the ranking applied is
that of the
company against the In addition,respect of PSP aparticipants in the PSP will
receivwards
vesting at the end of the perfe a further share aormance perward with a value
equivalent to
the dividends which wiod.ould have been paid in In relation to aexceeded the
growards made
befwth in RPI by 10% oore 2007,ver a perfthere will onlormance pery be a triod
of three
fansfer of shares under the second half if the groinancial years.wth in EPS of
the company
has FurRemtherunermoreation Committee is satisf,there will only be a tried that
the
companansfer of shares under the fy's TSR perfinal third (or second half in
respect of
aormance is reflective of the company'wards made befs underlying perfore 2007)
if
theormance. The Remappropr both in teriate perf uneration Committee
believormance measure
for the perfes that a combination of earormance share plan,nings per share
groas it
provides a transparent method of assessing the companwth and total shareholder
return
targets is the mosty's performance,
been achievms of undered by reference to the companlying financial
y's earnings
performance and retury's audited accounts which prons to shareholdervide an
per
accessibs.The companle and objectivy calculates whether the EPS perfe
measure of the companormance targets haveshare,whilst TSR ranking will be
determined by Towers Perrin whose findings are verified by Alithos.
disabilityAwards will not nor,redundancymall,retirement or fyvest where an
emploollowing a change of control of,yee ceases to be emploor sale outside the
group
of,yed within the group unless cessation of emplohis or her employing
companyment is
due to death,yinjury,vesting will occur in the normal course and the perf.In
these
situations, Onl
ormance targets will need to be satisfied pro rata to the time the
allocation
has been held.employayee was emploproportion of the ayed,will
vward,based on
the time which has elapsed from the award date to the end of the last
complete
month in which the a greater award to vest if it considerest in these
circumstances in most cases.s it to be appropriate in exceptional
circumstances.The Remuneration Committee does however retain the ability
to
allow for The company's current policy is to use market purchased shares
to
satisfy performance share plan awards. The
Remshareholderuners'interests.ation
Committee believAccordingles that continued shareholding by executive
directors will strengthen the alignment of their interests with made on
the
vesting of performance share plan ay,executive directorwards until they
has of
the companve by will be expected to retain shares to the value of 30% of
the
afteruilt up a shareholding equivalent to one times base salary.-tax
gains
Chief ex oAver the past freview of the compan ecutive's rem
ew years has been somewhat behind competitivy'
uneration rs executive remevieunerwation conducted f
e maror the committee bket norms.Folloy wing a consultation with major
shareholderTowers Perrin identified that the chief executivs and
shareholdere's total pay representativ executive's reme bodies,uneration
with
effthe Remunerect from 1 Janation Committee has therefuary 2008
wherebore
approy he will receivved a change to the Pe annual awards up to a face
value
of 200% of base salarerformance Share Plan element of the chiefy
a(maintaining
the same 2/3 and 1/3 split on EPS and level which is closer to, but
still some
way behind,TSR respectivmarket norms.ely).The RemThis change results in
the
chief exuneration Committee will kecutiveep this position under
reviewe's
total direct compensation being at.
40 Directors' Remuneration Report
At 31 December 2007
FThe chairees,ser
£51,030, with a furman'
vice contracts and letters of as
ann
ther ther £42,000 fual fee
£42,000 is £250,000.or the
fual fee is role of deputy
£250,000.or chairThe annual f
the role of ppointmentee for the
deputy non-ex
chairThe
annual f
ppointment-
e for the
non-ex
man, ecutive directors, which is set by the
chairman and the executive
directors, isand £15,750 f or the role of
senior independent
director.No other f £15,750 fees are paid
for the chairor
membermanship of each of the ship of the
board committees.Audit
and RemThese funeration Committeesees are
subject to
per
executiviodic review which take directors.es into account comparative fee
levels in other groups of
a similar size and the anticipated time commitment for the non- The service
contracts of those who
ser ved as executive directors during the period are dated as follows: Nick
BucklesT
2 June
2004
Grrevahame Gibsonor 2 June
Dighton 20046
December
2006
The contrexecutive directoracts of Messrs on 12 months's Buckles,Dighton and
Gibson are
ternotice.There are no liquidated damages prominable by the companvisions fy
on 12 months'or
compensation panotice.The contracts are terminable by the company reserves
the right to pay salar
yable upon early termination, but
thedirectors on no more than 12
months'notice and that pay in lieu of
notice.yments fIt is the
company's policy that it should be able to
terminate service
contracts of executive entitlements for
the notice period. The
Remuneration Committee is satisfor
termination of contried that
the current aract are restrricted to the
value of salary and
other contractualpractice.angements are
appropriate and in line
with best The chairInthe case of Mr
Seligman,man and the other
non-exthis term began on 1 Janecutive
directors do not hauary
2006,vand in the case of Mr Elliott,e
service contracts but
letterit began on 1 September 2006.s of
appointment which provide
fThe other non-exor three-year terms.
directors have been granted
three y
ecutiverequired to stand for re-election
by the shareholderear
extensions to their initial letters at
least once evers of
appointment beginning on 19 May three
years.y 2007.All continuing
directors are
It is the companfees.Mr Buckles is a non-exy's policy that executivecutive
director of e
directorArs mariva plc fy each hold not more than one exteror which he
received fees of £35,500 in
the ynal non-executive appointment and may retain any associated other
executive directors
currently holds an external non-executive appointment.
ear ended 31 December 2007. Neither of the
PThe perferformance
gra 2007, based on a hormance
grypothetical shareholding waph
belo ph
w shows the total cum orth £100,ulative shareholder
return of the company
from its first day of listing,20 July 2004,until 31
Decemberpercompared
with the return achieved by the FTSE-100
constituent companies over the
same geogriod.aphic coThe directorvs believe this
to be an appropriate
form of broad equity market index against which to
base a comparison given
the size andcompares the companerage of the
company's perfory and the fact
that,since December 2007,the company has itself
become a FTSE 100
company.The graph also shareholder return purposes
in the companmance over
the same pery's perfiod with the bespoke group of
companies which is used
now for comparative totalThe values attributable to
the bespoke comparator
group companies haormance share plan.(Until 2007,ve
been wthe FTSE-100
constituent companies were used for this purpose).
companies and spot
exchange rates were used at each of the relevant
dates to obtain constant
cureighted in accordance with the mrency.arket
capitalisation of the
230 G4S plc
FTSE 100 Index
210 Bespoke comparator group
190
170
15 0
13 0
110
90
20 Jul 31 Dec 31 Dec 31 Dec 31 Dec
2004 2004 2005 2006 2007
This graph shows the value at 31 December 2007 of £100 invested in G4S plc on 20
July 2004 compared with the value of £100 invested at the same time in both the
FTSE 100 Index and the bespoke comparator group used in the company's PSP
scheme. The other points plotted show the value at the intervening financial
year ends.
41
THE
FOL-
OWI-
G
INF-
RMA-
ION
HAS
BEEN
AUD-
TED
Base
sal-
ries
and
bon-
ses
Bene-
its
(exc- Perfor-
uding ance
Salary pens- related 2007 2006 2006 2006
2006
on
and cont- bonus Total Total Total
Total Total
fees ibut-
on)
£ ££££ ££££
££££
Cha-
rma-
(
Alf 237,5- - - 237,500161,250 161,250
161,250 161,250
Duc- 0
-Pn-
n-e-
ecu-
ivJ-
red-
re)-
en
(re- - - - -
ired
30
June
200-
)gen
Phi-
ip--
øre-
sen
(see 705,0- 30,1- 671,1601,406,2711,182,9- 1,182,990
1,182,9- 1,182,990
note 0 1 0 0
1
bel-
Tre-
or
Dig-
ton-
)
(see 436,0- 18,0- 397,632 851,715724,763 724,763
724,763 724,763
note 0 3
1
bel-
Gra-
ame
Gib-
onw)
(see 482,0- 29,5- 448,721 960,258
not- 6 1
s 1
& 2
bel-
w)
Mark 106,19- -- -- 106,19049,815 67,633T-
67,633T- 67,633Thor
Ell- 49,815 or or
ott
Bo 65,190 - - 65,19016,2006- 16,2006-
16,2006- 16,20060,550
Ler- ,550 ,550 ,550
niu-
lief
Kra-
up
Wal- 49,815 - - 49,81546,800(- 46,800(-
46,800(- 46,800(retir-
emar etired etired etired
d 30 June
Sch- 30 June 30 June 30
June 2006)
idt 2006) 2006) 2006)
Mark 49,815- -- - -22,500 22,500 22,500
22,500
Sel-
gman
Sir 65,190 - -- 49,81565,190 46,8006-
46,8006- 46,80061,800
Mal- ,800 ,800
olm
Wil-
iam-
on
Tot- 2,246,- 77,7- 1,517,- 3,841,7593,310,2-
3,310,280 3,310,2- 3,310,280
l 31 5 13 0 0
Not-
s:
1 the aThe perfward of deformance-related bonerred G4S shares,uses derbased
on a share prived
from the companice of 222.67py's bonus scheme w,being the aere paid as 50%
of basic salarverage
middle market closing pry in cash and the remainder ice of the company's
ord through
shares over the three days immediately following the date of the company's
preliminary results
announcement, 11 March 2008. The deferinaryawards were:red share
TNick Bucklesrevor Dighton 143,110 sharesGrahame Gibson80,673 shares90,826
shares
2 income tax.Grahame Gibson was reimbThe company also paid air fares amounting
to
£29,013 fursed £64,761 for expenses associated with his relocation from the
West
Midlands to Surrey.This sum is subject to UK or flights between the UK and
the USA
for Mr Gibson's wife and children. This
sum is taxable in
the USA.
The annual base salaries of the executive directors and the annual fees of
the
non-executive directors at 31 December 2007 were:
Executive £
directors
Nick 705,000
BucklesTrevor
Dighton
Grahame Gibson 436,000490,875
Non-executive £
directors
Alf Duch-PLord 250,000
Condonedersen
(chairman)
Mark 108,780Thorleif
KrElliottar51,030
Bo Lerenius up 66,780Mar51,030
Sir Malcolm k 51,03066,780
SeligmanWilliams-
n
42 Directors' Remuneration Report
(continued)
At 31 December 2007
Directors' share options
Option
Nick Buckles
AB
DC
E
CB
E
Option Option BA= 1996 Securicor Executive Share Option Scheme, exercisable
until
June 2008 Option C = Secur= Securicor Exicor Executivecutive Share Option
Schemee
Share Option Scheme,exercisable until December 2009Option D= Securicor
Executive
Share Option Scheme,,exexercisabercisable until June 2010 Option E =
Securicor
Executive Share Option Scheme, exercisable until December 2010le until
December 2011
The abounder these schemes will be madeve options,which had been gr.anted
over
Securicor plc shares,were rolled over into options over G4S plc shares.No
further
grants of options
Neither of the above directors exercised options under any of the above
schemes
during the year. Asreferared to aboresult of implementation of the Scheme of
ve
ceased to apply.This would not occur under the curArrangement of Securicor
plc in
Julrent Performance Share Plan.y 2004,the performance conditions for the
executive
share options
The market price of an ordinary share at 31 December 2006 was 188p. At 31
December
2007 it was 244.75p. The highest and lowest market prices of an ordinary
share during
the year to 31 December 2007 were 244.75p and 181.75p respectively.
43
Directors' interests in Performance Share Plan
Shares
awarded
conditional- Market price at
y
At during year Date of date of award Vesting date
2004 awards At 31.12.07
31.12.06 award
Nick BucklesT 1,062,0- 483,250 06.06.07 212.50p
06.06.10 368,830 1,176,495
5
Grevrahame
746,500735,110298,860336,48006.06.0706.06.07212.50p212.50p06.06.1006.06.10276,13
0252,460769,-
Gibsonor Dighton30819,130
The conditions subject to which allocations of shares vest under this plan are
described under (c)
Performance Share Plan on pages 38 and 39. During the year under review the
following performance share plan
awards from 2004 vested: Nick BucklesT
232,362 shares gross (368,830 maximum award; 63% vested;
136,902 shares
released after tax, NIC etc) Grrevahame Gibsonor Dighton
173,961 shares gross
(276,130 maxim159,049 shares gross (252,460 maximum aum
award;ward;63% v63%
vested;ested;114,575 shares released after tax,102,493 shares
released after
tax,NIC etc)NIC etc) The market price at date of award (21 July
2004) was
£1.23 per share. The market price at the vesting date (30
August 2007) was
£1.985 per share.
Dir(including aectors' inter
as shown abowards of def
ests in shar
ve) erred shares b es of G4S plc (unaudited)ut excluding shares under option and
shares awarded conditionally under the performance share plan,both
At 31.12.07
- At 31.12.06
t
-
-
-
-
-
-
-
6
Nick BucklesLord Condon 1,079,849
- 975,043
-
-
-
-
-
3
Trevor Dighton 729,4272,000
- 650,9642,000Alf Duch-P
-
-
-
-
-
-
-
-
-
-
-
-
-
f
-
-
-
-
-
P
Mark Elliottedersen 128,560
- 128,560Grahame
- Gibson--
-
-
-
-
-
-
-
-
-
-
-
e
-
-
-
-
-
-
-
-
Thorleif Kr 512,409
- 397,834Bo
- Lereniusarup3,2063,206
-
-
-
-
-
-
o
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
6
Mar 16,000
50,0002,000
All interests shown above are
beneficial.
the aChanges in the exward of deferecutivred shares relating to the 2007
annedirectors'holdings have taken
place since 31 December 2007 relating to the vual bonus scheme as a result of
which their interests as at 7
esting of the 2005 PApril 2008 are:erformance Share Plan and Nick BucklesT
1,202,544
Grrevahame Gibsonor Dighton
821,284641,878
As at 31 December 2007,in the Group 4 Securicor Emploeach of Nick Buckles,yee
Benefit Trust.Trevor Dighton
and Grahame Gibson also had a deemed interest in 5,209,320 ordinary shares held
44 Directors' Remuneration Report (continued)
At 31 December 2007
DirFor the perectors' pension
entitlements
scheme with a noriod under reviewmal retirement age of 60.,both Nick Buckles
and Trevor Dighton
participated in non-contributory categories of a group defined benefit
pension1/52ths of their final
pensionable salaries.An actuarTrevor Dighton accrial reduction is applied to
pensions paued pension at
a rate of 1/30ths and Nick Buckles accryable befued pension at a rate of
where retirement is deferred
beyond normal retirement age.
ore normal retirement age and an
increase is applied For death
befprospective pension at the age
of 60 plus a returore
retirement a capital sum equal to
fn of anour times pensionaby
contributions paid prle salarior to
the admission to the
non-contry is payable,together with
a spouse's pension of 50%
of the member'ibutory category.s
For death in retirement, a
spouse's pension of 50% of the
member's pre-commutation
pension is payable. Post retirement
pensions increase in line
with the increase in the Retail
Prices Index subject to a
maximum of 5% per annum. Grahame
Gibson opted for enhanced
protection and receives a salary
supplement in lieu of pension
of 40% of his basic salary. Pension
entitlements and
corresponding transfer values
increased as follows during the
12 months ended 31 December 2007
(all figures are in £'000s):
Increase Total Value of Total
Transfer value Transfer value
Gross in accrued accrued net increase change in
of accrued of accrued
increase in pension net pension in accrual transfer value
pension pension
accrued of at 31/12/07 over period during period
at 31/12/07 at 31/12/06
pension inflation
(1) (2) (3) (4) (5)
(6) (7)
Nick 31 21
Buck-
esTr-
v
ahame
Gibs-
nor
Digh-
on
294 248 606
3,735 3,129
Gr 1711 153 21762 27348 362607
1,1282,975
Notes
(i) of Mr Gibson whose accrPension accruals shown are the amounts which wual
ended on 5 April 2006.ould be paid
annually on retirement based on service to the end of the year with the
exception Transfer values have been
calculated in accordance with version 8.1 of guidance note GN11 issued by
the actuarial profession.
(ii)
(ii- serThe value of net increase (4) represents the incremental value to
the director of his ser on 5 vice terApril
) 2006.minated at the year-end.It is based on the increase in accrued
pension (2) with the exception of Mr Gibson
whose accr vice during the year, calculated on the assumption thatual
ended
(iv) directorThe change in trs,such as stock maransfer value (5) includes the
effket movements.ect of fluctuations in such value due to factors beyond
the control of the company and the Mr Gibson receives a salary supplement
in lieu of pension of 40% of his basic salary.
(v)
LorChaird Condon
7 Aprman of the Remil 2008uneration Committee
Statement of directorannual report and the financial
statementss'responsibilities in respect of the45 The directorlaw and
regulations.s are responsible for preparing the Annual Report and the group and
parent company financial statements, in accordance with applicable Companto
prepare the group fy law requires the directorinancial statements in accordance
with IFRSs as adopted bs to prepare group and parent company financial
statements for each financial year.Under that law they are required company
financial statements in accordance with UK Accounting Standards and applicaby
the EU and applicable law (UK Generle laallw and hay Accepted ve elected to
prepare the parentAccounting Practice). The group fgroup;the Companies inancial
statements are required bAct 1985 provides in relation to such fy law and IFRSs
as adopted binancial statements that refy the EU to present fairerences in the
relevant parly the financial position and the perft of that Act to financial
statementsormance of the giving a true and fair view are references to their
achieving a fair presentation.
The parent company financial statements are required by law to give a true and
fair view of the state of affairs of the parent company. In preparing each of
the group and parent company financial statements, the directors are required
to: >>select suitable accounting policies and then apply them consistently; >
makfor the group fe judgments and estimates that are reasonabinancial
statements,state whether they hale and prve been prepared in accordance with
IFRSs as adopted budent;>for the parent company financial statements,state
whether applicable UK Accounting Standards have been followed,y the EU;subject
to any material > prepare the fdepartures disclosed and explained in the parent
company financial statements;andcontinue in binancial statements on the going
concerusiness.n basis unless it is inappropriate to presume that the group and
the parent company will
The directorparent compans are responsiby and enable them to ensure that its fle
for keeping proper accounting records that disclose with reasonabinancial
statements comply with the Companies le accurAct 1985.acy at anThey hay time the
financial position of the taking such steps as are reasonably open to them to
safeguard the assets of the group and to prevent and detect fraud and other irve
general responsibility fregularities.or Under applicabCorporate Govle laernance
Statement which complw and regulations,the directory with that las are also
responsibw and those regulations.le for preparing a Report of the
Directors,Directors'Remuneration Report and
46 Independent auditor's report to the members of G4S plc
Wwhich compre have audited the group and parent companise the Consolidated
Income Statement,y financial statements (‘the fthe
Consolidated and Pinancial statements') of G4S plc for the year ended 31
December 2007 the Consolidated Statement of Recognised
Income and Expense and the related notes.arent CompanThese fy Balance
Sheets,the Consolidated Cash Flow Statement,accounting
policies set out therein.We have also audited the information in the
Directors'Remunerinancial statements haation Report that is
descrve been prepared under theibed as having been audited.
This reporundertaken so that wt is made solele might state to the company to
the company's membery's members,as a body,in
accordance with section 235 of the Companies Act 1985. Our audit work has
been purpose. To the fullest extent permitted b
s those matters we are s those matters we are required to state to
them in an auditor's report and for no othermembers as
required to state to them in a body,for our audit work,for this repory
law,we do not accept or assume responsibility to ant,or
an auditor's report and for for the opinions we have formed.yone other
than the company and the company's
no othermembers as a body,for
our audit work,for this
repory law,we do not accept
or assume responsibility to
ant,or for the opinions we
have formed.yone other than
the company and the company's
RespectivThe directors'e rresponsibilities fesponsibilities of diror
preparing the ectors and auditors International Financial Reporting
Standards (IFRSs) as adopted bAnnual Report and the Consolidated Financial
Statements in accordance with applicaby the EU and for preparing the
Parent Companle law andRemuneration Report in accordance with applicable
law and UK Accounting Standards (UK Generally
y
financial statements and the Directors'
Statement of Directors' Responsibilities on page 45.
Accepted Accounting Practice) are set out in the
Our responsibility is to audit the flegal and regulatory requirements and
Interinancial statements and the parnational Standards
on t of the DirectorAuditing (UK and Ireland).s'Remuneration Report to be
audited in accordance with relevant WDirectore
repors't to yRemunerou our opinion as to whether the fation Report to be
audited havinancial statements give a true and fair
view and whether the financial statements and the part of the financial
statements, Article 4 of the IAS Regulation.e been
properWe also reporly prepared in accordance with the Companies t to y
Act 1985 and, as regards the groupstatements.This
information given in the Reporou if,in our opinion,the
Directors'Report is not consistent with the financial
that is cross referred from the group results section
of
the Report of the Directors includes that specift
of
the Directors.In addition wic information presented
in
the Operating and Financial Reviewkept proper
accounting records,if we have not receive report to
you if,in our opinion,the company has not regarding
directors' remuneration and other transactions is not
disclosed.ed all the information and explanations we
require for our audit,or if information specified by
law Wfor our review be review whether the Cory the
Listing Rules of the Financial Serporate Governance
Statement reflects the companvices Authority, and w
y's compliance with the nine provisions of the
Combined Code specified board's statements on internal
control cover all risks and controls, or for
e
report if it does not. We are not required to
consider whether theprocedures or its risk and control
procedures.m an opinion on the effectiveness of the
group's corporate governance
Wimplications feread other infor our reporormation contained in the Annual
Report and consider whether it is
consistent with the audited financial statements. We consider the
responsibilities do not extend to ant if we
become ay other infware of anormation.y apparent misstatements or material
inconsistencies with the financial
statements.Our Basis of audit opinionW includes examination,e conducted our
audit in accordance with Interon
a test basis,of evidence relevant to the amounts anational Standards on
Auditing (UK and Ireland) issued bnd
disclosures in the fy the Auditing Practices Board. An auditRemuneration
Reportto be audited.It also includes
an assessment of the significant estimates and judgements made binancial
statements and the pary the
directort of the Directors' of the financial statements,y disclosed.and of
whether the accounting policies
are appropriate to the group'
s in the preparationadequatels
and company's
circumstances,consistently
applied and
Wsuffe planned and perficient evidence to givormed our audit so as to obtain all
the information and explanations which we considered necessary in order to
provide us with from material misstatement,e reasonable assurance that the
financial statements and the part of the Directors'Remuneration Report to be
audited are freethe presentation of information in the fwhether caused binancial
statements and the pary fraud or other irregulart of the Directority or error.In
fors'ming our opinion wRemuneration Repore also evaluated the ot to be
audited.verall adequacy of
47
OpinionIn our opinion:
> the group financial statements give a true and fair view, in accordance with
IFRSs as adopted
by the EU, of the state of the group's affairs > the group fat 31 December 2007
and of its
profit for the year then ended;>the parent companinancial statements ha of the
parent company
financial statements giv ve been proper
y's affairs at 31 December 2007;e a
tr ly prepared in accordance with the
Companies ue and fair view, in
accordance with UK GenerallAct 1985
and y Accepted Accounting PrArticle 4
of the IAS Regulation;actice,of the
state
> the parent companin accordance with the Companies y financial statements and
the parAct
1985;andt of the Directors'Remuneration Report to be audited have been properly
prepared > the
information given in the Report of the Directors is consistent with the
financial statements.
KPMG Audit Chartered AccountantsPlc
8 Salisbury Square
7Registered AuditorApril 2008 EC4Y 8BBLondon
48 Consolidated income statement
For the year ended 31 December 2007
2007 2006
Notes £m £m
Continuing
operations
Revenue 5,64,490.4- - 4,036.8
- -
- -
- -
- -
- -
8 8
Profit from
operations before
amortisation of
acquisition-rela-
ed intangib Share
of profofprofit
from associates
le assets and
share
it from 309.1 - 271.6
associates -
-
-
6
3.0 2.8 PrAmorofit frtisation
of
acquisition-related
intangibom operations
before amortisation of
acquisition-rle
assetselated intangible
assets
(PBITA)6312.1274.4 (36.0)
PrFinance
incomeofit from operations
before interest
and taxation (PBIT)
(41.6) - 238.4
-
-
-
4
Finance costs
12 92.6 79.5
13(146.3) - 199.5
-
-
-
5
--BefOn amorore (71.1) (67.4)
amortisation of
acquisition-related
intangibtisation of
acquisition-related
intangible assetsle
assets 14.9
10.8
14 (56.2) (56.6)
Profit after 160.6 - 142.9
taxation -
-
-
9
Loss from 7 - (33.0)
discontinued
operations
Profit for the 160.6 - 109.9
year -
-
-
9
Attributable to:
MinorEquity 147.2 96.5
holderity
interestss of the
parent
13.4 13.4
Profit for the 160.6 - 109.9
year -
-
-
9
Earnings per 16
share
attributable to
equity
shareholders of
the parent For
profBasicit from
continuing
operations:
Diluted
11.5p - 10.2p
-
-
-
p
11.5p - 10.2p
-
-
-
p
BasicFor profit 11.5p 7.6p
from continuing
and discontinued
operations:Dilut-
d
11.5p 7.6p
Consolidated balance sheet 4 9
At 31 December 2007
2007
2006
Notes £m
£m
ASSETS Non-curGoodwillrent assets
Other acquisition-related intangib
1 9 1,332.4
1,175.6
Other le assets le assets le assets 1 9 219.9
220.6
intangib-
e assets
Property
1 9 31.3
22.2
In , plant , plant and 2 0 400.9
354.9
and equipment
equipment
Trvestme-
t in
associat-
s
2 2 10.2
7.3
Defade and other receivaberred tax assetsles
25 69.4
49.9
36 84.2
115.7
2,148.3
1,946.2
CurInrent
assets
Invvento-
ies
23 57.1
49.5
Trade and other receivabestmentsles
24 73.2
73.7
Cash and cash equivalents
25 885.0
798.3
Assets classified as held for sale
28 381.3
307.5
27 130.9
-
1,527.5
1,229.0
Total 6 3,675.8
3,175.2
assets
LIABILIT-
ES
CurBank
orent
liabilit-
es
Bank
loansver-
rafts
2 8, 29 (109.9)
(97.5)
ObTligations under finance leases
29 (80.6)
(70.1)
30 (16.2)
(13.6)
Currade and other payables
31 (845.7)
Retirement benefrent tax liabilities
(710.2)
it obligations it obligations (18.0)
(26.3)
ProLiabilities associated with assets classifvisions
34 (47.3)
(42.2)
ied as ied as ied as held
held for held for for sale
sale sale
35 (23.6)
(41.3)
27 (78.3)
-
(1,219.6)
(1,001.2)
Non-curBank loansrent liabilities
Loan
notes
29 (729.1)
(830.3)
ObTligations under finance leases
29 (290.4)
-
30 (46.0)
(42.5)
Retirement benefrade and other pait obyabligationsles
31 (38.7)
(1.0)
Provisio-
s
34 (120.1)
(208.3)
Deferred
tax
liabilit-
es
35 (33.9)
(38.7)
36 (75.0)
(81.7)
(1,333.2)
(1,202.5)
Total 6 (2,552.8)
(2,203.7)
liabilit-
es
Net 1,123.0
971.5
assets
EQUITYSh-
re
capital
Share
premium
and reser
37 320.2
320.0
Equity ves ves 38 766.9
615.2
attribut-
b
Minority interestsle to equity holders of the parent 35.9 1,087.1
935.2
36.3
Total 1,123.0
971.5
equity
The consolidated financial statements were approved by the board of
directors and authorised for issue on 7 April 2008. They were
signed on its behalf by: Nick BucklesDirector
DirectorT- DirectorT- DirectorTr-
evor evor vor Dighton
Dighton Dighton
50 Consolidated cash flow statement
For the year ended 31 December 2007
2007 2006
Notes £m £m
PrLoss befofit before taxation from discontinore taxationued operations (0.3)
216.8 199.5
(31.6)
Adjustments fFinance incomeor:
Finance costs
( 92.6) (79.5)
Finance costs attr
146.3 118.4
Depreciation of propeributabtyle to discontinued operations
3.3 3.0
AmorAmortisation of acquisition-related intangib,plant and equipmenttisation of
other 91.1 82.8
intangible assetsle assets 41.6
36.0
Impairment of other intangible assets
8.5 7.4
Profit on disposal of property, plant and equipment and intangible assets other
than - 2.5
acquisition-related (ProfShare of profit)/loss on disposal of discontinued
operations
( 14.4) (1.6)
(12.0)
Equity-settled trit from associates
14.0
ansactions ansactions
( 3.0) (2.8)
4.1 5.0
Operating cash flow before movements in working capital Increase in inIncrease
in 389.4 353.1
receivabventories
(9.6)
Increase/(decrease) in pales
(6.9)
yables yables
(69.7) (17.7)
Decrease in provisions
84.1 (13.5)
(36.7) (47.6)
Cash generated by operations
357.5 267.4
Tax paid
(66.2) (70.3)
Net cash flow from operating activities
291.3 197.1
InInterest receivvesting activities
Cash flow ed
24.9 11.5
Purchases of properfrom associatesty
1.0 2.7
Proceeds on disposal of proper,plant and equipment and intangibty,le assets
other than (134.5) (93.2)
acquisition-related Acquisition of subsidiar
plant and equipment plant and equipment and plant and equipment and
intangible assets 25.5 10.7
and intangible intangible assets other than other than
acquisition-related Net cash
assets other than acquisition-related Net cash balances acquiredies
acquisition-related balances acquiredies
Net cash balances
acquiredies
(151.6) (96.7)
Disposal of subsidiaries
11.6 3.5
Purchase of inv
7.9 9.9
Own shares purchasedestments
(0.3) (21.8)
(3.1) (3.1)
Net cash used in investing activities
(218.6) (176.5)
Financing activitiesShare issues
Dividends paid to minority interests
0.9 9.1
Loan to minority interests
(3.8) (3.0)
Dividends paid to equity shareholderProceeds on issue of loan notess of the
parent RepaOther (13.3) (49.8)--
net moyment of revvement in borolving credit facilities with proceeds from
issue of loan 59.3)
notes
280.6 -
(280.6) -
Interest paid rowings
140.4 95.1
Net cash floRepayment of obw from hedging fligations under financial
instrinance (79.9) (59.3)
leasesuments (4.3)
11.8
(4.6) (8.4)
Net cash flow from financing activities
(23.9) (4.5)
Net increase in cash, cash equivalents and bank overdrafts Cash,Effect of fcash
equivalents 39 48.8 16.1
and bank ooreign exchange rate fluctuations on cash heldverdrafts at the
beginning of the
year
210.0 205.1
11.9 (11.2)
Cash, cash equivalents and bank overdrafts at the end of the year
28 270.7 210.0
Consolidated statement of recognised income and expense 5 1
For the year ended 31 December 2007
2007-
2-
-
06
-
6
£m £m
Exchange diffChange in fair value of net inerences on translation of 37.4-
(-
foreign operations Change in fair value of cash flovestment hedging -
2-
fw hedging financial instrinancial instruments -
6)
-
-
)
(19.0)
1-
.6
ActuarTax on items takial gains/(losses) on defen directly to ( 7.0)
equityined retirement benefit schemesuments (14.0)
62.1-
(-
-
4-
-
7)
-
-
)
- -
1-
- -
9-
- -
9
- -
9 9
Net recognised income 222.7-
4-
-
.2
-
2
AttrEquity holdeributable to:
Minority interestss of the parent 209.3-
3-
-
.8
-
8
13.4-
1-
-
.4
-
4
Net recognised income 222.7-
4-
-
.2
-
2
52 Notes to the consolidated financial statements
1 AGeneral inf to G4S plcresolution was passed at
the 2007
ormation ormation
. Annual General Meeting, held on 31 May 2007, to
change the company's name from Group 4 Securicor
plcincorporate the fG4S plc is a company
incorporated in the United Kingdom under the Companies Act
1985. The consolidated financial statements
and the group's interest in associates and jointlinancial statements of the
company and entities (its subsidiaries) controlled by
the company (collectively comprising the group)its principal activities are
set out in note 6 and in the Opery controlled entities
made up to 31 December each yating and Financial Review on pages 6 to
27.ear.The nature of the group's operations and and in a wide
range of functional currencies, the most significant being the euro,
The
group operates throughout the worldpresented in
sterling,as the group's primarthe US dollar and sterling.The
group's
financial statements are The address of the
registered office is given on page 113.y listing is in the
UK.Foreign operations are included in accordance with the
policies set out in note 3.
2 The consolidated fStatement of compliance use in the European Union y
financial statements in accordance with UK
(adopted IFRSs).inancial statements of the group haThe companve been
prepared in accordance with Intery has elected to prepare its parent
compannational Financial Reporting Standards adopted forGenerally
Accepted Accounting Practice (UK GAAP). These are presented on pages
97 to 105.
3 Significant accounting policies
(a) of preparation except fJudgements made bor the revaluation of
cerinancial
The statements of the group hatain non-current assets and fve been
prepared
conso- under the going concerinancial instruments.The principal
accounting
idated policies adopted are set out belon basis and using the historical
cost
fBasis basis,w.
estimates with a signify the directoricant risk of maters in the application of
these accounting polices which haial adjustment,are discussed in note 4.ve a
significant effect on the financial statements,and durThe comparing the
curativrent
yeincome statement fear.Revor the year ended 31 December 2006 has been
re-presented
for operations qualifying as discontinuedto the figures published previouslenue
from
continyuing operations has been reduced by £316.8m and PBT has been reduced by
£0.5m
compared sheet as at 31 December 2006 has been restated to reflect the
completion
dur.Further details of discontinued operations are presented within note 7.In
addition,the comparative balancemade during 2006.Adjustments made to the proing
2007
of the initial accounting in respect of acquisitions equivalent increase in the
reported value of goodwill.visional calculation of the fair values of assets
and
liabilities acquired amount to £4.7m,The impact of these adjustments on the net
assets acquired is presented in note 17.with an (b) Basis of consolidation
SubsidiariesSubsidiar policies of an inies are entities controlled bvestee
entity so
as to obtain benefy the group.Control is achievits from its activities,ed where
the
group has the power to govern the financial and operatingterms of any
shareholder
agreement.determined either by the group's ownership percentage,or by the
acquisition.On acquisition,Any excess of the cost of acquisition othe assets and
liabilities and contingent liabilities of the acquired bvusiness are measured at
their fair values at the date ofdeficiency in the cost of acquisition below the
fair values of the identifer the fair values of the identifiable net assets
acquired (i.eiable net assets acquired is recognised as goodwill.Any income
statement in the year of acquisition. The cost of acquisition includes the
present value of consider.discount on acquisition) is credited to theoptions
held bation payable in respect of put the assets and liabilities recognised.y
minority shareholderinterest are allocated against the interest of the
parent,Subsequentls.The interest of minory,any losses applicabity
shareholderexcept to the extent that the minorle to the minors is stated at the
minority interest in excess of the carity's proportion of the fair values of ity
has both a binding obrying value of the minorligation and the ability toity make
an additional investment to cover the losses.
The results of subsidiarof control or up to the effies acquired or disposed of
durectivedate of disposal,as appropring the yiateear are included in the
consolidated income statement from the eff.ective date JAoint v in that strjoint
v enturenture is a contres
ategic financial and operactual arrating decisions require the unanimous consent
of the parangement whereby two or more parties undertake an economic activity
that is subject to joint control,ties. The group'and assets and liabilities of a
jointls interest in joint ventures is accounted fy-controlled entity is combined
line bor using the proporytionate consolidation method,line with similar items
in the group'wherebs consolidatey the group'd fs share of the resultsinancial
statements.
53
3 Significant accounting policies (continued)
(b) Basis of
consolidation
(continued)
AssociatesAn
associate is an
entity o
participation in the financial and operver which the group is in a ating policy
decisions of the inposition to exvercise
signifestee.icant influence,but not control or joint control,through The
results and assets and liabilities of associates are
incorofaccounting.Invporated in the group's consolidated financial statements
using the equity method the net assets of the
associates,estments in associates are carried in the balance sheet at cost as
adjusted by post-acquisition changes in the
group's share ofinterest in those associates are not recognised.less any
impairment in the value of individual
investments.Losses of the associates in excess of the group's
TAll intrransactions eliminated on consolidation
venture or associate of the groupa-group transactions,balances,,profincome and
expenses are eliminated on consolidation.its
and losses are eliminated to the extent of the group'Where a group compans
interest in the relevant joint vy transacts with a
jointenture or associate. (c) The fForeign cur in curinancial statements of
each of the group' rencies
s businesses are prepared in the functional currency
applicable to that business. Transactions balance
sheet daterencies other than the functional
cur,monetarrency are translated at the rates of exchange
prevailing on the dates of the transactions.At
eachdate.Non-monetary assets and liabilities cary assets
and liabilities which are denominated in other curried at
fair value which are denominated in other
currencies are retrrencies are translated at the rates
prevailing on that at the date when the fair value
was deterGains and losses arising on retrmined.anslation
are included in the income statement
fNon-monetaranslated at the rates prevailing retranslated.
y items measured at historical cost denominated in other
curor the period.rencies are not On
consolidation,acquisition,are translated into sterthe
assets and liabilities of the group'ling at
exchange rates prevailing on the balance sheet dates
overseas operations,including goodwill and fair
value adjustments ar.Income and expenses are trising on
their at the average exchange rates for the
period (unless this is not a reasonable approximation of
the cum
anslated into sterlingthe transaction anslated into
sterlingthe transaction dates,in which case income
dates,in which case income and and expenses are
translated at the dates of the
expenses are translated at the dates
transactions).ulativExchange diffe effect of the rate prevailing
of the transactions).ulativExchange on recognised in
equityin foreign operations and on bor,together
diffe effect of the rate prevailing on with exchange
diffrowings and other curerences arrency instrising
recognised in equityin foreign on monetaruments
designated as hedges of such iny items that are
operations and on bor,together with in substance a
parvestments where and to the extentt of the
exchange diffrowings and other group'erences ars
net inising arevestment that the hedges are
curerences arrency instrising on deemed to be
effoperation is disposed of.ective.All such
monetaruments designated as hedges of translation
differences are recognised in the income statement in
such iny items that are in substance a the period in which
the In order to hedge its trassets are
parvestments where and to the extentt
denominated,anslation exposure to certhe group utilises
of the group'erences ars net inising derivativtain fe
foreign currencies in which more than 1% of the
arevestment that the hedges are deemed group's consolidated
net operating of such instruments).
to be effoperation is disposed
of.ective.All such translation
differences are recognised in the
income statement in the period in
which the In order to hedge its
trassets are denominated,anslation
exposure to certhe group utilises
derivativtain fe foreign currencies in
which more than 1% of the group's
consolidated net operating of such
instruments).
inancial instruments (see note 3(d) for details of the
group's accounting policies in respect
(d) DerivativIn accordance with its treasurefinancial
instruments and hedge financial risk, not for trading pury
policyposes.,the group onlSuch financial ry holds or
issues der accounting
isk includes the interest rivative financial instruments to
manage the group's exposure tothe
group'sfixed-rate borrowings,and foreign exchange risk on
transactions,on the trisk on the group's
variable-rate borrowings,the fair value risk on the group's
net assets measured in foreign currencies, to
the extent that these are not matched banslation of the
group'y foreign curs results and on the
translation ofmanages these risks through a range of
derivative financial instruments,rency
borrowings.The group exchange contracts and currency swaps.
including interest rate swaps, fixed rate agreements,
forward foreign Dermeasurement to fair value is
recognised immediatelivative financial instruments are
recognised in the balance sheet as fy in the
income statement,inancial assets or liabilities at fair
value.The gain or loss on re- qualify for hedge
accounting, the treatment of any resultant gain or loss
depends on the nature of the item being hedged as
descrunless they qualify for hedge accounting.Where deribed
beloivatives dow. FThe change in the fair
value of both the hedging instrair value hedge income
statement.
ument and the related portion of the hedged item is
recognised immediately in the Cash floThe change in
the fair value of the porwhedge subsequently
tion of the hedging instrument that is determined to be an
effective hedge is recognised in equity
andvalue of the hedging instrrecycled to the income
statement when the hedged cash floument is recognised
immediatelyin the income statement.wimpacts the income
statement.The ineffective portion of the fair
54 Notes to the consolidated financial statements (continued)
3 Significant accounting policies (continued)
(d) Derivative financial instruments and hedge accounting (continued) Net inThe
change in the fair value of the porvestment hedge subsequentl
tion of the hedging instrfair value of the hedging instry recycled to the
income statement when the hedged net inument that is deterument is
recognised
immediately in the income statement.vestment impacts the income
statement.mined to be an effective hedge is recognised in equity andThe
ineffective portion of the
(e)
Intangible
assets
GoodwillAll b
excess of the cost of acquisition ousiness combinations are accounted fver the
group'or by
the application of the purchase method.s interest in the fair value of the
identifiabGoodwill arising on consolidation represents thesubsidiary,associate
or jointlle
assets and liabilities and contingent liabilities of a minority in a subsidiary
represents
the excess of the cost of the additional iny-controlled entity at the date of
acquisition.Goodwill arising on the acquisition of an additional interest from
athe date
of exchange.Goodwill is stated at cost,less anvestment over the carrying amount
of the net
assets acquired at frequently if there are indications that amounts may be
impaired.y
accumulated impairment losses,and is tested annually for impairment or morethe
net
investment in associates.On disposal of a subsidiary,In respect of
associates,the carrying
amount of goodwill is included within included in the determination of the
profit or loss
on disposal.associate or jointly controlled entity the attributable amount of
goodwill is
Goodwill arbeing tested fising on acquisitions befor impairment at that dateore
tr.ansition to IFRS on 1 JanGoodwill written off to reseruary 2004 has been
retained at
the previous UK GAAP amounts,subject to included in determining any subsequent
profit or
loss on disposal.
ves under UK GAAP prior to 1998 has not been reinstated and
is not
Acquisition-rIntangibelated intangible assets acquisition.le
assets on
acquisitions that are either separSuch acquisition-related
intangible
assets include trable or arising from contractual rights are
recognised
at fair value at the date ofvalue of acquisition-related
intangible
assets is determined bademarks,technology,customer contracts
and
customer relationships.The fair or by the use of appropriate
valuation
techniques, including the roy reference to maryalty relief
method and
the ket prices of similar asexcess earsets,nings method.where
such
information is available, Acquisition-related
intangibacquisition-related intangible assets on an ongoing
basis and,le
assets are amortised by equal annwhere approprual instalments
oiate,vproer their expected economic lifvide for any
impairment in
valuee.The director.s review
The estimated
useful lives are
as follows:
TCustomer contrrademarksacts and customer relationshipsup to a maximup to a
maximum of fum
of ten yive yearears Technology
up to a maximum of five yearss
Other
intangibDev
recognised as an intangibelopment expenditure represents expenditure incur le
assets -
development expenditur
le asset only if the following can be demonstrred in estab e
lishing new ser ated: the expenditure creates an identifvices
and
products of the groupiable asset,.Such expenditure ismeasured
reliably,it is probable that it will generate future economic
benefits,it is technically and commerciallits cost can be
sufficient
resources to complete development. In all other instances,
the cost of
such expenditure is taken directly feasiby to the income
statement.le
and the group has Capitalised devmaximelopment expenditure is
amortised
over the period during which the expenditure is expected to
be
revenue-producing,up to a any impairum of ten yment in
valueears.The
director.s review the capitalised development expenditure on
an ongoing
basis and,where appropriate,provide for Research expenditure
is written
off in the year in which it is incurred. Other
intangibComputer software
is capitalised as an intangible assets - software identif
le asset if such expenditure (both internally generated and
externally
purchased) creates ansoftware is stated at cost,iable asset,if
its cost can
be measured reliabnet of depreciation and anly and if it is
probable that it
will generate future economic benefits.Capitalised computer cost
of the
assets to their estimated residual values byprovision for
impairment.
Amortisation is charged on software so as to write off the of
five years.
y equal annual instalments over their expected useful economic
lives up to a
maximum
55
3 Significant accounting policies (continued)
(f) ProperProper all property,
typlant and equipment is stated at cost,,plant and equipment ty,plant and
equipment other than
freehold land.net of accumulated depreciation and any provision for
impairment.Depreciation is
provided onestimated residual values by equal annual instalments over their
expected useful
economic livDepreciation is calculated so as to wres as fite off the cost
of the assets to
theirollows:
Freehold and long leasehold
bShor
Equipment and motor vt leasehold buildings (under 50 y uildings
ehicles ears)
10% - 33.3%over the life of the lease
Assets held under
fshorter,over the terinance leases are
depreciated om of the
relevant lease.ver their expected useful
economic lives on the
same basis as owned assets or,where
Where signifreview the caricant,rying value of properthe residual values
and the useful economic
livty,plant and equipment on an ongoing basis and,es of property,plant and
equipment are
re-assessed annwhere appropriate,provide for any impairually.The
directorment in values.
(g) Financial assets and fFinancial instrumentsinancial liabilities are
recognised
when the group becomes a party to the contractual provisions of the
instruments.
TTrrade rade receivabeceivables do not carles the use of an allo
ry interest and are stated initially at their fair value. The carrying
amount
of trade receivables is reduced throughconditions and past default
experwance
account.The group proience.vides for bad debts based upon an analysis of
those
that are past due in accordance with local
PFI assetsUnder the ter
with the purchaser of the associated serms of a Private Finance Initiativade and
other receivables.vices,e (PFI) or similar project,where the risks and rewards
of ownership of an asset remain largelyvalue within trthe group's interest in
the asset is classified as a financial asset and included at its discounted
CurCur including trrent asset in rent asset in
ansaction costs,vestments compr
vestments
and subsequentlise investments in secury measured at fair valueities,which are
classif.ied as held-for-trading.They are initially recognised at cost,income
statement.Gains and losses arising from changes in fair value are recognised in
the
Cash and cash equivalents Cash and cash equivalents compr of the group's cash
management are included as a component of cash and cash equivalents fise cash
balances and call deposits.Bank overdrafts that are repaor the puryable on
demand and fpose of the cash floorw statement.m an integral part
InterInterest-bearest-bearing borrowings char
ing bank overdrafts, loans and loan notes are recognised at the value of
proceeds received, net of direct issue costs. Financebasis using the
effges,including premiums paective interest method.yable on settlement or
redemption and direct issue costs,are recognised in the income statement on
an accrual
TTrrade paade payabyles are not interest-bearablesing and are stated initially
at fair value. Equity instrumentsEquity instruments issued by the group are
recorded at the value of proceeds received,net of direct issue costs.
(h) InIn in brv
ventorentories
inging inies are valued at the loventories to their present Cost is
calculated using either
condition and location and includes approprwer of cost and net the
weighted
realisable value.Cost represents expenditure incuriate overheads.red
in the ordinary course of business average or the first-in-first-out
method. completion and disposal. Provision is made fNet realisabor
obsoletele value is based on estimated selling pr,slow-moving or
defective items where approprice,less further costs expected to be
incuriate.red to
56 Notes to the consolidated financial statements (continued)
3 Significant accounting policies (continued)
(i) The carImpairment of impairrying value of the group's assets,apart from
inventories and
deferred tax assets,is reviewed on an ongoing basis for any indication
statement
whenevment,and if aner the cary such indication exists,rying value of an
asset or its
cash-generthe assets'recoverabating unit exceeds its recole amount is
estimated.An
impairverable amount.ment loss is recognised in the income
The recofuture cash floverabws derle amount of an asset is the greater of
its net selling
priving from the asset discounted to their present value using a pre-tax
discount rice and
its value in use,where value in use is assessed as the estimated
assessments of the time
value of money and the risks specific to the asset.
ate which reflects current marketthe recoverable
amount is determined
for the cash-generating unit to which the asset
attaches.For an asset
that does not generate largely independent cash
flows,
The recoattaches.vAn impairerable amount of goodwill is tested annment loss
recognised in respect of a cash-generually through assessing the carrying values
of the cash generating units to which the goodwill allocated to the
cash-generating unit, and then to reduce the carrying value of the other assets
in the unit on a pro-rating unit is allocated first so as to reduce the carrata
basis.ying value of any goodwill An impairchange in the estimates used to
determent loss in respect of goodwill is not revmine its recoverersed.In respect
of any other asset,an impairment loss is reversed if there has been a does not
exceed that which would have been determined (after depreciation and amorable
amount.The amount of the revtisation) if no impairersal is limited such that the
asset'ment loss had been recognised.s carrying amount (j) When share capital
recognised as equity is repurchased,Repurchase of share capital tax effects, is
recognised as a deduction from equity.Where repurchased shares are held bthe
amount of the consideration paid,y an emploincluding directlyee benefy attrit
trust,ibutabthey are classifle costs net of anytreasury shares and presented as
a deduction from equity.ied as
(k) Employee benefits
RetirPayments to defement
benefit costs
schemes are dealt with as pained contribution schemes are charyments to defined
contrged as an
expense as they fall dueibution schemes where the group'.Payments made to
state-managed
retirement benefitarising in a defined contribution retirement benefits
scheme.s obligations
under the schemes are equivalent to those For defcarried out at each balance
sheet dateined
benefit schemes,the cost of pro.The discount rviding benefate used is the yield
at the balance
sheet date on its is determined using the projected unit credit method,AA
credit rwith
actuarated corporial valuations being have maturity dates approximating to the
terms of th
ate bonds thatare recognised in the income
statement as
components of fe groupinance income and f's
obligations. The
expected finance income on assets and the
finance cost on
liabilities in full in the period in which they
occur and
presented outside the income statement in the
statement of
recognised income and expenseinance cost
respectively.Actuarial
gains and losses are recognised. Poast server
the avice cost is
recognised immediatelverage period until the
benefits vy to the
extent that the benefest.its are already
vested.Otherwise it is
amortised on a straight-line basis The
retirement
benefunrecognised past serit obvice
cost,ligation recognised in
the balance sheet represents the present value
of the
defreduced by the fair value of scheme
assets.Any asset
resulting from this calculation is limited to
unrecognisedined
benefit obligation as adjusted for past service
cost plus the
present value of available refunds and
reductions in future
contributions to the scheme. Long-term serThe
group' benef
s net ob vice
benefitsligation in
respect of long-term
ser settled directlit
that employ.yees have
earned at the balance
sheet date vice
benef,less the fair
value of scheme
assets out of which
the obits other than
retirement benefits
represents the
present value of the
futureligations are
to be
SharThe group issues equity-settled share-based pae-based paymentsyments to
certain employees.The fair value of share-based payments is determined at the
date of the shares that will evof grant and expensed,with a corresponding
increase in equity on a straight-line basis over the vesting period,based on the
group's estimateshares that will eventually ventuallest,y vsavest.e for changes
resulting from anThe amount expensed is adjusted oy market-related perfver the
vesting perormance conditions.iod for changes in the estimate of the number of
The fair value of share-based paadjusted for future dividend receipts and
fyments granted in the for any market-related performofoptions is measured
bormance conditions.ythe use of the Black-Scholes valuation technique,
57
3 Significant accounting policies (continued)
(l) PrProo
amount of the obvisions are recognised when a present legal or constr
visions
ligati- uctive obligation exists for a future liability in respect
of a past
n can event and where theof meeting lease requirements on unoccupied
be properly.Items within proties and restructurvisions include claims
estima- against the group'ing provisions for the costs of a business
reors
ed captive insurganisation wherance businesses,e thecosts
reliab
plans are sufficiently detailed and where the appropriate communication to
those
affected has been undertaken at the balance sheet date. Where the time
value of
money is materdiscount rate.ial,provisions are stated at the present value
of the
expected expenditure using an appropriate
(m)Revenue recognition
ReRevv
the consideren
enue represents amounts receivabue
ation received or receivable fle,or goods and sernet of discounts,Vvices
provided in the normal course of business and is measured at the fair value
ofproducts and fAT and other sales related taxes.Revenue for manned
security and cash services secur
or recurring services in secur ity systems products is recognised over the
period in which the service is provided. Revenue onmethod in respect of
constrity systems installations is recognised either on completion in
respect of product sales,uction contracts.or in accordance with the stage
of completion
Construction contractsWhere signif
Where the outcome of a constricant,security system installations with a
contruction
contract can be estimated reliabact duration in excess of one month are
accounted
fly,revenue and costs are recognised bor as construction contracts.completion
of the
contract activity at the balance sheet date.This is normally measured by the
proportion
that contry reference to the stage of work to date bear to the estimated total
contract
costs, except where this would not be representative of the stage of
completion.act costs
incurred forin contract work,claims and incentive payments are included to the
extent
that it is likely that they will be agreed with the customerV.ariations
Where the outcome of a constrincurred that are deemed likely to be
ely that
recouction contrveract cannot be estimated reliabable.Contract costs are
total
recognised as expenses as they are incurly,contract revenue is recognised to
the extent of red. Where it is likcontract costs contract costs will exceed
total contract revenue, the expected loss is recognised immediately as an
expense. Constrprogress billings.uction contrBalances are not offset.acts
are recognised on the balance sheet at cost plus profit recognised to
date,less provision for foreseeable losses and less GoGovvernment grants
Goverernment grnment grants in respect of items expensed in the income
statement are recognised as deductions from the associated expenditureants
in respect of property.the lives of the related assets.,plant and equipment
are treated as deferred income and released to the income statement over
InterInterest income is accrest that exactly discounts estimated future cash
receipts through the expected lifued on a time basis by reference to the
principal outstanding and at the effe of the financial asset to that
asset'ective interest rs net carate applicabrying amount.le.This is the rate
DividendsDividend income from investments is recognised when the
shareholders'rights to receive payment have been established.
(n) All borBorrorowing costswing costs are recognised in the income statement.
(o) PrProfofit frit from operom operations of particular signifations is stated
after the share of results of associates bicance,including restructuring
costs,are included within profut befit from operore finance income and fations
but are disclosed separinance costs.Exceptional items ately.
58 Notes to the consolidated financial statements (continued)
3 Significant accounting policies (continued)
(p) TIncome tax in equityax is
recognised in the income
statement except to the
extent that it relates to
items recognised in equity
es es
. The tax expense represents the sum of , in which case it is
recognised
current tax and deferred tax. Curexcludes
items of income or expense that are taxabrent
tax is based on taxable profit for the
year.Taxable or deductible profit diffle in
other yers from net profears and it furit as
reported in the income statement because it
deductible. The group's liability for current
tax is calculated using tax r
ther excludes items that are
never taxable orsheet date.ates that
have been enacted or
substantively enacted by the balance
Defconsolidated ferred tax is the tax expected to be payable or recoverable on
differences between the carrying
amounts of assets and liabilities in the balance sheet liability
method.inancial statements and the
corDeferresponding tax bases used in the computation of taxable profit,and is
accounted for using therecognised to
the extent that it is probabred tax liabilities are generle that taxable
profits will be aally recognised fvailable
against which deductibor all taxable temporary diffle temporerences.ary
diffDefererences can be utilised.red tax
assets are Such assets and liabilities are not recognised if the temporor from
the initial recognition (other than
in a business combination) of other assets and liabilities in a trary
difference arises from the initial recognition
of goodwill in a bansaction that affects neither the taxusiness combination
profit nor the accounting profit.
Defexcept where the group is aberred tax liabilities are recognised for taxable
temporary differences ar le futurele
to control the rev.ersal of the tempor ising on investments in subsidiaries and
interests in joint ventures,
reverse in the foreseeabary difference and it is probable
that the temporary difference will
not
The carthat suffricient taxabying amount of defle profits will be aerred tax
assets is reviewvailable to allow all
or pared at each balance sheet date and reduced to the extent that it is no
longer probabt of the asset to be
recovered.le Deferred tax is calculated at the tax rates that are expected to
apply in the period when the liability
is settled or the asset is realised. (q) Leases are classifLeasing All other
leases are classified as finance
leasied as operes when the terating leases.ms of the lease transfer
substantially all of the risks and rewards of
ownership to the lessee.
Assets held under flease payments.The corinance
um
leases are recognised at the inception of the
lease at their fair value orresponding
liability to the lessor is included in the
balance sheet as a finance lease ob,if lower,at
the present value of the minimligation.Amounts
due f lessees
romreceived are apporunder
finance leases are recorded as
receivabtioned betwles at the
amount of the group's net investment in
the leases.Lease payments made
or of interest on the outstanding
balance of the liability or
asset.een finance charges or income and
the reduction of the lease
liability or asset so as to produce a
constant rate Rentals
paincentives to enter into operyable or
receivable under operating
leases.ating leases are charged or
credited to income on a
straight-line basis over the lease term,as
are
(r) ASegment rsegment is a signifeporting the nature of the sericant component
of the
group which is subject to rvices provided (business segment) or by the economic
enisks
and rewards distinguishabvironment in which it trle from those of other
segments either
bansacts business (geographical segment).y (s) Non-curNon-curr to sell.
rent assets (and disposal groups) classif ent assets held for sale
and
discontinied as held for sale are measured at the loued
operationswer of
carrying amount and fair value less costs
Non-currrent assets and disposal groups are classified as held for sale if
their carrying amount
will be recovered through a sale transaction is aather than through continuing
use.This condition
is regarded as met onlywhen the sale is highlyprobable and the asset (or
disposal group)
recognition as a completed sale within one yvailable for immediate sale in its
present
condition.ear from the date of classifThe group must be committed to the sale
which should be
expected to qualify fication.or
Aoperdiscontinations or is a subsidiarued operation is a component of the
group'y acquired
exclusivs business that represents a separate major line of business or
geographical area of
criteria to be classified as held for sale.
ely with a view to resale, that has been disposed of,
has been abandoned
or that meets the
59
3 Significant accounting policies (continued)
(t) Dividends are recognised as distrDividends not recognised but are disclosed
in the notes to the consolidated fibutions to equity holders in
the perinancial statements.iod in which they are declared.Dividends
proposed but not declared are of
(u) In the yAdoption neear ended 31 December and
accounting
2007,w
Financial Financial Instruments: Financial Instruments:
Disclosures and the related amendment to IAS 1 aPresentation of Financial
Instruments: Disclosures and the Statementsmendment to IAS 1
Disclosures and related amendment to IAS
the related 1 aPresentation of
amendment to IAS 1Financial
aPresentation of Statementsmendment to
Financial IAS 1
Statementsmendment
to IAS 1
, both of which , both of which were effective from 1 January 2007. The
effect of the adoption of IFRS 7 and themanagement of capital.
were effective has been to expand the disclosures provided in these
financial statements regarding the group's financial instruments and
from 1 January Four interThese were:pretations issued by the
International Financial Reporting Interpretations Committee (IFRIC) were
2007. The effect effective for the current year. > IFRIC 7 Applying the
Restatement Approach under IAS 29, Financial Reporting in
of the adoption ofHyperinflationary Economies; > IFRIC 8 Scope of IFRS 2; >
IFRIC 9 Reassessment of Embedded Derivatives; and > IFRIC 10
IFRS 7 and Interim Financial Reporting and Impairment.
themanagement of
capital. has been
to expand the
disclosures
provided in these
financial
statements
regarding the
group's financial
instruments and
Four interThese
were:pretations
issued by the
International
Financial
Reporting
Interpretations
Committee (IFRIC)
were effective for
the current year.
> IFRIC 7 Applying
the Restatement
Approach under IAS
29, Financial
Reporting in
Hyperinflationary
Economies; > IFRIC
8 Scope of IFRS 2;
> IFRIC 9
Reassessment of
Embedded
Derivatives; and >
IFRIC 10 Interim
Financial
Reporting and
Impairment.
amounts reporThe adoption of these interted for the curpretations has not
resulted in changes to the group'rent or prior years.s accounting
policies and has not had a material impact on At the year end, the
following were in issue, endorsed but not yet effective: > IAS 14 IFRS 8
Operating Segments which was issued in November 2006 and will apply to the
group from 1 January 2009. This standard supersedes
operating segments;Segment Reporand ting and will require the group to
adopt the “management approach” to reporting on the financial
performance of its > or after 1 March 2007.IFRIC 11 IFRS 2 - Group and This
interTreasurpretation requires a share-based pay Share
Transactions which was issued in Noyment arvember 2006 and is effective for
annual periods beginning on
consideration for its own equity-instruments to be accounted for as an
equity-settled share-based parangement in which the group
receivyment transaction.es goods or services as At the year end, the
following were in issue, but were not yet endorsed or effective: > IAS
1 (Revised) Presentation of Financial Statements; > IAS 23 (Revised)
Borrowing Costs; > IFRIC 12 Service Concession Arrangements; > IFRIC
13 Customer Loyalty Programmes; and > IFRIC 14 IAS 19 - The Limit on a
Defined Benefit Asset, Minimum Funding Requirements and their
Interaction.
IFRIC 14,of the other standards and interif endorsed,may impact on the
group'pretations in future pers valuation of defiods will hained
retirement benefve no material financial impact on the fit obligations.The
directorinancial statements of the groups anticipate that the
adoption.
The preparAccounting estimates the application of the group'ation of financial
statements in confs accounting policies,ormity with IFRS
requires management to make judgements,estimates and assumptions that
affectdate of the fwhich are described in note 3,with respect to the
carrying amounts of assets and liabilities at the inancial statements, the
disclosure of contingent assets and liabilities at the date of the
financial statements and the reported amountsand varincome and expenses durious
other factoring the reporting period.These judgements,estimates
and associated assumptions are based on historical experience
of
some cases, actuarial techniques.s that are believAlthough these judgements,ed
to be reasonable under the circumstances,including current and
expected economic conditions,and incurrent events and circumstances,the actual
results may differestimates and associated assumptions are based
on management'.s best knowledge of
the estimate is revised and in anEstimates and underlying assumptions are
reviewyfuture periods affed on an ongoing basis.ected.Revisions to accounting
estimates are recognised in the period in which
60 Notes to the consolidated financial statements (continued)
4The e- (continestimates and assumptions which are of most
signifued)icance to the group are detailed below:
judgem- t-
nts,Ac- m-
ountingt-
s
VThe
initial
accounti-
g
faluation
of acquir
continge-
t
liabilit-
es as wor
an
acquisit-
on in
ed
business-
s
ell as the acquisition cost.volves identifying and deterIn some
instances,mining the fair values to be
assigned to identifthis initial accounting can only be deteriable
assets,liabilities andperiod in which the
acquisition is effected because the fair values and/or the cost is not
knomined provisionally by the end of
the accounting can be completed using provisional values with an
wn with full certainty. In such an event, the initialacquisition
date.Additionally,in detery
adjustments to those provisional values being completed within 12
months of the valuation techniques
are applied.
mining the fair value of acquisition-related intangible assets, in
the absence of market prices for
similar assets,discounted using the weighted avThese techniques use
a vareriety of estimates including
projected future results and expected future cash flows note 17.
age cost of capital. Full details of the fair values of assets and
liabilities of acquired businesses
are presented in Assessment of the rThe group tests tangible and
intangibecoverable assets,le amounts
in rincluding goodwill,espect of assets tested ffor impairment
amounts may be impaired. The impairment
anal
or impairment on an annual basis or more frequently if there are
indications thatand ev the
approprentual disposal of the assets.iate discount rates.The full
methodology and results of the
group'Such an anal ysis fysis includes an estimation of the future
anticipated results and cash floor
such assets is principally based upon discounted estimated future
cash flo
s impairment testing is presented in note 19.ws,annual gro ws
from the usewth rates and
VThe
valuation
of
defaluati-
n of retir
credit method for deterined retirement benef
ement benefit ob
mining the group's obit schemes is ar
ligationsr ived at using the advice of qualified independent
actuaries who
use the projected unit appropriate discount rate,
ligations. This methodology requires the use of a variety of
assumptions and
estimates, including theinflation.Full details of the group'the
expected
returs retirement benefn on scheme assets,it obligations,including an
analmortality assumptions,future service and earnings increases of
employees
and are presented in note 34.
ysis of the sensitivity of the calculations to the key
assumptions
5 An analRevenysis of the group'ues revenue is as follows:
2007 2006
Notes
£m £m
ContinSale of goodsuing
operations
Rendering of ser
105.3 93.7
Rev vices
4,288.7 3,886.9
Revenenue from construe from continuing operuction contrations as
96.4 56.2
presented in the consolidated income statementacts 6
4,490.4 4,036.8
DiscontinSale of goodsued
operations
RenderRev
Revenenue from constr
ing of services
9.3 7.1
ue from discontinuction contrued operationsacts
259.2 373.6
16.4 12.5
6, 7
284.9 393.2
Other operating
incomeInterest income
Net gain in fair value of
15.1 12.3
loan note derivativ Expected
return on defined retirement
benefe financial instruments
and hedged items
0.2 -
Total other operating it scheme assets
77.3 67.2
income
92.6 79.5
61
6 The group operBusiness and g substantial proporates in tw
eogra
tion of its revo core product areas:
phical segments
enue and PBIT from each of the fsecurity services and cash ising the
Middle East and Gulf States,
serollovices.The group operates on a worldwide basis and Latin America
and the Caribbean,
derives aIreland,and Continental Europe),North America, and
New Markets (comprwing geographical regions:Europe (comprising
the United Kingdom and Africa, and Asia Pacific). The
curreport brent management stry product area.The group'ucture
of the group is a combination of product area and geogrs
primary segmentation is therefore by business segment and its
secondaraphy,within which the lary segmentation is bger
businesses genery geographally.y Segment information is
presented below: Segment revenue
Revenue by Con- Disc- Cont- Discontinu-
business segment inu- ntin- nuingd
ng ed
ope- oper- Total oper- operations
Total
ati- tions tions
ns
2007 2007 2007 2006 2006
2006
£m £m £m £m£m£m
£m£m£m
SecurUK and
Irelandity
Services
EuropeContinental
Europe
593- - 593.0 539.7 270.5-
0
NorMiddle East 1,6- 258.6 1,929.9 1,52- 270.5
1,795.6
and Gulf Statesth 1.3 .1
America
1,0- - 1,043.8 1,04- 13.2
1,063.1
3.8 .9
Latin 177- - 177.9 125.5 -
125.5
9
AfricaAmerica and 158- 1.7 159.7 117.7 6.8
124.5
the Caribbean 0
Asia Pacific 183- - 183.9 152.6 -
152.6
9
268- 3.3 272.2 230.0
9
Total SecurNew
Marity Serkets
6.0
236.0
vices 788- 5.0 793.7 625.8 12.8
638.6
7
3,5- 263.6 3,767.4 3,20- 296.5
3,497.3
3.8 .8
Cash
SerEuropevices
North America 706- 17.2 723.5 628.8 92.6
721.4
3
78.0 - 78.0 85.3 -
Total Cash SerNew
Markets
85.3
vices 202- 4.1 206.4 121.9 4.1
126.0
3
Total revenue 986- 21.3 1,007.9 836.0 96.7
932.7
6
4,4- 284.9 4,775.3 4,03- 393.2
4,430.0
0.4 .8
Revenue by Total
Total
geographical
market
2007
2006
£m
£m
UK and Ireland 1,007.5
928.9
EuropeContinental 1,645.9
1,588.1
Europe
NorMiddle East 2,653.4
2,517.0
and Gulf Statesth
America
1,121.8
1,148.4
Latin America and 202.5
147.1
the Car
Africa 203.3
162.9
New MarAsia
Pacific
257.2
168.1
337.1
286.5
Total revenketsue 1,000.1
764.6
4,775.3
4,430.0
Revenue from TotalInter- Total Inter-
internal and gross gross
external customers
by business seg- segm- External segm- segment
External
segment ent nt nt
reve- reven- revenue reve- revenue
revenue
ue e ue
2007 2007 2007 2006 2006
2006
£m £m £m £m £m
£m
SecurCash Serity 3,7- (6.3)3,767.4 3,50-
Services 3.7 .1
Total revenvices
(3.8)
3,497.3
ue 1,0- (0.6)1,007.9 933.5 (0.8)
932.7
8.5
4,7- (6.9)4,775.3 4,43- (4.6)
4,430.0
2.2 .6
Inter-segment sales
are charged at
prevailing market
prices.
62 Notes to the consolidated financial statements (continued)
6 Business and geographical segments (continued)
Segment result
PBITA by business segment Contin- Disconti-
Contin- Disconti-
ing ued
ing ued
operat- operatio-
Total operat- operatio- Total
ons s
ons s
2007 2007 2007
2006 2006 2006
£m £m £m
£m£m£m
SecurUK and Irelandity Services
EuropeContinental Europe
48.4 - 48.4
44.1 - 44.1
61.5 (4.3) 57.2
56.5 (0.8) 55.7
North America 109.9 (4.3) 105.6
100.6 (0.8) 99.8
Middle East and Gulf States 61.5 - 61.5
62.7 0.7 63.4
Latin 14.2 - 14.2
10.9 -
Afr America and the Caribbean
10.9
10.3 (0.5) 9.8
6.3 0.2
Asia Pica
6.5
acif acif 16.0 - 16.0
12.5 - 12.5
New Marketsic 22.9 (1.4) 21.5
18.5 - 18.5
Total Security Services 63.4 (1.9) 61.5
48.2 0.2 48.4
234.8 (6.2) 228.6
211.5 0.1 211.6
Cash SerEuropevices
Nor 77.4 (2.2) 75.2
67.8
New Marth America
(14.7) 53.1
0.6 - 0.6
1.8 - 1.8
Total Cash Serketsvices 29.7 (0.6) 29.1
17.4 - 17.4
THead offotal PBITA before head office costs 107.7 (2.8) 104.9
87.0 (14.7) 72.3
342.5
Total PBITice costs
(9.0) 333.5
298.5 (14.6) 283.9
A A (30.4) - (30.4)
(24.1) - (24.1)
312.1 (9.0) 303.1
274.4 (14.6) 259.8
PBITEuropeA by geographical market
Nor 187.3 (6.5) 180.8
168.4 (15.5)
New Marth America
152.9
62.1 - 62.1
64.5 0.7 65.2
Total PBITkAetsbefore head office costs 93.1 (2.5) 90.6
65.6 0.2 65.8
342.5 (9.0) 333.5
298.5 (14.6) 283.9
Head offTotal PBITice costsA (30.4) - (30.4)
(24.1) - (24.1)
312.1 (9.0) 303.1
274.4 (14.6) 259.8
Result by business segment Contin- Disconti-
Contin- Disconti-
ing ued
ing ued
operat- operatio-
Total operat- operatio- Total
ons s
ons s
2007 2007 2007
2006 2006 2006
£m £m £m
£m £m £m
TAmorotal PBITA 312.1 (9.0) 303.1
274.4 (14.6) 259.8
Total PBITtisation of acquisition-related intangible (41.6) - (41.6)
(36.0) - (36.0)
assets
270.5 (9.0) 261.5
238.4 (14.6) 223.8
SecurCash Serity Services 215.4 (6.2) 209.2
195.4
Head office costsvices
0.1 195.5
85.5 (2.8) 82.7
67.1 (14.7) 52.4
Total PBIT (30.4) - (30.4)
(24.1) - (24.1)
270.5 (9.0) 261.5
238.4 (14.6) 223.8
Continuing PBIT as stated above is equal to PBIT as disclosed in the income
statement. Discontinued PBIT
as stated above is analysed in note 7.
63
6 Business and geographical segments (continued)
The fSegment assets and
liabilitiesollowing information is analysed by business segment and by
the
geographical area in which the assets are located:
Total assets
2007 2006
£m £m
BySecurbusiness segment
Cash Serity Services
2,135.3 1,805.7
Head off vices
954.8 843.0
InterTotal segment oper-segment triceading balances
103.5 81.4
ating assets
(64.1) (51.8)
3,129.5 2,678.3
By geograUK and Irelandphical segment
Continental Europe
938.1 869.5
Europe
923.9 773.6
Nor
1,862.0 1,643.1
Middle East and Gulf Statesth America
615.5 586.7
Latin
102.5 62.5
Afr America and the Caribbean
104.7 82.4
New MarAsia P
icaacific icaacific
190.3 76.6
206.8 178.3
Head offIntericekets
604.3 399.8
103.4 81.4
Total segment oper-segment trading balancesating assets
(55.7) (32.7)
Non-operating assets
3,129.5 2,678.3
Total assets
546.3 496.9
3,675.8 3,175.2
Total liabilities
2007 2006
£m £m
BySecurbusiness segment
Cash Serity SerHead offvicesvices
(719.5) (602.5)
(233.6)
Inter-segment trice
(195.1)
ading balances
(119.2) (45.4)
Total segment oper
64.1 51.8
Non-oper ating liabilities
(1,008.2) (791.2)
Total liabilitiesating liabilities
(1,544.6) (1,412.5)
(2,552.8) (2,203.7)
Non-operating assets and liabilities comprise financial assets and liabilities,
taxation assets and liabilities
and retirement benefit obligations. Included within operfor saleating and
non-operating assets are £123.3m
(2006:£nil) and £7.6m (2006:£nil) respectively relating to assets classified as
held associated with assets
classif.Included within operied as held fating and non-operor sale.Disposal
groups are analating liabilities
are £66.3m (2006:ysed in note 27.£nil) and £12.0m (2006:£nil) respectively
relating to liabilities Other
information by geographical location
By business Impairment Impairment
segment
losses Depreciat- losses
Depreciati-
on n
recognised and Capital recognised and
Capital
in income amortisat- additions in income
amortisati- additions
on n
2007 2007 2007 2006 2006
2006
£m £m £m £m £m
£m
SecurCash Serity
Ser
Head off vices - 72.5 201.3 2.5 58.2
139.7
vices
- 68.1 192.1 - 67.7
Total ice
73.9
- 0.6 2.9 - 0.3
0.6
- 141.2 396.3 2.5 126.2
214.2
64 Notes to the consolidated financial statements (continued)
6 Business and geographical segments (continued)
Other information by geographical location (continued)
By geographical segment
Capital Capit-
Capit-
l l
additionsaddit-
addit-
ons ons
2007 2006 2006
£m £m £m
UK and Ireland
83.3
EuropeContinental Europe
46.2 46.2
124.7 64.5 64.5
Nor
208.0 110.7 110.7
Middle East and Gulf Statesth America
13.2 15.2 15.2
Latin America and the Car
27.4 31.0 31.0
Afr ibbean
ibbean 13.6 20.3 20.3
Asia Picaacif
106.1 17.0 17.0
New Mark ic
25.1 19.4 19.4
Head off ets
172.2 87.7 87.7
Total ice
2.9 0.6 0.6
396.3 214.2 214.2
OperDiscontin security serations qualifying as discontin
ued operations ued operations ued operations
vices businesses vices businesses in vices businesses in Franceued in the
cur,which principallrent year pry include Group 4 many,which
in Franceued in Franceued in the Securimarily comprise:G4S Cash
Sericor SAS;and the securvices (France) SAS,ity services
the cur,which cur,which bdisposed of on 2 Julusinesses in
Gery 2007;theprincipally include G4S Sicherheitsdienste
principallrent principallrent year pryGmbH and G4S Sicherheitssysteme
GmbH,Berlin.The disposal of the security s France and
year pry include include Group 4 Germany is still in progress.
Group 4 Securimarily
Securimarily comprise:G4S Cash
comprise:G4S Cash Sericor SAS;and the
Sericor SAS;and securvices (France)
the securvices SAS,ity services
(France) SAS,ity bdisposed of on 2
services bdisposed Julusinesses in Gery
of on 2 2007;theprincipally
Julusinesses in include G4S
Gery Sicherheitsdienste GmbH
2007;theprincipal- and G4S
y include G4S Sicherheitssysteme
Sicherheitsdienste GmbH,Berlin.The
GmbH and G4S disposal of the
Sicherheitssysteme security s France and
GmbH,Berlin.The Germany is still in
disposal of the progress.
security s France
and Germany is
still in progress.
ervicesbusinesses in both
AdditionallWy,operations qualifying as discontinued in the prior year pr
disposed of on 28 December 2006.ertdienste GmbH,where
terms were agreed for divestment on 22 December 2006, imarily comprise the
Gerand the bman cash serusiness and assets of Cognisa
vices business of G4S Geld-undTransportation,Inc,
The results of the discontinued operations which have been included in the
consolidated income statement are presented below. 2007
2006 2006
£m £m £m
RevExpensesenue
284.9 393.2 393.2
OperNet fating loss before interest and taxation (PBIT) (9.0)
(293.9)(407.-
(407.-
) )
(14.6) (14.6)
AttrTotal operibinance costsutable tax credit/(expense)
(3.3)(3.0) (3.0)
ating loss for the ating loss for the year
0.3 (1.4) (1.4)
year
(12.0)(19.0) (19.0)
ProfAdjustment in respect of disposals in the prit/(loss) on disposal of
discontinued operior yations (note 18)ear 2.9 9.1 (19.2)
(19.2)
5.2 5.2
Net loss attributable to discontinued operations
- (33.0) (33.0)
The 2007 adjustment in respect of disposals in the prG4S Geld-und Wertdienste
GmbH, and £2.5m relating to the fior year comprinalisation of the disposal of
Cognisa ises £0.4m relating to the disposal of the GerTransportation,man cash
serInc.vices business of The 2006 adjustment in respect of disposals in the
pr£2.0m relating to the finalisation of the disposal of Falck Securior year
comprity Nederises £3.2m relating to the fland.inalisation of the disposal of
Cognisa Security and The effect of discontinued operations on segment results
is disclosed in note 6.
65
7 Cash floDiscontinws from discontinued operations (continued operations
included in the consolidated
cash floued)w statement are as follows:
2007 2006
£m £m
Net cash floNet cash flows from operws from inating activities Net cash flows
from 12.5 (10.8)
financing activitiesvesting activities
(1.4) 6.4
2.7 (3.7)
13.8 (8.1)
8 The income statement can be analProfit from
- (PBIT-
- ws:
-
-
-
-
-
-
-
s
Continui-
2007 2006
g
operatio-
s
£m £m
RevCost
4,490.4 4,036.8
of
salesenue
Gross
(3,485- (3,158.0)
prof
4)
AdministrShare of profation expensesit
1,005.0 878.8
it from
(737.5) (643.2)
associat-
s
PBIT
3.0 2.8
270.5 238.4
Included within administration expenses is £41.6m (2006: £36.0m) of
amortisation of
acquisition-related intangible assets. Revenue and expenses relating to
discontinued
operations are disclosed in note 7.
9 ProfProfit frit from continom operationsuing and discontinued operations has
been
arrived at after charging/(crediting):
2007 2006
£m £m
Cost of
salesCost
of in
Write-down of inventories recognised as an expense
92.4 68.0
Reversal of inventorventories previouslies to net realisabywritten dole
valuewn to net 0.5-(0.-
realisable value because subsequently sold0.6 Administration expensesAmor
Amortisation of )
acquisition-related intangibtisation of other intangible assets
41.6 36.0
Depreciation of property, plant and equipmentle assets
8.5 7.4
Impairment of property, plant and equipment and intangib Profit on disposal
of 91.1 82.8
property,
le assets other than le assets other than
acquisition-related - 2.5
acquisition-related
Impairme- plant and equipment and intangible assets other than
acquisition-related les (14.4) (1.6)
t of
trade
receivab
Litigati-
5.4 4.6
n
settleme-
ts
Research
0.7 0.1
and dev
Operating lease rentals paelopment expenditureyab
2.1 1.4
OperCost of equity-settled trating sub-lease rentals receivableansactionsle
96.7 85.0
(3.0) (1.9)
Gov
4.1 5.0
Net feroreign trnment granslation adjustmentsants received as a contribution
towards (2.2) (2.3)
wage costs (0.2)
1.0
66 Notes to the consolidated financial
(continued)
statements
10Auditors' remuneration
Fees payable to the company's auditor
for the audit of the company's annual
report and accounts Fees paThe audit
of the companyable to the company's
subsidiary's auditor and its
associates for other services: Other
services pursuant to legislationies
pursuant to legislation
Taxation ser
Corporate finance servicesvices
Fees payable to other auditors for
the audit of the company's
subsidiaries pursuant to legislation
The Corcompromised through the
proporate Governance Statement on
pages 34 to 36 outlines the
companvision by the company's auditor
of other services.y's established
policy for ensuring that audit
independence is not
11 The aStaff costs and emploverage monthly number of employeesyees,in
continuing and discontinued
operations,including executive directors was:
2007
2006
Number
Number
BySecurbusiness segment
Cash Serity Servicesvices 466,035
403,079
Not allocated,Total average nincluding shared 41,255
36,866
administrumber of employeesation and head office
190
183
507,480
440,128
By geograEuropephical segment
North Amer 115,951
114,216
New Mar ica 53,414
51,919
Not allocated,ketsincluding shared administrumber 337,925
273,810
of employeesation and head off Total average n
ice 190
183
507,480
440,128
Their aggregate remuneration, in continuing and
discontinued operations, comprised:
2007
2006
£m
£m
WSocial securages and salarity 2,772.2
2,654.3
costsies
Employ 410.2
387.8
Total staff costsee benefits 75.3
66.2
3,257.7
3,108.3
InfDirectorormation on directors'Remuneration Repors'remunertonation,pages 37
to 44.share
options,long-term incentive plans,and pension contributions and entitlements is
set out in the
67
12 Finance income
2007
2006
£m
£m
Interest income on cash,Other interest incomecash equivalents and 12.4
9.9
investments Expected return on defined retirement benef
2.7
2.4
Gain arising from change in fair value of derivativit scheme assetse 77.3
67.2
financial instr Loss ar
uments hedging loan notes 14.3
-
Total finance incomeising from fair value adjustment to the hedged
(14.1) -
loan note items 92.6
79.5
13Finance costs
2007
2006
£m
£m
Interest on bank oInterest on loan notesverdrafts and loans Interest 53.0
49.6
on ob
13.5
-
Other interest charligations under fTgesinance leases 3.3
2.4
4.2
0.2
Finance costs on defotal group borrowing costsined retirement benef 74.0
52.2
Total finance costs
it obligations 72.3
66.2
146.3 118.4
equity durIncluded within interest on bank oing the year.verdrafts and loans
is a credit
of £2.1m (2006:£2.5m) relating to cash flowhedges that were transferred from
14 Taxation
Continui- Discontinu-
Continu- Discontinu-
g d ng d
operatio- operations Total
operati- operations Total
s ns
2007 2007 2007 2006
2006 2006
£m £m £m £m
£m £m
CurUK corrent taxation
Ov poration tax 2.6 -
Adjustments in respect of
prerseas tax
2.6 10.1
- 10.1
- 64.5 (0.3) 64.2 49.7
1.4 51.1
-
r
-
-
-
r
UK corOv
Total curerseas tax
poration tax s:
(7.1) - (7.1) 0.7
- 0.7
rent taxation -- -(3.5)
- (3.5)
expense/(credit)
60.0 (0.3) 59.7 57.0
1.4 58.4
DefCurerrent yred taxation (see
note 36)
Adjustments in respect of (7.4) - (7.4) - --
prearTior years
3.6 - 3.6 (0.4)
- (0.4)
Total defotal income tax expense/(credit) - (3.8) (0.4)
- (0.4)
ferred taxation creditor the year(3.8)
56.2
(0.3) 55.9 56.6
1.4 58.0
UK coryear includes a £1.7m credit resulting from the defporation tax is
calculated at 30.0%
(2006:30.0%) of the estimated assessable profits for the period.The total
income tax expense
for the 28.0%. Taxation for other jurisdictions is calculated at the corerred
tax moporvation
tax rement arising from the reduction in the UK corates prevailing in the
relevant
jurisdictions.poration tax rate from 30.0% to
68 Notes to the consolidated financial statements (cont-
(continued)
nued)
14 (continge for the yued)ear can
be
reconciled to the profit per the
income statement as follows:
PrContinofit/(loss) befuing operore taxation
DiscontinTotal profued operationsit before
taxationations
TExpenses that are not deductibax at UK
corporation tax rate of 30.0% (2006:30.0%) T
le in determining taxable profit
Diffax losses not recognised in the curerent
tax rates of subsidiarrent year Adjustments
for previous yearies operating in non-UK
jurisdictions
Total income tax charge
Effective tax rate 25.8%
25.8%
In addition to the income tax expense charged to the income statement, a tax
charge of £14.0m (2006: £1.4m) has been recognised in equity.
15 Dividends
per per
per
shareP- share-
share-
nce KK KK
Amounts rFinal dividend fecognised as distributions to equity holders of the
paror the year ended 31 December 2005ent in the year Interim dividend for
the
six months ended 30 June 2006
2.241.- 0.2435
0.2435
9
Final dividend for the year ended 31 2.52 0.1863
0.1863
December 2006 Interim dividend for the six
months ended 30 June 2007
2.11 0.276-
0.276-
0.2319
0.2319
Proposed final dividend for the year ended 2.85p 0.2786
0.2786
31 December 2007
to shareholderThe proposed fs who are on the register on 2 Mainal dividend is
subject to approval by 2008.yshareholderThe exchange rs at the ate used to
trAnnual Generanslate it into Danish kroner is that at 10 March 2008.al
Meeting.If so approved,it will be paid on 6 June 2008
16 Earnings/(loss) per share attributable to equity shareholders
of the parent 2007
2006
£m £m
From continuing and discontinued operations
EarningsProf
Eff it fProfect of dilutivor the year attrit for the 147.2 96.5
purepotential ordinaributable to equity holderposes of diluted
earyshares (net of tax) s of the parent nings per share
0.2 0.3
147.4 96.8
Number of sharW
Effeighted average n
es (m)umber of ordinary shares
Wect of dilutiveighted average ne potential ordinarumber of
ordinary shares 1,275.2
1,268.3
y shares for the purposes of diluted earnings/(loss) per share 1.5 5.4
1,276.7
1,273.7
Earnings per sharBasicefrom continuing and discontinued
operations (pence) Diluted
11.5p 7.6p
11.5p 7.6p
69
16 Earnings/(loss) per share attributable to equity shareholders of the parent
(continued) 2007
2006
£m £m
From continuing operations
EarningsProf
Adjustment to exclude loss fit for the year attributable to equity holders of
the parent Profit 147.2 96.5
from contin
or the year from discontinued or the year from discontinued operations
(net of tax) (note - 33.0
operations (net of tax) (note 7) 7) Effect of dilutive potential ordinaruing
operations
Effect of dilutive potential
ordinaruing operations
1 47.2 129.5
Profit from continuing operations fy shares (net of tax) or the purpose of
diluted earnings per 0 .2 0.3
share 147.4
129.8
EBasicarnings per share from continuing operations (pence)
Diluted
11.5p 10.2p
11.5p 10.2p
From discontinued operations
Loss per sharBasice from discontinued operations (pence)
Diluted
- (2.6)p
- (2.6)p
From adjusted earnings
EarningsProf
Adjustment to exclude net retirement benefit from continuing operations
Adjustment to exclude 147.2 129.5
amorAdjusted profit for the year attrtisation of acquisition-related intangibit
finance income
(net of tax)ibutable to equity holders of the parentle assets (net of
tax)(3.6)25.2(0.7)26.7
170.3 154.0
WAdjusted eareighted avernings per share (pence)age number of ordinary shares
(m) 13.4p 1,275.2
1,268.3
12.1p
In the opinion of the directorassessment of operational perfsorthe
earmancenings per share f,the analysis of trends oigure
of most use to shareholderver time,the comparison of diffs is that which is
adjusted.erent businesses and the projection
of future earThis figure better allows thenings. The denominators used in all
earnings/(loss) per share calculations are
those disclosed in respect of continuing and discontinued operations.
17 Acquisitions
The group underCurrent year acquisitionsinclude the purchase of controlling
interests
in:took a number of acquisitions in the year,none of which were individually
material.Principal acquisitions in subsidiary undertakings management business
in Saudi
Arabia; and in RIG - PR Ltd,Fidelity Cash Management Sera specialist police
recrvices (Pty)
Ltd,uitment agency in the United Kingdom.in South Africa; al Majal Service
Master LLC, a
facilitiesincreased its interests in Israel and Mozambique,and recognised put
options that
increased the group's interest in the Baltic states.In addition,A summarthe
group the
provisional fair value of net assets acquired by geographical location is
presented below:
y
of
Europe AmerN- MarNewk
ricath
T otal
£m £m £mets
gr oup
£m
ProAcquisition of minorvisional 7.8 0.3 9.4 17.5
fair value of net assets acquired
of subsidiaryundertakings Total
pro
ity interests 19.2 0.3 1.4 20.9Goodwillvisional
fair value of net
assets
acquired27.092.50.61.610.838.4
Total purchase consideration 119.5 2.2 95.985.1 179.2217.6
70 Notes to the consolidated financial statements (continued)
17 Acquisitions (continued)
The fCurrolloent ywing tabear acquisiti- (continle sets out the
book values of the
ns identifued)of all acquisitions made
in the
year:iable assets and liabilities
acquired and
their provisional fair value to the
group in
respect
Book Fair
value£m£adjustmentsmFair value
value
£m
Acquisition-related intangibOther - 34.1 34.1
intangible assets
Proper le assets 1.0(0.7) 0.3Inventorty,plant
and
equipment24.5(1.9)22.6
Trade and other receivabiesles 50.24.0(0.4) 3.6Deferred tax
assets(3.6)46.6
Cash and cash equivalents 11.60.1 - 0.1Trade and other
payables(46.7)-11.6
Current tax liabilities (2.4)
(49.1)Pro(1.6)(1.1)(2.7)
Borvisionsrowings (22.9)(- (3.1)-(10.8)Deferred
tax liabilities-(22.9)
.7)
Minority interests (10.7)(9.7) (9.7)Net assets
acquired of
subsidiary
under4.5(6.2)
Acquisition of minor takings 1.8 15.7 17.5Goodwillity
interests17.83.120.9
Total purchase consideration 179.2217.6
SatisfCashied by:
Transaction costs 147.7Contingent
consider
otal purchase consideration
3.9
T ation ation 66.0217.6
intangibAdjustments made to identifle assets amounting to £34.1m attriable
assets and
liabilities on acquisition are to reflect their fair valueibutabl.These include
the
recognition of customer-relatedminority interests.The fair values of net assets
acquired
are proe to the acquisition of subsidiary undertakings and £3.1m attributable
to the
acquisition of estimates may be adjusted to reflect an
visional and represent estimates following a preliminary valuation
exercise.
Thesethe comparativeto the 2008 consolidated fy devinancial
statements.elopment in the issues to which they relate.Final fair
value
adjustments will,if required,be reflected in
The goodwill arand develop the bising on acquisitions can be
ascrusiness.Neither of these meet the
cribed to the existence of a skilled,iteria for recognition as intangibactive
workforce and the
opportunities to obtain new contracts acquisition includes £47.5m arising on
the acquisition of
minority interests.
le assets separable from
goodwill. Goodwill
arising on From the date
of acquisition,the part
year they were under the
group'in aggregate,s othe
acquired bwnership.If all
acquisitions had
occurusinesses contributed
£171.2m to revred on 1
Januarenues,y 2007,£10.0m
to PBITgroup revenA and
£(0.3)m to profue would
hait for £4,572.2m, PBITA
would have been £321.0m
and profit for the year
would have been £162.4m.
ve been
Prior yThe group underear acquisitions
included the purchase of controlling interests in the Chilean compantook a
number of acquisitions in
2006,none of which wy,Serere individuallvicios Generales,y
materLimitada,ial.Principal acquisitions in
subsidiara manned security services proy undertakingsal Majal Security
Services,asecurity servider,and
in Arab Emirates.
vices and cash services
business in Saudi Arabia.
In addition, the group
increased its interests in
United
71
17 Acquisitions (continued)
At 31 December 2006,Prior year acquisitions (continmade during 2006 has since
been fthe fair value adjustments made against net assets acquired
wued)inalised.The net assets acquired and goodwill arising in respect of all
acquisitions made in the yere provisional.The initial accounting in respect of
acquisitionsear are as follows:
Book value Fair
value£m£adjustmentsmFair value
£m
Acquisition-related
intangibProper
Def ty,plant and le assets other 7.0- 17.6(0.5)
17.6
equipment and than
intangib le assetsacquisition-related
6.5
CurerCurrent assetsred 22.00.2 (2.1)- 0.219.9
tax assets
Non-current (10.6) (4.7) (15.3)Minority
interestsrent
liabilities
liabilities(6.6)(6.4)(13.0)
Net assets acquired of (1.8) 0.6
(1.2)Acquisition of
subsidiary
minorundertakings10.24.514.7
Good- ity interests 6.4 4.6 11.0Total
purchase
ill
consideration72.7
98.4
Satis-
Cashi-
d by:
Tr 96.0Contingent
consideransaction
costs
otal purchase
consideration
0.7
T ation 1.798.4
Included within current assets acquired is £3.5m of cash and cash
equivalents. intangibAdjustments made to identifiable assets and
liabilities on acquisition are to reflect their fair value.These include
the recognition of customer-relatedminority interests.le assets amounting
to £17.6m attributable to the acquisition of subsidiary undertakings and
£4.6m attributable to the acquisition of an equivalent increase in the
reporOn completion of the fair value exted value of goodwill.ercise durThe
comparing 2007,ative balance sheet at 31 December adjustments made to the
provisional calculation amounted to £4.7m,2006 has been restated
accordingly. with The goodwill arand devising on acquisitions can be
ascribed to the existence of a skilled,active workforce and the
opportunities to obtain new contracts acquisition includes £10.1m arelop
the business.Neither of these meet the crising on the acquisition of
minoriteria for recognition as intangibity interests.le assets separable
from goodwill.Goodwill arising on In the yyear they wear of
acquisition,ere under the group'in aggregates owner,the acquired bship.If
all acquisitions had occurusinesses contributed £57.1m to revred on 1
January 2006,enues,group rev£7.8m to PBITenue wA and £1.8m to profould
have been £4,092.2m,it for the part would have been £279.5m and profit for
the year would have been £110.0m.
PBITA
PAost balance sheet acquisitions
were individuallnumber of acquisitions wymaterial.In aggregateere effected
after the balance
sheet date,the acquisitions,primarily within Europe,but before the f,North
inancial statements
wAmerica and ere authorised for issue, none of which£66m.In addition,there was
a cash outflow
of £41m in respect of contingent consideration accrued at 31 December
2007.Africa,were
satisfied by total consideration of
It is considered imprpreliminaryassessment of the fair value of assets and
liabilities
acquired is in progress.actical to disclose anyfurther information in relation
to
acquisitions effected after the balance sheet date because the Acquisition of
the Global
Solutions grIn December 2007,the group announced the acquisition of the entire
share
capital of De Facto 1119 Limited,oup (GSL) total consideration of £355m payable
in cash on
completion. GSL is an international leader in the provision of supporthe
holding compant
services for goy of GSL,vernments,for acompanies and pub following the receipt
of such
approlic authorities.The acquisition is subject to approval in 2008.val from
the European
Commission.The acquisition is expected to complete OffIn March 2008,er for
ArmorGr is a
leading provider of defthe group announced that it was making a recommended
cash off oup
International plc
ensive, protective er for the shares of ArmorGroup International plc.
ArmorGroupsecurity
security services agencies operating in hazardous
environments.vernments,multinational
to national go corporations and international peace and
72 Notes to the consolidated financial statements
(continue-
)
18 On 2 JulDisposal of a
subsidiary
2007,the
group
disposed
of
G4S Cash
Seryvices
(France)
SAS.
In 2006,on 22 December 2006,the group disposed of the Gerand the business
and
assets of Cognisa man cash services business of G4S Geld-und
Transportation,
Inc, disposed of on 28 December 2006.Wertdienste GmbH,where terms were
agreed
for divestment The net assets of operations disposed of were as follows:
2007
GoodwillProper
CurLiabilitiesrent assetsty,plant and equipment and intangible
assets other than acquisition-related Net assets of operations
disposed
Financial liabilities arProfising on disposal
Total considerit/(loss) on disposalation
SatisfCashied by:
amounts wIn the current yere fulleary pro,£12.4m was paid relating to the
disposal of the Gervided for within the loss on disposal recognised in
2006.man cash services business G4S Geld-und Wertdienste GmbH. These In
the
prior year,a further £3.2m was received relating to the finalisation of
proceeds from the sale of Cognisa Security in 2005. The impact of the
disposals,prior year is disclosed in note 7.combined with other operations
qualifying as discontinued,on the group's results and cash flows in the
current and
19 Intangible assets
2007 Goodwill Acquisition-related Other Total
intangible assets intangible
assets
Customer Deve-
opme-
t
Trademarks relatedTechnology exp- Software
ndi-
ure
£m £m £m £m £m £m £m
CostAt
Acquisition 1,218.0 16.4 274.8 10.9 4.8 47.1
1,572.0Additionsusiness-
of
s179.2--37.2-0.20.1216.7
b1January2007
Disposals - -- -- - 2.3 15.1 17.4Disposal
of
businesses-----(0.1)-(0-
3)(0.4)
Reclassified (85.1) (0.7) - - (0.- (1.3)
(1.3)Translation
as held for )
adjustments46.00.55.9(0-
sale
2)0.1(3.2)(89.3)
At 31 1,358.1 16.2 317.9 10.7 7.0 60.53.0 1,770.455.3
December 2007
Amortisation
and
accumulated
Atimpairment (68.4) (5.2) (0.- (29.4) (153.6)
lossesAmor1Jantisation charuary )
2007ge(42.4)-(3.3)(7.9)
Disposals - - (36.2)- (2.1)- (0.- (7.8)
(50.1)Disposal of
)
businesses----0.1-0.20.3
Reclassified 27.8 0.4 - - 0.2 1.02.6
1.0Translation
as held for
adjustments(11.1)(0.2)(-
sale
.1)0.1(0.1)(2.0)31.0
At 31 (25.7) (11.0) (106.7) (7.2) (0.- (35.4)
(186.8)(15.4)
December 2007 )
CarAt1rying 1,175.6 8.5 206.4 5.7 4.5 17.7 1,418.4
amountJanuary
2007
At 31 1,332.4 5.2 211.2 3.5 6.2 25.1 1,583.6
December 2007
73
19 Intangible assets (continued)
2006 Good- Acquisition-related Other intangible
Total
ill intangible assets assets
Customer Developme-
t
Trademarks related Technology expendit- Software
re
£m £m £m £m £m £m £m
CostAt
Acquisiti- 1,229.072.7 16.9- 259.722.2 12.3- 2.8 47.2
1,567.9Additions
n of
b1January
2006usine-
ses
Disposals - - - - 2.2 - 4.90.1 95.07.1
Disposal (7.7)- - - - - (0.7)
(0.7)Translation
of
adjustments(76.0)(0.5-
businesses
----(2.3)(10.0)
At 31 1,21- 16.4 274.8(7.1) 10.9(1.4) (0.2)4.847.1(2.1)
1,572.0(87.3)
December .0
2006
Amortisat-
on and
accumulat-
d
Atimpairment (39.3) (3.5) (0.1) (22.6) (122.9)
lossesAmor1Jantisation
charuary 2006ge(52.7)- (4.7)
Impairment - (3.3) (30.5) (2.2) (0.3) (7.1)
(43.4)Disposals-------
losses for
-(2.5)(2.5)
the year
Disposal - - - - -- 0.21.8
0.2Translation
of
adjustments10.30.11.4-
businesses
.50.10.813.21.8
At 31 (42.4) (7.9) (68.4) (5.2) (0.3) (29.4) (153.6)
December
2006
CarAtrying
amount
At 31 1,176.31,17- 12.28.5 220.4206.4 8.85.7 2.74.5
24.617.7 1,445.01,418.4
December .6
20061Janu-
ry 2006
Included within software is inter£2.2m (2006:£1.4m),nallygeneratedsoftware with
a gross carrying value of £4.7m (2006:£3.5m),and accumulated amortisation of
amortisation charge associated to these assets was £0.8m (2006:giving a net book
value of £2.5m (2006:£2.1m).£1.3m).During the year,additions amounted to £1.2m
(2006:£2.4m) and the Customeridentification as intangib-related intangible
assets in accordance with IFRS.les comprise the contractual relationship with
customers and the customer relationships which meet the criteria for
Customer contrcarracts and relationships recognised upon the acquisition of
Securicor plc on 19 July 2004 are considered significant to the group.The a half
yying amount at 31 December 2007 was £152.3m (2006:ears.£172.6m),and the
amortisation period remaining in respect of these assets is six and Goodwill
acquired in a bcombination.The following CGUs hausiness combination is allocated
to the cash generve significant carrying amounts of goodwill:ating units (CGUs)
which are expected to benefit from that business
2007
2006
£m
£m
US securUK cash serity services 246.6
250.4
(manned security)
UK vices 226.1
226.1
secur
Nether ity services (justice ser 105.8
94.0
vices)
UKOther (all allocated)securlands 103.8
95.4
security services (manned security
services ity) 65.7
63.4
Total goodwill 584.4
446.3
1,332.4
1,175.6
The group tests tangibamounts may be impaired.le and intangibThe annual
impairle assets,ment test is perfincluding
goodwill,for impairment on an annual basis or more frequently if there are
indications that impairment test compares the
carr
ormed just prior to the year end when the
budgeting process is finalised. The
group'sto have occurred where the
recoverying value of each CGU to its recoable
amount of a CGU is less than its
carverable amount.rying valueUnder IAS 36 .
Impairment of Assets, an impairment
is deemed
74 Notes to the (continued)
consolidated
financial
statements
19The
recoIntang-
b include
forecast
cash flover
, all of whichat the lower of the planned growth rive year
forecast
period are projected into perpetuity operin the projections
fates.Where
the planned groor years four and fwth rate in yivate in year
three and
the feear three exceeds the forecast underorecast underlying
economic
grolying economic growth rate fwth ror the economies in which
the
CGUate,the excess is progressively reduced pre-tax, w
. Growth rates across the group's CGUs range from 0% to 18%.
Future cash
flows are discounted at a financial risks in each countreighted
average
cost of capital which fy in which the CGUs operor the group is
11.3%
(2006:ate.10.8%).This rate is adjusted where appropriate to
reflect the
different In appl2007 or fying the group'or the year ended 31
December
2006.s model,no impairment has been identified and recognised
in any of
the group's CGUs for the year ended 31 December
The kvariabey assumptions used in the discounted cash flow calculations
relate to
the discount rate and underlying economic growth rate.With all other with
an
equivalent increase in the discount rles being equal,an impairment of
approate
fximatelor all country £5m wies,ould aror the underise if either the group
discount
rlying growth rate in all countrate were to be increased by 1.5% to
12.8%,appro
iations in the assumptions wximations indicate the sensitivity of the
impairould
impact on all CGUs at the same timement test to changes in the under.lying
assumptions.Ho ies were to be reduced by 1.6%. These
var wever,it is highly unlikely that any
20 Property,plant and equipment
Land and Equipment
buildin- and Total
s vehicles
2007 £m £m £m
CostAt
Acquisition of b1January 2007 137.8 540.4
678.2Additionsusinesses3.119.522.6
Disposals 34.5 105.1 139.6Disposal of
businesses(12.4)(35.9)(48.3)
Reclassified as held f (12.4) (11.9) (24.3)T
At 31 December 2007ranslation
adjustments
or sale (0.6)
157.67.6
(21.6)
629.133.5
(22.2)
786.741.1
DeprAt1Janeciation and
accumulated impairment losses
Depreciation charuary (30.5)(1- (292.8)(7-
(323.3)(91.1)
2007Disposalsge .1) .0)
Disposal of b 6.9 19.1
26.0Reclassifusinesses3.58.211.7
Translation adjustmentsied as (3.7)0.3 (22.5)16- 17.1At 31
December
held for sale 8
2007(35.6)(350.2)(385.8)(26.2)
CarAt1rying amountJanuary 2007 107.3 247.6 354.9
At 31 December 2007 122.0 278.9 400.9
75
20 Property,plant and equipment (continued)
Land and Equip-
ent
buildings and vehicles Total
2006 £m £m £m
CostAt
Acquisition of b1January 2006 142.4 489.9
632.3Additionsusinesses12.30.75.76.4
Disposals (8.2) (12.4-
105.7(20.6)
93.4
TDisposal of brusinesses (4.9) (12.8) (17.7)At 31
December 2006anslation
adjustments137.8(4.5)540.4(23.4)678.2(27.9)
DeprAt1eciation and accumulated
impairment losses
Depreciation charJanuary 2006 (28.2) (249.-
(277.7)Disposalsge(8.5)3.6(74.3)(82.8)
)
Disposal of businesses 1.4 8.49.9 12.0T
At 31 December 2006ranslation (30.5)1.2 (292.-
adjustments )12.7
11.3
(323.3)13.9
CarAt
At 31 December 20061
rying amountJanuary 2006
107.3114.2247.62-
354.9354.6
0.4
The carrying amount of equipment and vehicles
includes the following in respect of assets held
under finance leases:
2007 2006
£m £m
Net book valueAccum 50.8 52.3
Depreciation charulated depreciationge 47.9 34.2
for the year
14.0 11.2
The rights over leased assets are effectively security for lease
liabilities. These rights revert to the lessor in the event of
default. The carleases:rying amount of equipment and vehicles
includes the following in respect of assets leased by the group
to third parties under operating
2007 2006
£m £m
Net book valueAccum
Depreciation charulated depreciation
32.5 29.3
ge for the year 49.0 40.2
7.5 5.6
The net book value of land and
buildings comprises:
2007 2006
£m £m
FreeholdsLong leaseholds (50 year 51.3 42.9
Short leaseholds (under 50 ys and 17.0 14.1
oears)ver)
53.7 50.3
Atto £2.1m (2006:31 December 2007 the group had entered into contr£4.3m).actual
commitments for the
acquisition of property,plant and equipment amounting
76 Notes to the consolidated financial statements (continued)
21T- in joint vollowing signifenturicant interests in joint
vesentures:
e
g-
o-
p
h-
s
t-
e
f-
n-
e-
t-
e-
t
(- goThe group owns 100% of the equity of Wackenhut Services, Inc.
(“WSI”) under US Foreign Ownership Controlling
) Interest provisions,
to be strverned through a proategically sensitivxy agreement.WSI
provides security services to US Government
agencies including security services on sites deemedrepresented by
directors on the e. In accordance with the proWSI
board who are independent of the group bxy agreement the group is
excluded from access to operut under fiduciary and
contractual obational infligation to act in the ormation and is best
interest of the shareholderdecisions.As da.The
group,through the proxy agreement,retains the power to veto certain
material operational and strategic that the
group propory to day management of the business remains with an
independent board,WSI is accounted for as a joint
venture.This meanscase if WSI were accounted ftionatelor as a subsidiary
consolidates the results of y.
WSI at 100%, giving rise to an accounting result identical
to that which would be the (b)
both cases,At the year end the group othe group jointly shares operwned
59% of the equity of Brational and fidgend
Custodial Services Ltd and 50% of the equity in STC (Milton Keynes)
Ltd.In the results of each, which are
consolidated on the basis of the equity shares held.inancial control
over the operations and is therefore entitled
to a proportionate share ofshareholding in Safeguards Securicor Sdn
Bhd,in MalaIn addition,at 31 December 2006,the
group's 49% equity operation which is now accounted for as a
subsidiary.ysia, was accounted for as a joint venture.
During 2007, the group obtained control of this The results of each of
the jointlconsolidated into the group's
financial statements are as fy controlled operations are prepared in
accordance with group accounting
policies.ollows:Amounts proportionately
Resu- 2007
2007 2006
ts
£m
£m £m
Inco- 320.6
320.6 344.4
eExp-
nses
Prof- (307.1)
(307.1) (326-
t
4)
after
tax
13.5
13.5 18.0
Bala- 2007
2007 2006
ce
sheet
£m
£m £m
Asse-
sNon-
cur
Curr- 54.5
54.5 49.7
nt
asse-
srent
asse-
s
92.6
92.6 75.8
147.1
147.1
Non-current liabilitiesrent liabilities
(41.-
)
(52.5)
(52.5) (43.-
)
Net (108.8)
(108.8) (84.-
asse-
)
s
38.3
38.3 40.7
The inassociatess share of associates'profit and net assets and the
reconciliation to the net investment
grou- are as follows:
'Inv-
stme-
t
2007
2007 2006
£m
£m £m
TTot-
l
asse-
s
Net
inot-
l
liab-
liti-
s
14.2
14.2 13.1
vestme- (4.0)
(4.0) (5.8)
t in
associ-
tes
10.2
10.2 7.3
Reve- 75.8
75.8 83.6
ue
Prof- 3.0
3.0 2.8
t for
the
year
The net inof 46%.vestment and results presented above largely relate to Space
Gateway Support LLC,in the USA,in
which the group holds an investment
77
23
Inventories
2007 2006
2006
£m £m
£m
RaWorw materials 12.5 9.0
9.0
Finished goods 7.4 9.5
9.5
including consumabk
in progressles
Total 37.2 31.0
31.0
inventories
57.1 49.5
49.5
24InIn at their fair
values based on
quoted marv
vestments
comprestmentsise
primarily listed secur
estments is restricted to the settlement of claims
against the group's captive
25Trade and other
receivables
2007 2006
2006
£m £m
£m
Within
curT
Allorade
debtor
rent assets
wance for doubtful - 788.5 709.7
debtss -
-
-
5
Amounts owed b - (36.4)(25.7)
-
-
-
-
)
Other y 3.3 1.2
1.2
debtor associated
undertaki-
gs
Prepa s 64.4 58.2
58.2
Amounts due from
constryments and
accrued incomeDer
Total trivativade and
other
receivabefinancial
instruments at fair
value (see note 32)
uction contract
customers (see note
26)
51.6 40.7
40.7
11.3 7.0
7.0
les 2.3 7.2
7.2
included
within
current
assets
- 885.0 798.3
-
-
-
0
Within
non-curDerivative
frent assets
Other debtorinancial 15.1 1.4
1.4
instruments at fair
value (see note 32)
Amounts receivabsTotal
trade and other
receivable under PFI
contrles included
within non-curacts
13.9 7.3
7.3
- 40.4 41.2
41.2
-
-
t
-
-
-
-
-
s
69.4 49.9
49.9
CrThere is limited
concentredit risk on
trade r geographically
in over 100
countration of credit
r eceivables ies.
isk with respect to trade receivables, as the group's
customers are both large in number and dispersed
Credit terThere is no group-wide rms vary across the
group and can rate of provision,and proange from
0 to 90 davision is made for debts that are past due
according to local conditions and past default
experys to reflect the different risks within each
country in which the group operienceates.. The
movement in the allowance for doubtful debts is as
follows: 2007
2006
2006
£m £m
£m
AtAmounts - (25.7)(24.9)
wr1Januaryitten off -
during the y -
-
-
)
Increase in ear 5.4 4.6
4.6
allo
At 31 Decemberwance - (16.1)(5.4)
(5.4)
-
-
-
-
)
- (36.4)(25.7)
-
-
-
-
)
Included within trwhich no provision has been made as there has not been a
signifade receivables are trade debtors with a
carrying amount of £290m (2006:£351m) which are past due at the reporting
date for recoverable. The group does not hold an
icant change in credit quality and the group believes
that the amounts are stilloverdue for payment
was 39% (2006:32%).ycollaterThe group-wide aal over
these balances.verage age of all trThe proporade
debtortion of trs at yade debtorear end was 58 das at 31
December 2007 that wys (2006:56 days).ere
The directors believe the fair value of trade and other receivables, being the
present value of future cash flows, approximates to their book value.
78 Notes to the consolidated financial statements (continued)
25 Trade and other receivables (continued)
Amounts - under PFI contractsy the group's joint vacts
comprentures.ise the group's
receivabAmounts - proportion of amounts receivable in
respect of the Private Finance
- Initiative (PFI)
-
-
-
-
-
-
-
-
-
-
-
-
s
-
-
-
-
-
-
-
-
-
n
-
-
e
-
-
-
-
r
-
-
I
-
-
-
-
-
-
e
59%. There were no During the year the group increased its ownership
interest in Bridgend Custodial
further changes in Services Ltd toHMPrison and
these ar Young
Offenders Institution
Parc in Brrangements
duridgend,ing the
year.The projects are
the
design,construction,-
inancing and
management of people
in Milton Keynes for
the Youth Justices
Board.The Bridgend
contrSouth Wales,act
commenced in Janfor
the Home
Office;uarand the
Oakhill Secure y 1996
and expires in
December
2022.TheTraining
Centre for
youngMilton Keynes
contr
of a severe failure to complact commenced in June 2003 and expires in June
2028.y with the contrBoth
contracts can be terminated by the customer either in the eventassets remain
the property of the
customeract or voluntarily with six months notice and the payment of
appropriate compensation.The
specified of the contracts. There is currently no obligation to acquire or
bs.The group's joint vuild
furentures hather assets and anve the right to proy such obvide services using
the specified assets
during the lifevariations to the contracts.The pricing basis is
inflation-indexed.ligation would be
agreed with the customers as
Amounts receivable under PFI
contracts are pledged as security
against borrowings of the group.
26 ContrConstruction
contractsacts in place at the
balance sheet date are as
follows:
20072006
£m£m Amounts due from
contrAmounts due to contract
customeract customers
included in trs included in
trade and other paade and
other
receivabyablesles11.37.0
(1.7)
Net balances relating (1.5)
to construction
contracts
9.6 5.5
ContrLess:Progress billingsact costs 32.222.6
incurred plus recognised profits
less recognised losses to date Net
balances relating to construction
contracts
(22.6)(17.1)
9.6 5.5
At 31 December 2007,customers for contract wadvances receivork at either
balance sheet dateed from
customer.s fAll tror contract work amounted to £2.8m (2006:£3.6m).There were no
retentions held by
settlement within one year.
ade and other receivables
arising from construction
contracts are due for The
directortheir book
valuesbeliev.e the fair value
of amounts due from and to
contract customers,being the
present value of future cash
flows,approximates to
27 Disposal groups imarily comprise the assets and liabilities
associated with the
classifDisposal groups security servicesG4S Sicherheitsdienste GmbH and
G4S Sicherheitssysteme
classified as held fied as GmbH,incipally include Group 4 Securicor
SAS,Berand the securlin.ity
held for sale as at 31 services businesses in Germany,which principally
include
December 2007 pror sale
businesses in France, which
pr
The major classes of assets and liabilities
comprising the operations classified as held for
sale are as follows:
2007
£m
ASSETSGoodwill and acquisition-related intangib
Proper le assets 57.6Inty,plant and equipment
and intangible
assets other than
acquisition-related5.8
Tventories 3.3Cash and cash
equivalentsrade and other
receivables56.6
7.6
Total assets classified as 130.9
held for sale
LIABILITIESBank o
Bank (8.3)Trade and other
pa(0.6)
loansverdrafts
Cur yables (62.3)Retirement benefrent
tax liabilitiesit
obligations(2.0)
Provisions (1.1)(4.0)
Total liabilities associated with assets classified as held for sale (78.3)
Net assets of disposal group 52.6
79
28 ACash,cash equivalents and bank overdrafts is presented beloreconciliation
of cash and
cash equivalents reporw:ted within the consolidated cash flow statement to
amounts
reported within the balance sheet 2007
2006
£m
£m
Cash and cash equivalentsBank o 381.3
307.5
Cash, cash equivalents and bank overdraftsverdr (109.9)
(97.5)
Total cash,cash equivalents and bank ovafts included within disposal (0.7)
-
groups classiferdraftsied as held for sale 270.7
210.0
Cash and cash equivalents pr2007 bore interest at a
parties
weighted aincipallvery comprage rate of 3.3% (2006:ise
short-term money mar3.2%).The credit rket deposits,isk
on cash and cash equivcurrent account balances and cash
held in alents is limited because the counterATM
machines and in are banks with high credit ratings
assigned by international credit-rating agencies. The
group operIt balances and the equivalent amount of the
ois anticipated that the n ates a multi-curumber of
parrency notional pooling cash management system which
included in excess of 80 group companies at 31 December
2007.ticipants in the group will contin
verdraft balances were effectivue to groely
offset fw.At 31
December 2007 £82.9m (2006:or interest purposes
within the
cash pool.£75.2m) of the cash Cash and cash
equivalents of
£28.1m (2006:the settlement of claims against the
group'scaptiv£17.7m) are held be insurance
subsidiary the
group'ies.s wholly-owned captive insurance
subsidiaries.Their use is restricted to
29 Bank overdrafts,bank loans and loan notes
2007
2006
£m
£m
Bank oBank loansverdrafts 109.9
97.5
Loan notes 809.7
900.4
Total bank overdrafts,bank loans and loan notes 290.4
-
1,210.0
997.9
The borOn demand or within one yrowings are repayab In
the second y
ear le as follows:
190.5
167.6
In the third to fearifth years inclusive 10.7
6.5
After fTive years 702.1
805.5
306.7
18.3
Less:otal bank overdrafts,bank loans and loan notes 1,210.0
997.9
- Bank oAmount due fverdraftsor settlement within 12 months (shown (109.9)
(97.5)
under current liabilities):-Bank loans (80.6)
(70.1)
Amount due for settlement after 12 months (190.5)
(167.6)
1,019.5
830.3
Analysis of bank overdrafts, bank loans and loans notes
by currency:
Sterling Euros - Others
Total
S
-
-
-
-
-
-
s
£m £m - £m
£m
m
Bank oBank loansverdrafts 184.964.4 329.212.4 - 30.5
109.9
-
-
-
-
-
-
6
Loan notes - - - 53.4-
809.7290.4
-
-
-
4
At 31 December 2007 249.3 341.6 - 83.9
1,210.0
-
-
-
2
Bank oBank loansverdrafts 126.161.4 293.612.1 - 22.9
97.5
-
-
-
-
-
-
1
At 31 December 2006 187.5 305.7 -
32.955.8900.4997.9
-
-
-
9
Of the borrowings in currency other than sterling, £821m (2006: £763m) are
designated as net investment hedging instruments.
80 Notes to the consolidated financial statements
(contin-
ed)
29 oeighted lo- and loan no-
(continates on bank overdrafts,bank loans and
averdrafts,vera- ns
es loan notes wued)ere as follows:
e interest rbank
2007 2007
% %
Bank oBank loansverdrafts
6.0 6.0
Loan notes
5.7 5.7
5.9 5.9
The group'arevolving credit facility of £30m maturs committed bank
borrowings compring June 2008 with a one yise
two multicurrency revolving credit facilities totalling £1,087m with a
maturity date of June 2012 and 31 December
2007, undrawn committed availab
ear term out option, and
uncommitted facilities of £410.9m (2006:
£353.3m). At is at prevailing
Libor or Euribor rates, dependent upon
the perle facilities amounted to
£427.9m (2006:iod of drawdown,plus an
agreed mar£227.7m).Interest on
all committed bank borgin,and repriced
within one year or less.rowing
facilities Borrowing at floating rates
exposes the group to cash flow
interest rate risk. The management of
this risk is discussed in note
33. The group issued fMarch 2014
($100m),ixed rMarch 2017
($200m),ate loan notes in the US PrMarch 2019
($145m) and March 2022
($105m).ivate Placement market totalling
US$550m (£276.3m) on 1st March
2007.The notes mature in
The committed bank facilities and the loan notes are subject to one
facceleration of maturity.The group was fully
in compliance with the financial covenant and any non-compliance with the
covenant may lead to an applicable, the
year to 31 December 2006. The group has not defaulted on,inancial coor
breached the tervenant throughout the yms
of,anear to 31 December 2007 and,y material loans during the yearwhere.
curBank orent at the balance sheet dateverdrafts and bank loans are stated
at amortised cost.Loan notes are stated
at amortised cost recalculated at an effective interest ratemarket
prices,approximates to their book value.The
directors believ.e the fair value of the group's bank overdrafts,bank loans
and loan notes,calculated from
30 Obligations under finance leases
Present Present
value of value of
Minimum
Minimumminimum minimum
lease
lease lease lease
paymen-
paymentspayments payments
s
2007
2006 2007 2007
£m
£m £m £m
Amounts paWithin one yy
In the second to fear
able under finance leases:
After five yearsifth years 18.7
15.6 16.2 16.2
inclusive
40.3
40.8 35.6 35.6
11.2
8.4 10.4 10.4
Less: Future finance charges on finance 70.2
64.8 62.2 62.2
leases
Present value of lease obligations (8.0)
(8.7)
62.2
56.1
Less:Amount due fAmount due for settlement after 12 monthsor settlement
within 12 months (shown under current
liabilities)(16.2) 46.0
It is the group'year ended 31 December 2007,spolicy to lease certhe wtain of
its feighted aixtures and equipment
under fverage effective borinance leases.The weighted average lease term is
eight years.For the All leases are on
a fixed repayment basis and no arrangements have been entered into frowing
rate was 5.4% (2006:or contingent
rental pa5.5%).Interest ryments.ates are fixed at the contract date. The
directorbook value.s believe the fair
value of the group's finance lease obligations,being the present value of
future cash flows,approximates to their
The group's obligations under finance leases are secured by the lessors'
charges over the leased assets.
81
31 Trade and other payables
2007 2006
£m £m
Within curTrent li
Amounts due to constrrade creditors
abilities:
137.1 116.6
Amounts owed to associated underuction contract
1.7 1.5
customertakingss (see note 26) Other taxation and social
security costs
0.3 0.7
Other creditorAccruals and defs
129.1 140.3
erred income
409.4 311.2
Derivativ
1 53.0 138.5
Total trade and other pae financial instruments at fair value (see note
1 5.1 1.4
32)yables included within current liabilities 845.7
710.2
Within non-curDerivativrent liabilities:
Other creditore financial instrTotal trade and other
6.7 0.3
pasuments at fair value (see note 32) yables included
within non-current liabilities
32.0 0.7
38.7 1.0
Ttrrade and other payables principally comprise amounts outstanding for trade
purchases and ongoing
costs.The average credit period taken for floade purchases is 46
daws,approximates to their book valueys
(2006:42 da.ys).The directors believe the fair value of trade and other
payables,being the present value
of future cash
32 The carDerivativrying values of dere financial instrumentsivative financial
instruments
at the balance sheet date are presented below:
Assets Assets
Liabilities Liabilities
2007 2006
2007 2006
£m £m
£m £m
Forward fInterest roreign exchange contracts - 6.3
13.6 0.9
Interest rCommodity swapsate swaps designated as fair value hedgesate
8.2 0.4
swaps designated as cash flow hedges3.12.3 14.3
-
- -
- -
- 0.4
Less:Current porNon-curtionrent portion 17.4 8.6
21.8 1.7
(15.1) (1.4)
(6.7) (0.3)
2.3 7.2
15.1 1.4
DerThe source of the marivative financial instrkuments are stated at fair
valueet prices is Bloomberg and
in addition the third par,based upon market prty relationship counterices where
available or otherwise on
discounted cash floparty banks.The relevant curw valuations. used to forecast
the floating rate cash flows
anticipated under the instrument which are discounted back to the balance sheet
daterency yield cur.This
value isve iscompared to the original transaction value giving a fair value of
the instrument at the
balance sheet date.
The mark to market valuation of the derivatives has
fallen by £11.3m during the year. The interest rate and
commodity swaps which qualify as cash flow hedges have
the following maturities: Assets
Assets
Liabilities Liabilities
2007 2006
2007 2006
£m £m
£m £m
Within one yIn the second yearear 0.1 0.5
0.1 0.4
In the third y 1.0 0.3
0.9 -
In the fIn the fourth yearear 0.6 1.1
1.1 -
0.7
Total carifth yrying value of cash floear or greater 0.2
2.2 -
w hedges 0.7 0.2
3.9 0.4
3.1 2.3
8.2 0.8
82 Notes to the consolidated financial statements
(continued)
32Projected settlement of cash financialinstrume- (continws
(including accrued
floDerivative ts interest) associated with
derued)ivatives that are
cash
flow hedges:
Assets
Assets
2007
2006
£m
£m
Within one yIn the second year 1.7
In the third y ear
1.4
0.6
0.5
In the fourth year
0.4
0.4
In the fifth year or 0.2
0.1
greaterear
Total cash flows 0.2
-
3.1
2.4
33 Financial risk
The manas objectivgementto stakeholders are maximised.e in managing its
capital
group'- is to ensure that the bThe group believusinesses within it can
continue and
apital develop as going concerns whilst returns
is minimised and that this is the case when the group broadles that these
retury has
the charns are maximised when the group'acteristics of a BBB rated entitys
W.eighted
The group therefAverage Cost of Capital (Wore aims generallACC)maintain its net
debt
expressed as a multiple of cash generated from operations within a range
corresponding to those of BBB rated entities.y to
acquisitions mThe group has a range of returnon capital targets in respect of
potential
acquisitions,depending upon their size.Most proposals for “bolt-on”return a
minimust demonstrum of
10% within this timefrate a post-tax returame and relativn of at least 12% on
the capital inely
rare,large,vestment within 3 years.Medium-sized acquisitions are required to
calculation of its
post-tax WACC at 31 December 2007 was 8.2%.
strategic acquisitions a minimum equal to the
group's WACC. The
group's The group monitorthe group monitor
performance and therefs s
the fthe Returinancial perf
ore calculates it as EBITn on
Net
orAssets (Rmance of
acquired b
A divided bONA) of all its b
usinesses dur
y net assets excluding goodwill,usinesses on a monthl ing the years
fy basis.ollowing
acquisition against the retur
tax,The group regards Rdividends payable and
retirement benefONA as
a measure of oper n targets. In addition,
it obligations.ational
The group has no curmarket on a regular basis so as to prorent intention to
commence a share bvide a
pool of shares from which to satisfy share auy-back plan.The group operwards to
emploates a programme
to purchase its oyees as the awards vest.wn shares on the The group is not
subject to exterduring the
year.nally-imposed capital requirements and there were no changes in the
group's approach to capital
management Liquidity riskThe group mitigates liquidity r of such facilities to
remain unutilised and
in prisk by ensuring there are suffactice the group ricient undruns comfawn
committed facilities
aortably above this level.vailable to it.Policy demands a minimum of 20% The
percentage of available,
but undrawn committed facilities during the course of the year was as follows:
31 December 200631
March 200747%22% 30 June 200730 September 200741% 31 December 2007
38%39%
Tof fo reduce re-finance terminating on a single dateinancing risk,Group
Treasur.y obtains finance
with a range of maturities and hence minimises the impact of a single material
source The group's
committed facilities have the following maturity dates: June 2008June 2012
£30m
March 2014 £50m£1,087m
March £73m£100mMarch
2019March 2022£53m
2017
83
33 Financial risk (continued)
Re-fLiquidity risk (continits terinancing rmination dateisk is fur.ther reduced
bued)y Group Treasury opening negotiations to either replace or extend any major
facility at least 18 months before Folloits sources of fwing the example of the
inaugurinance and reduce further the proporal US Private Placement of loan notes
issued in March 2007,tion of bank supplied finance.the group will continue to
seek to diversify
Market risk
CThe group conducts burrency risk and f
financing activities in local
curusiness in man
orward f orward f
rency.Hoy cur rency.Hoy cur
orei-
n e
w rencies. xchangTransaction re
contractsisk is limited
since,wherever possible,each business
operates and conducts its
to fof its exposure to fluctuations in
the troreign exchange
risk due to the translation of the
results and net assets of
its fever,the group presents its
consolidated financial
statements in steranslation into
sterling of its overseas net
assets boreign subsidiary holding loans
in fies.The group
hedges a substantial proporling and it
is in consequence
subject oreign currencies.
tion
Tcurranslation adjustments arrency equity investments as they qualify as net
inising on the
translation of fvoreign curestment hedges.rency loans are recognised in equity
to match translation
adjustments on foreign The group enterThe group hedges those fs into forward
foreign exchange contr is
a suff
oreign currencies in oreign currencies in which more than 1% of the group'
acts so as to hedge a
which more than 1% of high propors consolidated net opertion of the
translation rating assets are
the group' acts so as denominated,isk not hedged by way of loans.provided
there be considered where
to hedge a high propors the cost of hedging is acceptabiciently liquid and
large enough foreign
consolidated net exchange marleket in which to hedge the currency.Other
currencies below the 1%
opertion of the threshold will alsonotional value of outstanding
forward foreign exchange
translation rating contr.Gains and losses on such facts at 31 December
2007 was £373.2m
assets are (2006:orward foreign exchange contr£342.4m).acts are
recognised in equityAll
denominated,isk not these contracts had.The matured binstruments are
designated and fully 29
hedged by way of February 2008,at which point they wy effective as net
inere replaced with new
loans.provided there be fvestment hedges and moorward fvements in their fair
value haoreign exchange
considered where the contrvacts.e been defAll the feroreign exchange
hedgingred in equity.
cost of hedging is
acceptabiciently liquid
and large enough
foreign exchange
marleket in which to
hedge the
currency.Other
currencies below the 1%
threshold will
alsonotional value of
outstanding forward
foreign exchange
contr.Gains and losses
on such facts at 31
December 2007 was
£373.2m (2006:orward
foreign exchange
contr£342.4m).acts are
recognised in equityAll
these contracts had.The
matured binstruments
are designated and
fully 29 February
2008,at which point
they wy effective as
net inere replaced with
new fvestment hedges
and moorward fvements
in their fair value
haoreign exchange
contrvacts.e been
defAll the feroreign
exchange hedgingred in
equity.
At 31 December 2007,respectively hedged by fthe group'oreign curs US
dollarrency loans and
f,euro,oreign exchange fCanadian dollar and Danish krone net assets worward
contracts (2006:US dollar
90.6% and euro 94.7%).ere approximately 98%,90%,93% and 83% The fdepreciation
of GBP against each of
the hedged curinancial instruments used to hedge the foreign currency
translation exposure had a fair
value loss of £13.6m at 31 December 2007.Assuming a 1% value loss would be
posted to equity. A
simultaneous depreciation of GBP against all currencies,the fair value loss on
these instrrencies is
unlikuments would increase bely based on past mary a further £3.9m.ket
movements.This additional fair
InterBorrowing at floating rest rate risk and interest rate swaps approved by
the directorates as
descrs.Interest ribed in note 29 exposes the group to cash floate swaps and,w
interest rate risk,
which the group manages within policy limitsof borrowings on a reducing scale
over forward perto a
limited extent,iods up to a maximforward rate agreements are utilised to fix
the interest rate on a
proportion contrrate was 4.9% (US dollar) (2006:acts was £213.5m (in respect of
US dollar) (2006:4.9%)
and 3.8% (euro) (2006:£196.7m) and £183.6m (in respect of euro) (2006:um period
of five years.At 31
December 2007 the nominal value of such3.4%),and their weighted average period
to matur£141.5m),ity
was three ytheir weighted average interest rate hedging instruments are
designated and fully effective
as cash flow hedges and movements in their fair value have been deferearred in
equitys.All the
interest. The US PrAt the time of issue in March 2007,ivate Placement market is
predominantlthe group
was comfy a fixed rorate market,with investors looking for a fixed rate return
over the life of the
loan notes. and therefore rather than take on a higher proportion of fixtabed
rle with the proportion
of floating rate exposure not hedged by interest rate swapson the Prate debt
arranged fixed to
floating swaps effectively converting the fixed coupon swaps havivate Placement
to a floating rebeen
documented as fair value hedges of the US Prate.Following the swaps the
resulting average coupon on
the US Private Placement is Libor + 60bps.Theseposted to profit and loss at the
same time as the
movement in the fair value of the hedged item.ivate Placement fixed interest
loan notes,with the
movements in their fair value
The core group borwhich fix a portion of the exposurerowings are held in
USD,some interest r,euro and
GBP.Although the impact of rising interest rates is partly shielded by interest
rate swaps these cur
ate risk remains. Assuming a 1% increase
in interest rates
across the yield curve in each
ofexpected in the 2008 frencies
and keeping the 31 December 2007 debt
position constant
throughout 2008,inancial year.an
additional interest charge of
£5.6m would be
Commodity risk and commodity sThe group'
swaps are sometimes used to fs principal commodity rix syntheticallisk relates
to the
fluctuating lev waps
el of diesel prices, particularly
affecting its cash ser
vices businesses. Commodity in
place at 31 December 2007.
y part of the exposure and reduce the
associated cost
volatility. There were no commodity
swaps
84 Notes to the consolidated financial statements (continued)
33 Financial risk (continued)
The - riskisk management is to set minimum credit ratings for counterparties
and monitor these on a regular basis.
gr- -
up- -
Co- r
nt- -
rp- -
rs -
st- -
at- -
gy t
fty -
-
-
-
t
For treasurapplying a wy-related treighting to the notional value of each
transactions,the policy limits the aggregate credit risk assigned
to a counterparty rating agency. For long-teransactions (under one ym
transactions,the fear),inancial counterthe financial counter ansaction
outstanding with each counter
. The utilisation . The utilisation of a . The utilisation of a credit
limit is calculated byFor short-term tr party mparust haty
of a credit limit credit limit is must be inve a minimvestment
gr par
is calculated byForcalculated byFor
short-term tr partyshort-term tr party
mparust haty must mparust haty must be
be inve a inve a minimvestment gr
minimvestment gr par
par
um rating of ade r ty based on the type and dur A+/A1 from Standard &
Pated by
either the Standard & P ation of the tr
oor's or oor's or Moody'oor's or oor's or
Moody'oor's or Moody'
Moody'oor's or Moody'
Moody'
ansaction. ansaction.
ansaction.
s. s. s.
s
Ttwreasuro countery transactions are dealt with the group'party exposures
related to Treasurs relationship banks all of which hay
transactions were £5.3m and £4.4m and held with institutions with long terve a
strong investment grade rating.At 31 December 2007 the larm
Standard & Poor'gest ratings of AA and AA- respectively.These exposures
represent 30% and 25% of the car rying values of derivative
financial instruments with a fair values creditgain at the balance sheet date.
The group opercredit balances of £84.5m wates a
multi-currency notional pooling cash management system with a wholly owned
subsidiary of an AA rated bank. At year end pooling agreement.
ere pooled with debit balances of £82.9m, resulting in a net pool balance of
£1.6m. There is legal right of set off under the At an
opercounterparating levties with noel the minim,or a non-inum in int and
exposure to mvestment gr vestment grade rating criteria applies.
Exceptionally,where required by local countr y circumstances,
g- adeultiple industr,rating can be approies,there is minimal concentrved
as counterparties fation ror a perisk.iod of up to 12 months.Due
o- to the group's
al
g-
o-
r-
p-
i-
al
f-
o-
pr
T- be- ob within the
e ef- countrates a wide
g- t ries concerned.ange
o- of retirement benef
p
o-
e-
R-
t-
r-
m-
nt
li-
at-
ons
These include funded defit arined contrrangements which are estabibution and
funded and unfunded deflished in accordance with local
conditions and prined benefit schemes.actices Defined contribution arThe
majorrang contribution and resulting income statement charity of
the retirement benefit ar ementsrangements oper
ge is fixed at a set levated bythe group are of a defel or is a set
percentage of emploined contribution stryees'ucturepay.,where the
employercontribution schemes and charged to the income statement totalled
£57.9m (2006:£49.8m).Contributions made to defined In the
UK,contribution schemefollowing the closure of the def.ined benefit
schemes to new entrants,the main scheme for new employees is a
contracted-in defined Wdeposits to the varackenhut Services,ious defInc
(“WSI”) is the administrined benefit schemes as deterator of
sevmined beral defined benefit schemes.WSI is responsible for making
periodic cost-reimbursable ackno
y independent actuaries. In each instance, the US Department of Energy
(“DOE”)these schemes are accounted fwledged within the contror
as defact entered betwined contreen the DOE and ibution schemes.WSI its
responsibility for all unfunded pension and benefit
liabilities. Therefore, In the Netherpossible to identify separlands,most
emploatelythe group'yees are members of industry-wide
defined benefit schemes which are not valued on an IAS 19 basis as it is
not contribution schemes. Contributions made to the schemes
and charsshare of the schemes'assets and liabilities.ged to the income
statement in 2007 totalled £4.7m (20As a result the schemes are
accounted 06:fo£4.2m).r as defiTnehdamounts of contributions expected to
be paid to the schemes dure estimated accrual of benefits is
approximately £4.9m.
ing the financial year commencing 1 January 2008 in respect of the
ongoing
Defined benefit arThe group operrangements pensionable pay.ates a
nLiabilities
under these arumber of defined benefrangements are stated at the
discounted
value of benefit retirement arrangements where the benefits are based on
emploits accrued to datey,ees'based upon actuarlength of service and fial
adviceinal. Under unfunded arin respect of these arrangements,the group
does
not hold the related assets separ held in separ
rangements in 2007 totalled £1.8m (2006: £1.6m). Under funded ar ate from the
grouprangements,.The amount charthe assets of defined
benefged to the income statementit schemes are unit credit method.ate
trustee-administered funds.The group operates severThe pension costs
are assessed on the advice of qualifal funded defined retirement benefit
schemes.Whilst the group'ied independent actuars pries using the
projectedit also oper Netherlands and one in Isrates other materael) haial
schemes in the Netherve been reclassified,flands,or disclosure
purIreland,Canada and Isrposes,into the materael.During 2007,ial funded
deftwo defined retirement benefined benef imary schemes are in the
UK,it schemes (one in the
it schemes it schemes category. it schemes
category.
category.
85
34 The carRetirement benefit obrying values of retirement benefligations
(continit obligations at the
balance sheet date are presented beloued)w:
2007 2006
£m £m
UKRest ofWor 121.6 210.7
Net liability on materldUnfunded 15.7ligations135.5226.4
and other funded defial funded
defined retirement benefined
retirement benefit obit
schemes13.9
31.9 24.1
Less: 1 67.4 250.5
Included within (47.3) (42.2)
non-curAmounts
included within
current
liabilitiesrent
liabilities 120.1
208.3
The defThey comprined benefise two arit schemes in the UK account
frangements:the pension scheme
demeror 90% of the net balance sheet liability on materged from the forial
funded defined retirement
benefit schemes. and the Securicor scheme,
mer Group 4 Falck A/S with total membership of
approximately 8,000of
approximatelresponsibility for which the group assumed on
20 July 2004 with the
acquisition of Securicor plc,with total membership scheme
and at 5 y
20,000.Aprhavil 2006 in respect of the SecurRegular
actuarial assessments of the
schemes are carried out,the latest being at 31 March 2007
in respect of the Group
4earnings increases,e been updated to 31 December 2007 and
use the valuation
methodologies specificor scheme.Pension obligations stated
in the balance sheet
takied in IAS 19 e account of future service and Employee
Benefits. The weighted
average principal assumptions used for the purposes of the
actuarial valuations
were as follows: UK
Rest of World
KDiscount rey
assumptions used 2007
Expected 5.8%6.7% 5.5%5.8%
returateExpected rnon
scheme assets
Future pension 5.2%3.4% 2.1%3.3%Inflation3.4%2.2%
increasesate of salary
increases
KDiscount rey
assumptions used 2006
Expected returate 5.2% 4.8%Expected r
Future pension
increasesate of salar
n on scheme assetsy 6.5%4.9% 5.8%3.7%
increases
Inflation 3.1%3.1% 2.3%2.3%
the schemes in the UK are as fIn addition to the above,the group uses
approprollows:iate mortality
assumptions when calculating the schemes obligations.The mortality tables used
for >>CurCurrent and
future pensionerrent and future pensionerss125% of PMA92 (Y115% of PFA92 (YOB)
ShorOB) Shortt
CohorCohorttFemaleMale The amounts recognised in the income statement in
respect of these defined
benefit schemes are as follows: UK
Rest of Total
World
- £m £m
m
Amounts rCur
Finance cost on
defrent ser
ecognised in income (4.1) (15.6)
2007vice cost
Expected return (3.9) (72.3)Total amounts recognised in incomeon
defined retirement benefit
scheme assets73.9(6.0)(4.6)3.4(10.6)77.3
Amounts rCur
Past serrent ser
ecognised in income
2006
vice costvice cost (3.5) (13.7)Finance cost on defined retirement
benef(0.4)(0.7)(1.1)
Expected return on (2.9) (66.2)Total amounts recognised in incomeit
scheme
defined retirement assets64.8(9.1)(4.7)2.4(13.8)67.2
benefit obligations
86 Notes to the consolidated financial statements
(continu-
d)
34The amounts recognised in income are included within the benefit
obligations (continu-
fRetirement 2006
d)ollowi-
g
categori-
s in the
income
statemen-
:
Cost of salesAdministr
Finance incomeation expenses
Finance costs
Total
Actuarial gains and losses recognised cumulatively in the statement of
recognised income
and expense are as follows:
AtRecognised in the y1January
At 31 December
The amounts included in the balance sheet arising from the group's
obligations in respect
of its defined benefit schemes are as follows:
UK
£m
2007Present value of def
Fair value of scheme assetsined benefit obligations
1,291.3
2006Present value of def
Fair value of scheme assetsined benefit obligations
(1,118.1-
1,328.8
(45.4)61-
1
(1,163.5-
1,389.9D-
ficit in
scheme
recognis-
d in the
balance
sheet210-
715.7226-
4
2005Present value of def
Fair value of scheme assetsined benefit obligations
1,199.3
2004Present value of def
Fair value of scheme assetsined benefit obligations
1,038.6
87
34 MoRetir follovws:ements in the present value of def ement benefit obligations
(continined benefit obued)ligations in the current year and the fair value of
scheme assets during the year were as
UK Rest of World Total
2007 £m £m £m
ObligationsAt
Ser1vice costJanuary 2007 1,328.811.5 61.1 1,389.9Interest
cost68.44.115.6
Contributions from scheme 3.9 72.3Actuarial
member
gainss(77.5)3.3(8.4)1.9(85.9)5.2
BenefOtherits paid (44.5)1.3 15.9(- (45.8)
.3)
Translation adjustments - 7.4 17.27.4
At 31 December 2007 1,291.3 84.6 1,375.9
AssetsAt
Expected retur1January 1,118.1 45.4 1,163.5Actuarial
losses73.93.477.3
2007n on scheme assets
Actual retur (16.6) (4.6) (21.2)Contrn on scheme
assets57.3(1.2)56.1
Contribibutions from scheme 34.2 3.8 38.0Benefits
memberutions from the
paids(44.5)3.3(1.3)1.9(45.8)5.2
sponsoring companies
OtherTranslation
adjustments
1.3- 15.76- 17.06.4
4
At 31 December 2007 1,169.7 70.7 1,240.4
UK Rest of World Total
2006 £m £m £m
ObligationsAt
Ser1vice costJanuary 2006 1,199.310.2 61.1 1,260.4Past ser3.513.7
Interest costvice cost 0.4 0.7 1.1Contributions from
scheme
members63.33.52.91.066.2
Actuarial losses/(gains) 85.4 4.5Benefits
paid(36.7)(4.0)81.4
Acquisitions/divestments (1.2) (37.9)Other0.43.00.50.9
Tr - 3.0At 31 December
2006anslation
adjustments1,328.8-61.1(3.4)1,389.9(3.4)
AssetsAt
Expected retur1January 1,004.5 39.3 1,043.8Actuarn on scheme
2006 assets64.82.467.2
Actual returial gains n on 110.245.4 2.65.0 115.248.0Contr
scheme assets
Contribibutions from the 33.2 3.2 36.4Benefits paidutions
from scheme
sponsoring companies
members(36.7)3.5(1.2)1.04.5
Acquisitions/divestments 0.4 (37.9)Other3.00.5-0.9
Translation adjustments 3.0At 31 December
20061,118.1-45.4(2.4)1,163.5(2.4)
The contrschemes.The other moibution from sponsorvements in the rest of the wing
companies in 2007 included £26.1m (2006:orld in 2007 represent the
reclassif£24.2m) of additional contrication as material of twibutions in respect
of the defo funded plans.icit in the
88 Notes to the consolidated financial statements
(continued)
34The composition of the scheme assets at the balance benefitobligations
sheet date is as fRetirement UK
Analysis of scheme assets Rest of
Rest of World
World
2007Equity instr
Debt instrumentsuments 68%30%
68%30%
Other assets -4%-100%2-
-4%-100%2%100%25%100-
100%25%10-
3%
%3%
2006Equity instr
Debt instrumentsuments 70%
70%
Other assets 3%-63%%3%-
3%-63%%3%-100%100%10-
100%100%1-
%
0%
None of the pension scheme assets are held in the entity's own financial
instruments or in
any assets held or used by the entity. The expected weighted average rates
of return on
scheme assets for the following year at the balance sheet date are as
follows: UK
Rest of
Rest of World
World
2007 (retur2006 (return expected in 2008) 6.9%
6.9%
2005 (returnn expected in 2006)expected in 2007) 6.7%6.5%
6.7%6.5%
The expected rwith respect to other assets bates of return on individual
categories of scheme
assets are determined with respect to bonds by reference to relevant
indices,and respect of
assets of a similar natureyreference to relevant indices of the histor.The
overall expected
rate of return is the wical retureighted an and economic fverage of the
rorecasts of future
returates on the individual asset categorns relative to inflation inies.
The history of
experience adjustments is as follows: 2007
UK
UK
Experience adjustments on scheme liabilitiesAmount
(£m)
Percentage of scheme liabilities (%) 5.5-
5.5-
Experience adjustments on scheme assetsAmount (£m)
Percentage of scheme assets (%) (16.6)(1)
(16.6)(1)
2006 Experience adjustments on scheme
liabilitiesAmount (£m)
Percentage of scheme liabilities (%) 29.02-20.-
29.02-20.129.1
29.1
Experience adjustments on scheme assetsAmount (£m)
Percentage of scheme assets (%) 45.44
45.44
2005 Experience adjustments on scheme
liabilitiesAmount (£m)
Percentage of scheme liabilities (%) (17.5)(1)
(17.5)(1)
Experience adjustments on scheme assetsAmount (£m)
Percentage of scheme assets (%) 99.010
99.010
89
34 Retirement benefit obligations (continued)
2004
UK Rest of World
Percentage of scheme liabilities (%)
(2.7)(1) --
Experience adjustments on scheme assetsAmount (£m)
Percentage of scheme assets (%)
30.24643.733.9
The estimated amounts of contrthe ongoing accrual of benefits is approibutions
expected to be paid to the
schemes durximately £18m anding the financial year commencing 1 January 2008 in
respect of changes in financial
conditions. Additional contributions of around £26m will also be made in 2008
in respect of the def it is
anticipated that these will remain at a similar level in the medium tericit in
the schemes.m subject to IAS 19
specifto apply the aies that pension liabilities should be discounted at
approprviate high quality corporate
bond rates.The directors consider that it is appropriate and hamovement in the
discount rve thereferore used
such a rage of the yields on those ate applicabate,being 5.8%,AA corle in the
UK is to alter reporin respect of
the UK schemes at 31 December 2007 (5.2% at 31 December 2006).porate bonds
which most closely approximate to
the timescale of the liability profile of the schemested liabilities (before
associated deferred tax) by
approximately £26m.The effect of a 0.1%
Liability calculations are also heaexpectancy of a male member of the UK
schemes curvily impacted by the morrentltality
projections included in the actuary aged 65 has been assumed as 19.6 yial
assumptions.ears.The weighted aThe wveighted aerage
life expectancy verage life atto the prof65of a male curile of the memberrently
aged 52 has been assumed as 20.4 yship of the
schemes.The effect of a one years.The directorear change in this UK lifs
consider,on actuare expectancy assumption is to alter
reporial advice,these assumptions to be approprtediate liabilities (before
associated deferred tax) by approximately £49m.
Pgenerension obally moligations in respect of defve in line with
inflation.erInflation is therefred members increase in line
with inflation.ore an important assumption in the calculation of defIncreases
in salaries and increases in pensions-in-payment
effect of a 0.1% movement in the rate of inflation assumption applicable in the
UK is to alter reported liabilities (befined
retirement benefore associated defit liabilities.Theby approximately £14m.erred
tax)
35 Provisions
Employee Employee Claims Onerous
ben- Rest- reserves contracts Other
Total
fitsuctu-
ing
£m £m £m £m £m £m
AtAdditional 11.- 1.9 37.9 10.1 18.6 80.0
pro1January 3.6
2007vision in
the year
On acquisition -5.20- 12.2- 8.2- 2.4-
21.0Utilisation of
of subsidiary 2
provision(2.3)(1.2)(10.9)10.8
Unused amounts (3.6) (18.6)
(36.6)Reversals on disposal of a
rever
subsidiarsedy(0.6)-(2.4)(9.0)-(-
.5)(14.5)
Reclassified (2.- -- -- - (0.6)
(0.6)Translation
as held for )
adjustments0.20.2-(2.0)0.30.7-(-
sale .0)1.4
At 31 December 10.4 3.9 30.2 13.0 - 57.5
2007
Included in curIncluded in 23.633.9
non-current liabilitiesrent
liabilities
57.5
EmploThe pro
items such as long servision f
yee benefitsor emplo
vice ayee benefwards and terits is in respect of anmination indemnity schemes.y
employee benefits which accrue over the working lives of the employees,typically
including RestructuringRestr operations.ucturing proSettlement of restrvisions
include amounts fucturing proor redundancy pavisions is highly
probabyments,le.and the costs of closuThe timing is uncertain bre of activities
in acquired but is generally likely to be shorusinesses and discontint term.ued
90 Notes to the consolidated financial statements (continued)
35 Provisions (continued)
The reserof the group's cash servves are held besvices,genery the
wholly-owned
claims captive insurance subsidiaries in Guernsey,Luxembourg and the US which
reserC- underwrite part al liability,wor kers' compensation and auto
liability
aims policies. The provisions are subject to regular actuarial
reviewuncertain,iate.Settlement of these provisions is highly probable
but
both the value of the final settlements and their timing is
and are
adjusted
as
appropr
possible claims.dependent upon the outcome of ongoing processes to determine
both
liability and quantum in respect of a wide range of claims or OThe onerous
contrnerous
contracts leased properWhilst the likties.act provision mainly comprises the
provision
against future liabilities for all properties sub-let at a shortfall and for
long-term
idle,properties.The proelihood of settlement of these obvision is based on the
value
of future net cash outfloligations is considered probabws relating to
rent,le,there is
uncerrates,sertainty ovice charver their value and durges and costs of
maration.keting
the
Other
prOth-
r pro
various of its subsidiarvisions include amounts ar
ovisi-
ns
ies ising in respect of disposals where their final calculation is dependent
on
are future events. The company andis made f,from time to time,parties to
legal
proceedings and claims which arise in the ordinary course of
business.Provision
do not anticipateor the estimated value of settlements likely to be made,but
both
this value and the timing of any payments are uncertain.The directorsamaterial
adverse eff,taking account of legal and other profect on the group's financial
position or on the results of its operessional advice as
appropriateations.,that the
outcome of these proceedings and claims will have
36 The fDeferred tax reporolloting perwing are the major defiods:erred tax
liabilities and assets recognised by the
group and movements thereon during the current and prior Retirement
Other
bene- Intan- temporary
it ible
obli- assets Tax differences
Total
atio- lo-
s ses
£m £m £m £m £m
At(Char1Jange)/cre- (10.- (70.9) 8.2
16.7 28.1
it to the income )74.1
statementuary 2006
Acquisition of 10.8 (1- 1.6
0.4Credit/(char-(3.9)--(3.9)
subsidiaries 4)
Translation 9.7- 2.8- -- (2.1) 7.6At 31
December
adjustmentsge) to
200673.2(61.2)6.815.2(1.0)34.01.8
equity
At(Char1Jange)/cre- (14.- (61.2)- (1.-
15.2 34.0
it to the income )73.24.9 )6.8
statementuary 2007
Acquisition of - (9.7) 5.2
3.8(Charge)/credit to equity(22.2)-0.1(9.6)
subsidiaries
Translation 0.7 (3.7)- -- (0.7)6.9
(15.3)(3.7)
adjustments
At 31 December 2007 37.1 (59.7) 5.1 26.7 9.2
Cerfor ftain definancial reporerred tax assets and liabilities hating
purposes:ve been offset where permitted.The
following is the analysis of the deferred tax balances (after offset)
2007 2006
£m £m
DefDefererred tax (75.0) (81.7)
liabilities
Total defred tax 84.2 115.7
assetserred tax
position
9.2 34.0
At the balance sheet datefuture profits.A defer,the group has unutilised tax
losses of approximately £126.5m
(2006:£118.4m) potentially available for offset against losses.
red tax asset of £5.1m (2006: £6.8m) has been recognised in
respect of approximately £19.3m (2006:
£32.1m) of grossof future profNo defit streams in the
relevant jurerred tax asset has been
recognised in respect of the remaining £107.2m (2006:£86.3m)
of gross losses due to the
unpredictability author2011 and 2012 respectivities.Included
in unrecognised tax losses are gross
losses of £0.8m,isdictions and the fact that a
signifely.Other losses may be carried forward
indefinitel£3.0m,icant propory.£1.7m,tion of such losses
remains unaudited b£1.4m and £0.4m which
will expire in 2008,y the relevant tax2009,2010,
91
36 At the balance sheet , the aggregate ary differences associated with
undistributed earnings of
dateDeferred tax (contin amount of tempor ued) non-UK subsidiaries for which
defer on the basis that
the group is in a
position to control the
timing of the revred tax
liabilities have not
been recognised is
£2,504m
(2006:£1,056m).No
liability has been
recognised in respect of
these gross
differencesdifferences
will not reverse in the
foreseeable future.ersal
of the temporary
differences and it is
probable that such
Temporary differences
arising in connection
with interests in
associates and joint
ventures are
insignificant. At the
balance sheet datetax
issues in var,the group
has total unprovided
contingent tax
liabilities of
approximately £39.0m
(2006:£31.8m) relating
to unresolved
liabilities
crystallising is
improbabious
jurisdictions.leNo
pro.It is not
possibvision has been
made fle to estimate the
timing or outcome of
these issues.or these
amounts on the basis
that the group considers
that the likelihood of
the
37 Share capital
At 31 December 2007 At 31 December
2006
Issued and Issued and Issued and
Authorised fully paid Authorised fully paid
G4S plc £ £ £ £
Ordinary 500,000,000 320,177,685 500,000,000 319,954,230
shares
of 25p
each
(2006:
25p
each)
Nominal
Number Number Number value £m
OrAtdin-
r
Shares
issued
on
ex1Janu-
r
y shary
2006es
in issue
ercise 1,268,715- 1,268,715,480
317.2Ex
of 480
options:
Sharesa- 3,556,271- 3,556,2717-
3,556,2717,545,167
cutivve ,545,167 545,167
Schemee-
cheme
Shares 1,279,816- 1,279,816,918
320.0Ex
issued on 918
exuary
2007erci-
e of
options:
Sharesa- 667,50022- 667,500226-
667,500226,320
cutivvee ,320 320
SchemeS-
heme
At 31 1,280,710- 1,280,710,738
320.2
December 738
2007
The holderof the compans of ordinary.y shares are entitled to receive dividends
as declared from time to time and are
entitled to one vote per share at meetings Options owere as follover G4S plc
shares outstanding at 31 December
2007,ws:rolled over at 19 July 2004 from options previously held over Securicor
plc shares,
(a)
Executi-
e share
option
scheme
Number Number of Exercise price per share (pence)
of ordinary
options shares
outstan- under
ing1 option
9 72,901 107.98p 107.98p Exercise
date2008
9300,000450- 133.75p16- 133.75p164p
2008 - 200910230,0002008 - 2010
000 p
5 1,655,000 153p 153p 2008 -
20102108p2008 - 2011
1 150,000 130p 130p 2008 -
2012125,00025,00079.75p85p2008 - 20132008 - 2013
1 50,000 91p 91p 2008 - 2013
The proceeds from shares allotted under this scheme during the
year amounted to £783,769 (2006: £4,266,774).
92 Notes to the consolidated financial statements (continued)
37 Share capital (continued)
(b) All remaining scheme scheme during the year amounted to £144,845
(2006:ve been
shares under this exercised or ha£4,860,469).ve lapsed during the year.The
proceeds from
scheme haSharesave shares allotted under this
All of the above
options are
inclusive of those
held by directors as
set out in the
Directors'
Remuneration Report
on page 42.
5,209,320 shares are
held by an employee
benefit trust as
detailed in note 38.
38 Share premium and reserves
Share Retained Hedging Translation Merger
Reserve for Total
premium earnings reserve reserve reserve
own shares reserves
£m £m £m £m £m
£m 625.0
attr
Shares issuedof the
parent
ibutable to equity
shareholders
6.3- 73.8- 10.6- (52.6)- --
-- 31.8Dividends declared-(49.8)--6.3
Own shares purchased - - -
- (49.8)Equity-settled tr
At 31 December 10.3- 186.05.0 4.8-
2006ansactions
- -
(2.8)---
-
(3.1) (3.1)
426.3
(9.4) 615.25.0
AtNet recognised 186.0 4.8 (2.8) 426.3
(9.4) 615.2
income/(expense)1January
200710.3
attr
Shares issuedof the
parent
ibutable to equity - 189.7 (19.2) 38.8 -
-
shareholders
Dividends declared 0.7- (59.3)------
209.30.7
Own shares - - - -- --
(3.1)- (59.3)(3.1)
purchasedOwn shares a
Equity-settled -- (3.5)4.1 -- -- --
3.5- 4.1-
trwardedansactions
At 31 December 2007 11.0 317.0 (14.4) 36.0 426.3
(9.0) 766.9
Hedging rThe hedging
resereser
transactions that hav
vee
ve not ycompret occurises the effred (net of tax).ective portion of the
cumulative net change in the fair value of cash flow instruments related to
the hedged TThe trranslation r as well as from the translation reser eserv
anslation of liabilities that hedge the
compane compr ve
ises all foreign exchange differences ar y's net inising
from the trvestment in fanslation of the foreign operations (net of
tax).inancial statements of foreign operations, MergThe
merer rger resereservve compre in 2000 and the acquisition of
Securises resericor plc bves arising upon the merythe
group in 2004.ger between the former Group 4 Falck A/S and the former
Group 4 Securitas BV ReserAn emplove fyor own shares
performance share plan and perfee benefit trust established by the group
holds 5,209,320 shares (2006:6,022,967 shares),to satisfy
the vesting of awards under the2,264,973 shares wormance-related and
synergy bonus schemes.During the year 1,451,326 shares
were purchased by the trust,whilst £8,953,071 (2006: £9,435,828),ere
used to satisfy the vwhilst the maresting of aket value
of these shares was £12,749,808 (2006:wards under the schemes.At 31
December 2007,the cost of shares held by the trust wasas
treasuryshares,are deducted from equity,do not bear dividends and are
excluded from the calculations of ear£11,323,178).Shares
held bnings per sharey the tr.ust are treated
93
39 AAnalreconciliation of
net debt to amounts in the
consolidated balance sheet
is presented beloysis of net
debtw:
2007 2007 2006
£m £m £m
Cash 381.3 381.3 307.5
and
cash
equiva-
entsIn-
estmen-
s
Net 73.2 73.2 73.7
debt
includ-
d
within
dispos-
l
groups
classi-
Bank
oied as
held
for
sale
(1.5)
- - -
Ba- (109.9) (109.9)
(97.5)
k
lo-
ns-
er-
ra-
ts
Lo- (809.7) (809.7)
(900.4)
n
no-
es
Fair (290.4) (290.4) -
value
of loan
note
deriva-
ive f
Ob- in- 1 4.3 1 4.3
-
ig- nc-
ti- al
ns in-
un- tr-
er me-
fi- ts
an-
e
le-
ses
To- (62.2) (62.2)
(56.1)
al
net
de-
t
(804.9) (804.9) (672.8)
An
analys-
s of
moveme-
ts in
net
debt in
the
year is
presen-
ed
below:
2007 2007 2006
£m £m £m
Increase in cash,Purchase
of incash equivalents and
bank overdrafts per
consolidated cash flo
Increase in debt and lease
fvestments w statement
48.8 48.8 16.1
0.3 0.3
Change
in net
debt
result-
ng from
cash
floina-
cing
21.8
Bor ws (135.8) (135.8) (86.7)
(86.7) (86.7)
Net
additi-
ns to
frowin-
s
acquir-
d with
subsid-
aries
(48.8) (48.8) (48.8)
(22.9) (22.9) (2.5)
Moveme- (10.3) (10.3)
(19.6)
t in
net
debt in
the
yinance
leases-
ar Tr
(119.9) (119.9) (70.9)
Net (12.2) (12.2) 55.4
debt at
the
beginn-
ng of
the
yansla-
ion
adjust-
ents
Net
debt at
the end
of the
year
ear ear (672.8) (672.8) (657.3)
(804.9) (804.9) (672.8)
40Contin- liabilitiesmal course of business,none of which are
individually or
ent collectively significant.
liabil-
ties
exist
in
respect
of
agreem-
nts
entered
into in
the
norCon-
ingent
Details
of
unprov-
ded
contin-
ent tax
liabil-
ties
are
presen-
ed in
note
36.
41 Operating lease arrangements
At the balance sheet dateThe group as lessee,the group had outstanding
commitments under non-cancellable operating
leases,which fall due as follows:
2007 2006
£m £m
Within one yIn the second to fearifth y After five y
95.6 72.4
ears inclusive
185.8 140.2
Total operating lease commitmentsears
148.2 130.4
429.6 343.0
The group leases a nnegotiated over an avumber of its offerage termof eight and
a half yice properties,vehicles and
other operears,at rates reflectivating equipment under operating leases.Leased
properties are in line with
prevailing marvehicles and other operating equipment are negotiated oket
conditions.Some but not all lease
agreements hae of marver an average lease terve an option to renew the lease at
the end of the lease terket
rentals.Periodic rent reviews take place to bring lease rentalsm of three and a
half years.m.Leased
CerThe total future minimtain leased properties haum sub-lease pave been
sub-let byments expected to be receivy the
group.Sub-leases are negotiated on tered by the group from sub-let properms
consistent with those of the associated
properties amount to £16.4m (2006: £18.3m).ty.
94 Notes to the consolidated financial (cont-
statements nued)
42The group has pa Securicor plc
twShare-based shares and rolled
oo types of
equity-settled,
yments
ver to y 2004, and (2)
y 2004, and (2)
G4S plc conditional
conditional
shares allocations
allocations
with the
acquisit-
on of
that
bshare-b-
sed
payment
scheme in
place:(1)
share
options
previous-
usiness
on 19
July held
by
employees
over of
G4S plc
shares.
SharShare
options
rolled oe
options
under the
ESOS were
grver
from
Securant-
d at
maricor
plc fall
under
either
the Exket
value,ve-
t three
or four
yearecut-
vs fe
Share
Option
Scheme
(ESOS) or
the
Sharesave
Scheme.O-
tionscon-
itions
are met
and that
the
recipien-
s
continue
to be
employed
bollowing
the date
of grant
(provided
that
certain
non-mark-
t
performa-
ce
following
the date
of grant.
Options
under the
Inland
Rev
y the group during the vesting period) and are
exercisable up to ten yearsvest
after three years following the date of grant and
remain exenue-approercisabved
Sharesale for a perviod of six months fe scheme were
granted at a discount of 20%
to marollowing vesting.ket value,
Details of the share options
outstanding during the year are
as follows:
Weigh- Weighted
Weighted
ed
Numberavera- Numberaverage
average
of e of
sharesexerc- sharesexercise
exercise
under se under
optionprice optionprice
price
(penc- (pence)
(pence)
)
2007 2007 20062006
2006
Outstanding at 1 JanForfeited 3,912- 117.7315,37- 91.23
91.23
duruary 990 ,443
Exercised -- (249,061)70.50
70.50
during the year
Expired durOutstanding at 31 (893,- 103.89(11,1- 82.22
82.22
Decembering the ying the yearear 20) 1,438)
(61,269)
64.00(113,- 104.00
104.00
54)
2,957- 123.023,912- 117.73
117.73
901 990
Exercisable at 2,957- 123.023,912- 117.73
117.73
31 December 901 990
outstanding at 31 December 2007 wThe weighted average share price at the
date of exere vested.ercise for
share options exercised during the year was 197.85p (2006:174.56p).All
options No share option expense
has been recognised in the income statement during the year (2006: £1.4m)
as all share options had
previously vested. SharShares allocated conditionalles allocated
conditionallyy allocated conditionally
under the perffall under either the group'ors performance-related bonus
scheme or the group's Performance
Share Plan (PSP).Sharesperfmance-related bonus scheme vest three years
following the date of grant
provided certain non-market conditions are met as to twormance conditions
are met.Those allocated under
the PSP vest after three years,to the extent that (a) certain non-market
performancemet as to the
remaining third of the allocation (half fo thirds of the allocation (one
half for awards made pror awards
made prior to 2007).ior to 2007) and (b) certain market performance
conditions are
The number of shares allocated
conditionally is as follows:
Performance- Perfo-
mance-
related relat-
d
bonus bonus
scheme PSP Totalscheme PSPTotal
Total
2007 2007 2007 2006 20062006
2006
Number Numb- NumberNumberNumberNumber
Number
r
Outstanding at
1 JanAllocated
dur
T ing the y 1,915,270 11,1- 13,06- -7,763-
7,763,4- 7,763,4-
uareary 4,403,673 419 9
9
377,7254,35- 4,737-
,350 075
Forfransferred
during the year
1,915- 3,716-
5,632,0- 5,632,0-
270 815 5
5
(311,218) (1,9- (2,26-
3,75- ,973)
)
Expired dureited during the ying
the year
---
---
-(952- (952,- -(325,-
(325,83- (325,83-
469) 69) 31) )
)
Outstanding at -(1,1- (1,14- - --
--
31 Decemberear 7,46- ,460)
)
1,981,777 11,4- 13,44- 1,915- 11,15-
13,069,- 13,069,-
0,069,846 270 ,403 73
73
The wThe weighted aeighted avvererage remaining contrage share price at
the date of allocation of shares
allocated conditionallactual life of conditional share allocations
outstanding at 31 December 2007 was 16
months (2006:17 months). contractual life of all conditional allocations
was three years.
y during the year was
y during the year was
216.83p (2006: 185.14p) and
216.83p (2006: 185.14p)
the Under the
and the Under the
PSPShareholder Retur,the
PSPShareholder Retur,the
vn(a maresting of twket
vn(a maresting of twket
perfo thirds of the shares
perfo thirds of the shares
allocated conditionallory
allocated conditionallory
(one half for awards made
(one half for awards made
prior to 2007) depends upon
prior to 2007) depends
Total upon the group's T
upon Total upon the
group's T
mance condition) over the vesting year measured against a
comparator group. 25% of the
allocation vestssubject to this marotal Shareholder
Returket performance condition has
therefn equalling median perfore been reduced bormance
amongst the compary 75%.ator
group.The fair value of the shares allocated
95
42 Share-based payments (continued)
TSharotal expenses of £4.1m wes allocated conditionally (continued)calculation
of which included an estimate of the nere recognised in the income statement in
the year (2006:£3.6m) in respect of conditional share allocations,the based upon
the probable achievement against the perfumber of those shares allocated subject
to non-marormance conditions.ket performance conditions that would vest 43
Related party transactions
TTrransactions and balances with joint vansactions between the company and its
subsidiarenturies haves and associated undere been eliminated on consolidation
and are not
disclosed in this notetakingstransactions between the group and other related
parties are
disclosed below.All tr.Details of course of business.
ansactions with related parties are entered into in the
normal
Joint ventures Joint ventures Associat- Associat-
s s
2007 2006 2007 2006
£m £m £m £m
TRevransactionsenue
13.8 14.5 -
Amounts due from related parCreditors
ties ties
ties ties
- - 1.5 5.4
DebtorLoanss
0.7 1.4 - -
2.3 3.5 - -
RevSTC (Milton Keynes) Ltd.enue relates to fees of £10.4m (2006:Amounts
ow£9.6m) charged to Bridgend Custodial Services Ltd and fees of £3.4m
(2006:£4.9m) charged to are unsecured and will be settled in cash.ed bNo
expense has been recognised in the yy the group are to its associated
undertaking Space Gateway Support LLC.The amounts outstandingrelated
parties.Details of principal joint ventures and associated undertakings are
shoear fwn in notes 21 and 22 respectivor bad and doubtful debts in respect of
amounts oely.wed by
TIn 2006,ransactions with Mr Jørgthe group purchased air tren Philip-Søransport
services of £19,300 and leased
offensen,whilst a director (rice facilities fetiror £34,707 from Mr Jøred 30
June 2006)gen Philip-Sørensen at cost price.
TDetails of trransactions with post-emplo amounted to £1.4m at 31 December 2007
(2006:ansactions with the group's yment
benefit schemespost-emplo
£1.5m).yment benefit schemes are provided in note
34.Unpaid contributions owed to schemes RemThe group'uneration of k
whose remsunerkey management per ey mana
ation is ation is determined bsonnel are deemed to be the non-ex
determi- gement personnel
ed
bsonnel
are
deemed
to be
the
non-ex
gement
personn-
l
y the y the y the Remuneration Committee. Their remecutive
directoruneration is set out belos and those individuals,w.Furincluding
Remuner- Remuneration the executive directors,remuneration of
individual director pages 41 to 44.
tion Committee. Their
Committ- remecutive
e. Their directorunerati-
remecut- n is set out
ve belos and those
directo- individuals,w.F-
unerati- rincluding the
n is set executive
out directors,remun-
belos ration of
and individual
those director pages
individ- 41 to 44.
als,w.F-
rinclud-
ng the
executi-
e
directo-
s,remun-
ration
of
individ-
al
director
pages 41
to 44.
s s included s included within key management
ther information about the
included within key personnel is pro Report
within management
key personnel is pro
managem- Report
nt
personn-
l is pro
Report
on on vided in the
audited part of the Directors' Remuneration
2007 2006
£ £ £
ShorP
Other long-terost-emplo
t-term employment benefyee benefitsits
4,869,3654,337,944
343,443 826,777
Share-based pam benefTotalymentits
28,896 22,138
2,344,4122,022,518
7,586,1167,209,377
44 AEv are pron
ents after the balance sheet dateumber of acquisitions w vided within note
17.ere effected after the balance sheet date,but before the financial
statements were authorised for issue,details of which On 7 March 2008 the
group signed committed bank facilities amounting to £350m.group can exercise
an option to extend the facilities to 30 June 2009.These facilities expire on
31 December 2008,although the
96 Notes to the consolidated financial statements (co-
tin-
ed)
45The companies listed investments affected the group's results and
beloSignificant net assets durw are those which wing the yere
pareart of the group at 31 December 2007 and
which,in the opinion of the
directors,significantlygroup as a whole..The
directors consider that those companies not
listed are not significant in relation to the
The principal activities of the companies listed below
are indicated according to the following key:
SecurCash serity
servicesvices CS
These businesses operate principally in the country in
which they are incorpor ated. Product
segment seg-
ent
Subsidiar
G4S SecurGroup 4 Secur
y underity S S
Sertakingsvices AG
G4S Cash Serity Services S S
SA/NV
G4S Security Services C C
(Canada) Limited
G4S Security A/S
Services
A S S
G4S Cash Centres (UK) Limitedviation Security (UK) S
Limited G4S International UK Limited
C C
G4S Security Services S S
(UK) Limited
Group 4 Group 4 S S
Technology Limited
G4S SecurAS S+C S+C
G4S Sicherheitsdienste SS SS
GmbHicor SAS
G4S Security Services
(India) Pvt.
G4S Security Services (Ireland) Limitedvices (Ireland) C
Limited
G4S S S S S
SecurHashmiraCompanyLimi-
ed
G4S Security Serity Services (Kenya) Limited S+C
Group 4 Securicor Cash C C
Services BV
G4S Security AS
Services
al Majal Service Master SS SS
AS4
G4S Security Services (SA) (Pty) Limited S
G4S Security ige) AB C C
Ser
Youth Services LLCvices (Sverige) AB SS
The Wackenhut Corporation S S
J
STC (Milton Keynes)
LimitedBr
oint vidgend Custodial S S S S
Serentures (see note
21)vices Limited 3
Associated underSpace
Gateway Supportakings
(see note 22)t LLC
S S
12 G4S Security Services (India) Pvt. Limited has a
year end of 31 March. Safeguards Securicor Sdn Bhd
has a year end of 30 June.4Bridgend Custodial
Services Limited has a year end of 30 September.
3
of G4S SecurBy virtue of shareholder agreements,ity Serthe group has the power
to govern the financial and operating policies the benefits from their
activities.vices (India) Pvt.These are therefLimited,Safeguards Securore
consolidated as full subsidiaricor Sdn Bhd and al Majal Series.vice Master,so as
to obtain
Parent company balance sheet 9 7
At 31 December 2007
2007 2006
Notes
£m £m
FixTed assets
Inangibvestmentsle assets
( b)
4.3 3.9
(c)
2,214.9 587.5
2,219.2 591.4
CurDebtorrent assets
Cash at bank and in hands
( d)
1,418.1 1,176.3
9.7 7.7
1,427.8 1,184.0
CBank oreditors - amounts falling due within one yverdraft
(unsecured)ear Borrowings (unsecured)
(63.6) (61.1)
Other
( e)
(15.0) (25.0)
(f)
(2,141.2) (504.5)
(2,219.8) (590.6)
Net current (liabilities)/assets
(792.0) 593.4
Total assets less current liabilities
1,427.2 1,184.8
CrBoreditors - amounts falling due after mor
Otherrowings (unsecured)
e than one year
(e)
(962.4) (786.2)
(f)
(4.8) (0.3)
(967.2) (786.5)
Provisions for liabilities and (i)
(2.7) (3.8)
charges
Net assets
457.3 394.5
CaCalled up share capitalpital and
reserves
Share premium and reserves
37
320.2 320.0
(j)
137.1 74.5
Equity shareholders' funds (k)
457.3 394.5
The parent company financial statements were approved by the board of
directors and authorised for issue on 7 April 2008. They were signed on
its behalf by: Nick BucklesDirector
DirectorTrevor Dighton
98 Notes to the parent company financial statements
(a) Significant accounting policies
The separBasis of prhistorical cost conate feparationinancial statements of the
company are presented as required by the Companies Act 1985. They have been
prepared under the Standards (UK GAAP).vention except for the revaluation of
certain financial instruments and in accordance with applicable United Kingdom
Accounting ExAs peremptionsmitted by section 230(3) of the Companies Act 1985,
the company has not presented its own profit and loss account.
The companThe cash flows of the company has taken advantage of the exy are
included within its consolidated femption from preparing a cash floinancial
statements.w statement under the terms of FRS 1 Cash Flow Statements.
of the groupThe compan.y is also exempt under the terms of FRS 8 Related P arty
Disclosures from
disclosing related party transactions with other member s The consolidated
fConsequently the
companinancial statements of the group contain fy has taken advantage of
certain exinancial
instremptions in FRS 29 from the requirement to present separument disclosures
and comply with FRS 29
Financial Instrate fuments:Disclosures. disclosures for the company.
inancial instrument
TT
strangib
angib
aight-line basis ole f
le fixixed assets are stated at cost net of accumed assets
ver their expected economic life.ulated depreciation and
anShory provision for impairment.Tangible fixed assets are
depreciated on aand vehicles are depreciated over periods
up to a maximum of ten yt leasehold properears.ty (under 50
years) is depreciated over the life of the lease.Equipment
FixFix
indicatored asset in
ed asset in
s that the carvestments,
vestments
rying value mawhich compry not be recoise investments in subsidiarverable.y
undertakings,are stated at
cost and reviewed for impairment if there are Financial instrumentsFinancial
assets and financial
liabilities are recognised when the group becomes a party to the contractual
provisions of the
instruments.
> External debtorsDebtors do not carry interest and are stated initially at
their fair value.
> Cash and cash equivalents and cash equivalentsise cash balances and
call deposits.
comprCash
> InterInterest-bearest-bearing
bor
charges, including premiums paing bank
overdr
roafts,wings
yabloans and loan notes are recognised at the value of proceeds receivle on
settlement or
redemption and direct issue costs,ed,net of direct issue costs.Financeaccrual
basis using the
effective interest method.are recognised in the profit and loss account on an
> External crCreditorsare not interest-beareditorsing and are stated initiallyat
their fair value.
> Amounts owed to/from to/from subsidiary undertakings bear
undertakingsket
oAmounts subsidiarwed interest at prevailing mary
rates.
> Equity instrumentsEquity instruments issued by the group are recorded at the
value of
proceeds received,net of direct issue costs.
PrProo
amount can be madevisions are
recognised when the compan visions
. y has a present legal or constructive obligation as a result of
past events and
a reliable estimate of the
99
(a) Significant accounting policies (continued)
In accordance with its treasurDerivative financial instruments and hedgry
policy,the company only holds or
issues dere accountingivative financial instruments to manage the group's
exposure to financial fixisk,not
for trading purposes.Such financial risk includes the interest risk on the
group's variable-rate borrowings,
the fair value risk on the group'sassets measured in fed-rate borrowings,oreign
curand foreign exchange
rrencies,to the extent that these are not matched bisk on transactions,on the
translation of the group'y
foreign currency bors results and on the translation of the group's net through
a range of derivative
financial instruments, including interest rate swaps, fixed rate agreements,
forward frowings.oreign
exchange contrThe company manages these racts andiskscurrency swaps.
Derto fair value is recognised immediatelivative financial instruments are
recognised in the balance sheet
as financial assets or liabilities at fair value.The gain or loss on
remeasurement hedge accounting, the
treatment of any in the profy resultant gain or loss depends on the nature of
the item being hedged as
descrit and loss account,unless they qualify for hedge accounting.Where deribed
beloivatives do qualify
fw:or >
FThe change in the fair value of both the hedging instrair value hedge and
loss account.
ument and the related portion of the
hedged item is recognised
immediately in the profit
> The change in the fair value of the porCash
LeasesAssets held
under f
their useful economic lifinance leases are included as tangibe.The capital
element of future
rentals is included within creditorle fixed assets at their capital value and
depreciated over
the shorter of the lease term andover the period of the lease.s and finance
charges are allocated
to accounting periods Annual rentals payable or receivable under operating
leases are charged or
credited to the profit and loss account as incurred. FThe foreign cur
translated at the rinancial
statements of the compan rencies
ates of exchange prevailing on the dates of the try are presented in
sterling,its functional
curansactions.At each balance sheet daterency.Transactions in currencies other
than sterling are
denominated in other cur are denominated in other currencies are retrrencies
are translated at
the ranslated at the rates prevailing on that dateates prevailing at the date
when the fair value
was deter.Non-monetary assets and liabilities car , monetary assets and
liabilities which areried
at fair value which measured at historical cost denominated in other cur
mined. Non-monetary itemsand loss account.rencies are
not
retranslated.Gains and losses arising on retranslation
are included in the
profit
TCuraxation
by the balance sheet daterent tax is provided at amounts expected to be paid
(or
reco.vered) using tax rates and laws that have been enacted or substantively
enacted
Deftax is measured on a non-discounted basis at tax rerred tax is recognised in
respect
of all material timing differences that have originated,but not reversed,by the
balance
sheet date.Deferred on tax rates and laws enacted or substantiv
ates that are expected to apply in the periods in which the
timing
differences reverse based considered more lik be deducted.
ely than not in that there will be suitab ely enacted at the
balance sheet
datele taxable profits from which the future rev.Deferred tax
assets are
recognised where their recoersal of underlying timing
differences can very
is
PThe companensions
unable to identify its share of the schemes'y participates in multi-employer
pension
schemes in the UK,which provide benefits based on final pensionable pay.The
company is
schemethe compan.Details of the schemes are included in note 34 to the
consolidated
fytreats the schemes as if they w assets and liabilities on a consistent and
reasonabere
defined contribution schemes and recognises charle basis.In accordance with FRS
17
Retirement Benefits, inancial statements.
ges as and when contributions are due to the
100 Notes to the parent company financial statements (continued)
(a) Significant accounting policies (continued)
The companShare-based paymentsof grant and expensed,y issues equity-settled
share-based pawith a corresponding increase in equity on a stryments to certain
emploaight-line basis oyees.The fair value of share-based paver the vyments is
determined at the date the shares that will eventually vest. The amount
expensed is
adjusted over the vesting period for changes in the estimate of the nesting
period,based on the company's estimate ofthat will eventually vest,save for
changes
resulting from any market-related performance conditions.umber of shares
The fair value of share-based pafor future dividend receipts and fyments gror
any
maranted in the fket-related perform of options is measured bormance
conditions.y
the use of the Black-Scholes valuation technique,adjusted The companservices in
exchange fy grants share options oor these options.ver its own shares to the
employees of subsidiary companies.The company does not receive goods or
accounting
entry upon gr
These are accounted for as a written call option on the entity's own
shares
and do not result in anpremium for new shares issued or to record a
reduction
in the treasurant.When the share options are subsequently exy shares
oercised
the resulting entrwned by the emploies are either to increase share
capital
and shareyee benefit trust.
DividendsDividends are recognised as distr
recognised but are disclosed in the notes to the consolidated fibutions to
equity holders in the perinancial statements.iod in which they are
declared.Dividends proposed but not declared are not Financial guaranteesThe
compan such contracts as a contingent liability unless and until such time as it
becomes probaby enters into financial guarantee contracts to guarantee the
indebtedness of other companies within the group.The company treatsunder the
guarantee.le that the company will be required to make a payment
Own sharTransactions of the companes held by employee benefit trust purchases of
shares in the company-sponsored employ are debited directlyee benefy to equityit
trust are included in the parent compan.y financial statements.In particular,the
trust's
(b) Tangible fixed assets
Land and Equipme-
t
buildings and Total
vehicles
£m £m £m
CostAt
Additions at cost1January 2007 3.0- 1.52.4 1.55.4Disposals
At 31 December 2007 3.0- (0.6)3.3 (0.6)6.3
DeprAt
Char1ge fJan
eciationuar
or the yy 2007ear (0.8) (0.7) (1.5)At 31 December
2007(0.2)(1.0)(1.0)(0.3)(2.0)(0.5)
Net book value At 31 December 2.02.2 2.31.7 4.33.9
2007At 31 December 2006
The net book value of land and buildings comprises short leasehold buildings
(under 50 years).
101
(c) The fFixed asset inollowing are included in the net book
value of fvestmentsixed asset investments:
Subsidiary undertakings Total
£m
SharAt1es at cost:
AdditionsJanuary 2007
587.5Disposals(1,566.0)3,-
93.4
At 31 December 2007 2,214.9
The increase in the carof the company's subsidiarrying value of subsidiaries in
which transfy
undertakings in the year is mainly due to a reorganisation of the legal
structure in respect of
some and the group are detailed in note 45 to the consolidated fers were
reflected at
marinancial statements.ket values.Full details of significant investments held
by the parent
company
(d) Debtors
- 2006
-
-
7
- £m
m
Amounts oOther debtorwed by group undertakings
Prepa s
- 1,150.7
-
-
-
-
-
2
- 16.1
-
-
0
Derivativyments and accrued income
- 0.9
-
8
Total debtore financial instrsuments at fair value
- 8.6
-
-
1
- 1,176.3
-
-
-
-
-
1
Included within derivative financial instruments at fair value is £14.8m due
after more than one year
(2006: £1.4m). See note (g) for further details. Included in other debtors is
£8.3m (2006: £6.5m)
with regard to deferred tax comprised as follows: 2007
- 2006
-
-
6
- £m
m
AccelerEmploated capital allowances
- (0.3)
-
-
-
)
Changes in fair value of hedging deryee benefits,including equity-settled
9.0
trivativesansactions and special pension contributions Total deferred tax
- (2.2)
-
7
- 6.5
-
3
The reconciliation of deferred tax balances is as follows:
- Total
-
-
-
l
£m
AtCredited to prof1January 2007it and loss
6.9
At 31 December 2007
(e) The unsecured borBorrowings (unsecurrowings are in the
fed)ollowing currencies:
- 2006
-
-
7
- £m
m
SterEuroling
- 89.9
-
-
-
0
US dollar
- 291.3
-
-
-
4
Total unsecured borrowings
- 430.0
-
-
-
0
- 811.2
-
-
-
4
102 Notes to the parent company financial statements (continued)
(e) The paBorroyment (unsecurile of the unsecured (continued)rowings is as
follows:
profwings bored)
2007 2006
£m £m
RepaRepayyabable within one yle within two to feariv
15.0 25.0
Repayab
e
672.0 786.2
-
-
-
-
s
Total unsecured borle after five yroearwingss
290.4 -
977.4 811.2
Undrawn committed facilities mature as follows:
2007 2006
£m £m
Within one yWithin two to fearive years
15.0 5.0
Total undrawn committed facilities
412.9 212.5
427.9 217.5
Borat amorrowings consist of £687.0m of floating rate bank loans (2006:£811.2m)
and £290.4m of fixed rate
loan notes (2006:£nil).Bank loans are stated believe the fair value of the
group'tised cost.Loan notes are
stated at amors bank loans and loan notes,tised cost recalculated at an
effcalculated from marectivket pre
interest rices,approate curximates to their book valuerent at the balance sheet
date..The directors
Borrowing at floating rates exposes the company to cash flow interest rate
risk. The management of this risk
is detailed in note (h). There were no financial liabilities upon which no
interest is paid.
(f) Creditors
2007 2006
£m £m
Amounts falling due within one yTear:
Amounts orade creditorwed to group unders
1.8 0.5
Other taxation and social secur takings
2,101.8 493.6
Other creditors ity costs ity costs
1.1 1.2
Accruals and def
9.6 4.2
Der erred income
12.1 4.0
Total creditorivativefinancial instrs - amounts falling due within one yuments
at fair 14.8 1.0
valueear 2,141.2
504.5
Amounts falling due after morDerivative financial instruments at fair valuee
than one
year:
4.8 0.3
(g) The carDerivativrying values of dere financ-
instrumentsivative financial instruments
al at the
balance sheet date are presented
below:
Assets Liabilities Liabilities
2007 2007 2006
£m £m £m
Forward fInterest roreign exchange contracts
-
Interest rate swaps designated as fair value hedgesate swaps designated as cash
flow hedges
13.6
0.9
2.8 6.0 0.4
14.3 - -
Amounts falling due after more than one y Amounts falling due within
17.1 19.6
one year
ear
- 1.3
-
-
-
)
(14.8) (4.8) (0.3)
2.3 14.8 1.0
DerThe marivativk to mare financial instrket valuation of the deruments are
stated at fair valueivatives has fallen
b,based upon mary £9.8m durking the yet prices where aear.vailable or otherwise
on discounted cash flow valuations.
103
(g) The interest rDerivative financial instruments
(continate swaps which qualify as cash flow hedges
haued)ve the following maturities:
Assets Assets
Liabilit- Liabilit-
es
es
2007 2006
2007 2006
£m £m
£m £m
Within one yIn the second year
In the third y ear 0.1 0.5
0.1 -
1.0 0.3
0.9
In the fIn the
f
otal carifth y
ourth year
-
ear 0.6 1.10.2
1.1 -
0.7
2.2 -
T rying value of cash floearw hedges 0.4 0.2
1.7 0.4
2.8 2.3
6.0 0.4
Projected settlement of cash flows (including accrued interest)
associated with derivatives that are cash flow hedges:
Assets Assets
Liabilit- Liabilit-
es
es
2007 2006
2007 2006
£m £m
£m £m
Within one yIn the second year 1.7 1.3
1.3 -
In the third yIn the fearear 0.6 0.5
2.8 0.1
0.3 0.4
1.4 0.2
In the fTotal cash floifth yourth yearear 0.2 0.1
0.5 0.1
ws - -
- 0.1
2.8 2.3
6.0 0.5
(h) Financial risk
The group conducts bCurrency risk and fusiness in manorward fyoreign exchange
contractssubject to foreign exchange risk due to the trcurrencies.anslation of
the results and net assets of its fThe group presents its consolidated financial
statements in steroreign subsidiaries.The companling and it is in consequence
substantial portion of the group's exposure to fluctuations in the translation
into sterling of its overseas net assets by holding loans in fy therefore hedges
acurrencies.Translation adjustments arising on the translation of foreign
currency loans are recognised in the profit and loss account.oreign
The companon such fy enters into forward foreign exchange contracts so as to
hedge group translation risk not hedged by way of loans.Gains and losses
exchange controrward facts at 31 December 2007 was £373.2m (2006:oreign exchange
contracts are recognised in the prof£342.4m).it and loss account.All these
contrThe notional value of outstanding forward foreignthey were replaced with
new forward foreign exchange contracts.acts had matured by 29 February 2008,at
which point
InterBor
limits approrowing at floating r
est rate risk and inter
ved by the directorates as descrs.Interest
ribed in note (e) exposes the compan est rate
swaps
ate swaps and, to a limited extent,y to cash floforward rw interest rate
risk,which the company manages
within policyproportion of borrowings on a reducing scale over forward periods
up to a maximum perate
agreements are utilised to fix the interest rate on a value of such
contraverage interest rate was 4.9%
(US dollar) (2006:acts was £213.5m (in respect of US dollar) (2006:4.9%) and
3.8% (euro) (2006:£196.7m)
and £183.6m (in respect of euro) (2006:iod of five years.At 31 December 2007
the nominal3.4%),and their
weighted average per£141.5m),their weighted years. All the interest rate
hedging instruments are
designated and fully effective as cash flow hedges and mo
iod to maturity was threedeferred
in equity.vements in
their fair value have been
At the time of issue in March 2007,The US Private Placement market is
predominantlthe company was comfy a fixed rorate martable with the
proporket,with investors looking for a fixed rate return over the life of the
loan notes.and therefore rather than take on a higher proportion of fixed rate
debt arranged fixtion of floating red to floating swaps effate exposure not
hedged bectively converting the fy interest rixed couponate swaps on the Prswaps
haivate Placement to a floating rate.Following the swaps the resulting average
coupon on the US Private Placement is Libor + 60bps.These posted to profve been
documented as fair value hedges of the US Prit and loss at the same time as the
movement in the fair value of the hedged item.ivate Placement fixed interest
loan notes,with the movements in their fair value
104 Notes to the parent company financial statements (continued)
(h) Financial risk (continued)
The companCounterpary's strty crategy fedit riskor credit risk management is to
set
minimum credit ratings for counterparties and monitor these on a regular basis.
For
treasurcalculated by-related tr of the transaction.y applying a w ansactions,
-
-
r
-
-
-
-
-
-
-
-
-
-
-
g
-
o
-
-
e
-
-
-
-
-
-
-
l
-
-
-
-
e
-
f
-
-
-
h
-
r
-
-
e
-
-
-
-
-
y
-
-
-
-
-
s
-
-
e
-
-
-
-
-
-
-
-
e
-
-
-
-
-
t
r
t-term transactions (under one year), the fansaction outstanding with
each
counter isk assigned to a counterparty. The utilisation of a credit
limit is
party based on the type and duration
Standard inancial counterparty must be investment grade rated by either the
& P
Standard & Poor'oor's or Moody's or Moody's rs.ating agency.For long-term
transactions,the financial counterparty must have a minimum rating of A+/A1
from
Tlarreasurgest twy tro counteransactions are dealt with the companparty
exposures
related to y's relationship banks all of which have a strong investment grade
rating. At 31 December 2007 the credit ratings of AA and AA- respectively.These
exposures represent 30% and 25% of the carTreasury transactions were £5.3m and
£4.4m
and held with institutions with long terrying values of derivative fm Standard
&
Poor'sbalance sheet date.inancial instruments at the
The companbank.There is legal ry participates in the group'ight of set off
under the
pooling agreement.s multi-currency notional pooling cash management system with
a
wholly owned subsidiary of an AA rated
(i) Provisions for liabilities and charges
Onerous
contracts
£m
AtUtilisation of pro1January 2007visions (1.1)3.8
At 31 December 2007 2.7
The onerous contrThe provision is based on the value of future net cash
outfloacts provision
comprises a provision against future liabilities fws relating to rent,or all
properrates,service
charties sub-let at a shorges and costs of martfall and for long-terketing the
properm idle
properties.ties.
(j) Share premium and
reserves
Share Profit and Own
premium loss shares Total
account
£m £m £m £m
AtRetained prof1January 10.3- 73.6 (9.4) 74.5
2007it
Changes in fair value of 137.4 - 137.4Shares issuedes
hedging derivativ
Dividends declared 0.7 - (24.1)- -- (24.1)0.7
Own shares purchased -Own shares (3.1)- (59.3)(3.1)
a-(59.3)-
Equity-settled -- (3.5)4.1 3.5 -Tax on equity
trwardedansactions movements-6.9--4.16.9
At 31 December 2007 11.0 135.1 (9.0) 137.1
(k) Reconciliation of movements in equity shareholders' funds for the year ended
31 December 2007
2007 2006
£m £m
Retained profChanges in fair value of hedging derit/(loss) for 137.4
(6.4)
the yearivatives Shares issued
(24.1) 13.1
Dividends declared 0.9 9.1
Own shares purchased (59.3)
(49.8)
Equity-settled trTansactions (3.1)
(3.1)
4.1 5.0
Net increase/(decrease) in shareholderax on equity 6.9
(2.2)
movementsOpening equity shareholders'funds 62.8 Closing equity
shareholders's'fundsfunds
428.8
(34.3)
394.5
457.3 394.5
105
(l) At the balance sheet dateOperating lease commitments,the company had annual
commitments under non-cancellable operating leases,which expire as follows:
2007 2006
£m £m
Within one yIn the second to fear 0.2 0.1
After more than fTotal operating lease commitmentsivifth ye 0.5 00.8.7
yearearss inclusive 0.8 1.5
1.6
(m) Auditor'Fees paid to KPMG s remuneration
company's consolidated fAudit Plc and its associates financial statements
are required to disclose such for non-audit services to the companees on a
consolidated basis.y itself are not disclosed in its individual accounts
because the
(n) Staff costs and
employees
2007 20- 20- 20- 2006
7 7 7
Number Nu- Nu- Nu- (Restated)Number
ber ber ber
The average monthly 178 171
number of employees of
the company during the
year was:
Total staff em-
costs,including lu-
directors' en-
s,
we-
e
as
fo-
lo-
s:
2007 20- 20- 20- 2006
7 7 7
£m £m £m £m £m
WSocial securages
and salar
P ity 23- 23- 22.0
co- 1 1
ts
ies
2.0 2.0 2.0 2.0 1.9
Total staff 1.1 1.1 1.3
costsension costs
26.2 26- 26- 26- 25.2
2 2 2
(o) The group has o types of equity-settled,
twShare-based share-based payment scheme in
place: (1) share options
previously held by employees over
of G4S plc
shares.ricor plc
shares and rolled o
of share-based
payment charThe
majorges
applicabity of the
shares under option
are attr ver to G4S
plc shares with the
acquisition of that
b
le to le le to
subsidiary to subsid-
under su- ary
takings.ibutab- si- under
herefle to ia- taking-
emplo y .ibuta-
un- Theref-
er e to
ta- emplo
in-
s.-
bu-
ab-
he-
ef-
e
to
em-
lo
usiness on 19 us- usiness
Jul ne- on 19
s Jul
on
19
Jul
ore all ore ore all disclosures relevant to
disclosures all the companyees of the compan y
relevant to the di- 2004,y,hoand (2) conditional
companyees of cl- allocations wever the compan y
the compan y su- are presented within notey bears
2004,y,hoand es the full cost42 to the
(2) conditional re- consolidated financial
allocations ev- statements.
wever the nt
compan y are to
presented the
within notey co-
bears the full pa-
cost42 to the ye-
consolidated s
financial of
statements. the
co-
pan
y
20-
4,-
,h-
and
(2)
co-
di-
io-
al
al-
oc-
ti-
ns
we-
er
the
co-
pan
y
are
pr-
se-
ted
wi-
hin
no-
ey
be-
rs
the
fu-
l
co-
t42
to
the
co-
so-
id-
ted
fi-
an-
ial
st-
te-
en-
s.
(p) TConting At 31 December 2007 guaro help secure cost eff ent
liabilitiesective f antees totalling £377.4m (2006:inance facilities for its
subsidiaries,£315.4m) wthe companere in place in suppory issues guarantees to
some of its ft of such facilities.inance providers.
The companunpaid debts in this connection.y is included in a group registrThe
liability of the UK group registration for UK VAT purposes and is therefation at
31 December 2007 totalled £18.2m (2006:ore jointly and severally liable for all
other UK group companies'£18.8m).
106 Group financial record
Presented
under
the then
Presented under IFRS UK GAAP
£m 2007 2006 2005 2004
2003
RevPro- 4,490.4 4,036.8 4,045.7
3,093.6 2,569.5
enue
intangibit before interest,le assets and exceptional
itemstaxation,amortisation of
acquisition-relatedProfit/(loss) after taxation312.1274.4255.0165.5118.4
Profit/(loss) attr
160.6 109.9 90.7 (65.4)
(3.2)
Non-curNet assetsrent 147.2 1,946.296.5 1,966.780.8
1,876.0(72.3) 693.6(9.7)2,148.3
assetsibutable to
shareholders
Net 1,123.0 971.5 969.9 909.9
323.6
debt
Net 8 04.9 672.8 657.3 586.4
382.4
debt/e-
uity
(%)
Return on net assets (%) 72 69 68 64
118
(profit/(loss) after
taxation/net assets)
Adjusted earnings per
ordinar
14 11 9 (7)
(1)
Divid- y share (pence) 13.4p 12.1p 11.2p 9.5p
8.0p
nds f
Average headcount (nor the 4.96p 4.21p 3.54p 1.85p
0.46p
year per ordinarumber)y
share (pence) 507,480
440,128 395,771 306,313
230,472
on 19 JulThe fiveyy 2004.ear record comprAfter that dateises onl,the record
reflects the results of the combined
bythe results of the security businesses of the forusinesses.mer Group 4 Falck
A/S up to the acquisition of
Securicor plc The fthe 2007 figures presented financial statements which haor
2003 are in accordance with the then
UK GAAPvebeen prepared under IFRS relate to:.The main adjustments that would be
required to make them consistent
with
(a)(b)the non-amortisation
of goodwill
(c) the recognition of separthe recognition of the funding balances fable or
contractual intangible assets on a
business combination(d)the recognition of a charor each retirement benefit
scheme (e)(f)the accounting treatment
of joint vge to income in respect of share options grentures under the
proportionate consolidation method
rantedather than the gross equity method of accounting (g) the recognition of
all derivative financial instruments
at fair value(h)the recognition of all taxable temporary timing differences
between the accounting base and tax
base of assets and liabilities (i)
dividends being prothe reclassifvided for in the year in which they are
declared(j)the reclassification of
cerication of securtain contrities held bacts as fy the group'inance
leases rs captivather than opere
insurance companies as a component of net debtating leases
Notice of Annual General Meeting 1 07
Notice is hereb29 May 2008 at 2.00 pm.y given that the Annual General Meeting
of G4S plc will be held at Ironmongers'
Hall, Barbican, London EC2Y 8AA on Thursday, Resolutions 1 to 7 will be
proposed as ordinary resolutions. Resolutions 8
to 10 will be proposed as special resolutions. 1
To receive the financial statements of the Company for the year ended 31
December 2007 and the reports of the directors
and auditor thereon. 2
To receive and approve the Directors'Remuneration Repor t contained in the
financial statements for the year ended 31
December 2007. 3
To confirm and declare
dividends.
4 To re-elect Grahame Gibson,a
director who is retiring by
rotation. To re-elect Bo
Lerenius,a director (and member
of the Audit and Remuneration
Committees) who is retiring by
rotation.
5
6 at which accounts are laid befTo re-appoint KPMG Audit Plc as auditor of the
Companore the shareholders,and to authory
from the conclusion of this meeting until the conclusion of the next generise
the directors to fix their
remuneration.al meeting (“the 1985 That the directorAct”) to exs be and are
herebercise all the poy generwers of the
Companally and unconditionally to allot relevant secury authorised in
accordance with section 80 of the Companies Act
1985
7
aggregate nominal amount of £106,500,000 proMeeting in 2009,savethat the
Companyshall be entitled to makvided that the
authoreoffity herebers or agreements befy given shall expire on the date of
the Companities (as defined in section
80(2) of the 1985 y's AnnAct) up to anual General or agreement as if this
authorrequire relevant securities to be
allotted after such expirrevoked.ity had not expired;and all unexpired
authoryand the directorities grs shall be
entitled to allot relevant secur ore the expiry of such author
anted previousl ities pur ity which wsuant to ities pur
ity which wsuant to anould or mighty such
anould or mighty such offer y to offer y to
the directors
the directors
and are to allot relevant to allot relevant securities be
to allot relevant securities be
hereby securities be
8 of the 1985 That the directorAct) fs be and are herebor cash as if section
89(1) of the 1985 y granted, pursuant to
section 95 of the 1985 Act did not apply to such allotment,Act,power to allot
equity securprovided that this poities
(as defwer shall be limited to:ined in section 94(2) the allotment of equity
securshares on the register of memberities
in connection with a r
(i)
to the interests of the
ordinary shareholders at
such record dates as the
director ights issue, open
off
s are proportionate (as
nears ma
er or other off
ly as may detery be) to the respectivmine where the equity secur er
of securities in favour of the holder
e numbers of e numbers of ordinarities respectivy
shares held orely attr s of ordinaributable y
ordinarities respectivy
shares held orely attr s
of ordinaributable y
or expedient to deal with treasurdeemed to be held bythem on anysuch
record date,subject to such exclusions or
other arrangements as the directors may deem necessaryor the
requirements of an ; and
y regulator y shares,y body or stock exchange or bfractional
entitlements or legal or practical problems
arising under the laws of any overseas territory matter whatever
y virtue of shares being represented by depositary
receipts or any other (ii)
the allotment (otherwise than purvalue of £16,000,000;suant to
sub-paragraph (i) above) to any person or persons
of equity securities up to an aggregate nominal
agreements befand shall expire on the date of the Company's Annual General
Meeting in 2009 save that the Company shall be entitled to make offbe
authorentitled to allot equity secur ore the expiry of such po
ities granted previously to the directorities pursuant to an wer which w
s under section 95 of the 1985 y such off ould or might require equity securer
or agreement as if the poities to be allotted after such expir Act be and are
herebwer confery revred hereboked.yhad not expired; y and the directorers orand
all unexpireds shall
9 of the 1985 That the CompanAct) of ordinary be and is herebyshares of 25p
each in the capital of
the Company generally and unconditionally authorised to makyprovided that:e
market purchases
(within the meaning of Section 163(3) the maximum number of shares which may
be purchased is
128,000,000;
(i)
(ii) the minimum price which may
be paid for each share is
25p; the maximordinary share
in the Companum price which
mayy as derbepaid fived from
or each share is an amount
equal to 105% of the aThe
London Stock Exchange Daily
Offverage of the middle
market quotations for an
(iii)
the day on which such share icial List for the five business days
immediately preceding
is contracted to be purchase of shares the contrthis
authority shall expire at
purchased; and (iv) the conclusion of the after such
expiry).
act for which was entered into bef
Annual Generore the
expiral Meeting of the Company of this
authory to be held in
2009 (except in relation to theity and
which might be
executed wholly or partly
108 Notice of Annual General Meeting
10 entitled That the
Compan“Amendments
to y's articles of association
be
amended with effArticles”(a
copect
from 1 October 2008 in
accordance
with the contents of the
document y
of which has been produced to
the
meeting and initialled by the
chairman for the purposes of
identification).
By order of the board PSecretareter David
7 April 2008y
The ManorManor Ro The
ManorManor Ro
CrayalWest Sussex yalWest
Sussex
RH10 9UNwley RH10
9UNwley
Notes
(a) The Company's issued share capital as at the date of this notice is
1,281,190,738 ordinary shares with voting rights. (b) A member entitled to
attend, speak and vote at this meeting may appoint one or more persons (who need
not be members of the Company) to exercise all or any of his rights to
attend,speak and vote at the meeting. A member can appoint more than one proxy
in relation to the meeting, provided that each proxy is appointed to exercise
the rights attaching to different shares held by him.Completion and submission
of the proxy form will not preclude the member from attending and voting at the
meeting or any adjournment thereof.If a member attends the meeting in person,
the authority of the proxies will be terminated automatically.In order to be
valid, forms appointing proxies must be deposited at the office of the Company's
registrar by 2.00 p.m. on 27 May 2008.
(c) haTo have his name entered on the register of ordinarve the right to attend
and vote at the meeting (and also fy shares by no later than 5.30 pm on 27 Maor
the purposes of calculating how many votes a person may cast),a person must time
shall be disregarded in determining the rights of any person to attend or vote
at the meeting.y 2008.Changes to entries on the register after this (d) section
146 of the Companies A copy of this notice has been sent fAct 2006 (“Nominated
Por information only to perersons”).sons who haThe right to appoint a prove been
nominated bxy cannot be exy a member to enjoercised by a Nominated Py
information rights under onlhe was nominated to be appointed as a proy be
exercised by the member.However,a Nominated Person may have a right under an
agreement between him and the member berson;y whomit can a r
xy for the meeting or to have someone else so appointed. If a Nominated
Person does not have suchvoting right or does not wish to
exights.Nominated Persons should contact the registered member bercise
it,he may have a right under such an agreement to givy whom they were
nominated in respect of these are instructions to the member as to the
exrangementercise ofs.
(e) In order to facilitate vshareholder has appointed the chairoting
bycorporate representatives at the
meeting,arrangements will be put in place at the meeting so that (i) if a
corporate
directions of all of the other corporate representativman of the meeting as
its cores for that
shareholder at the meeting,porate representative with instructions to vote
on a poll in accordance
with thevoting directions to the chairman and the chairman will vote (or
withhold a vote) as corthen
on a poll those corporate representatives will give and (ii) if more than
one cornot appointed the
chairman of the meeting as its corporate representative for the same
corporate representativporate
shareholder attends the meeting bporate representative in accordance with
those directions;e,a
designated corporate representativut the core will be nominated,porate
shareholder has corporate
representatives who attend, who will vote on a poll and the other corporate
representatives will give
v
from thosecorporate
representative.Corporate shareholders are
referoting directions to that
designated on prorepresentation
letter if the chairxies and
corporate representativman is
being appointed as descres -
www.icsa.org.uk - fred to the
guidance issued bor fury the
Institute of Chartered
Secretaries and Administratorsibed
in (i) abother details of
this procedureve..The guidance
includes a sample form of
(f) By attending the meeting, a member expressly agrees that he is requesting
and willing to receive any communications made at the meeting. the sale or
trIf the addressee of this notice has sold or transfer was effected so that
it can be passed on to the purchaser or transferred all of his shares in the
Companansfy,ereethis notice should be passed to the per.son through whom
(g)
109
Notes (continued)
(h) managerIf you are in an,solicitory doubt about the contents of this
document,,accountant or other
independent professional adviser authoror the action you should takised
pursuant to the Financial Sere,you
should immediatelvices and Mary consult your stockbrokkets Act 2000.er,bank (i)
the procedures descrCREST members who sonal Members or other
CREST sponsored members, and those
wish to appoint a proibed in the CREST CREST members constitutes
theas to be receiv
Manxy or proual.CREST Pxies bery
utilising the CREST electronic proxy
appointment service may do so by
utilising who hav appropr e appointed
a voting service provider(s), should
refer to their CREST sponsor or voting
service provider(s), who will be able
to take the (a “CREST Proiate action
on their behalf.xy Instruction”) must
be properIn order for a prolxy
appointment made by means of CREST to
be valid,the appropriate CREST message
the information required for such
instructions, as descry authenticated
in accordance with Euroclear UK &
Ireland Limited'ibed in the CREST
Manual.The message regardless of
whether its specifications and must
contain appointment of a proxy or an
amendment to the instruction given to
a previously appointed pro
meeting. For this pured by the Compan
xy must, in order to be
valid, be transmitted so pose,
y's agent (ID number - RA10) by the
latest time for receipt of proxy
appointments specified in this
notice ofApplications Host) from
which the Companthe time of receipt
will be taky's agent is aben to
be the time (as deterle to retrieve
the message bmined by enquiry
the timestamp applied to the message
by to CREST in the manner
prescry the CREST Company may treat
as invalid a CREST Proxy
Instruction in the circumstances set
out in Regulation 35(5)(a) of
the Uncertificated Securibed by
CRESTities.TheRegulations 2001. (j)
ArCopies of the ar be
aticles”vailabrefle fer
ticles of association of the Company marked up to show the proposed changes
and the document entitled
“Amendments to or inspection at the place of the red to in Resolution 10
are availabAnnle on the Companual
General Meeting fy's wor at least 15 mineb site (www.g4s.com),utes befat
the Companore and during the
meeting.y's registered office and will also (k) shareholderIt should be
noted that the Company's w in
relation to the meeting or otherwises.Neither the web site nor an eb site
address is given in this notice
solely for the purpose of providing access to information for
. y e-mail address referred
to on it may be used by
shareholders or others to
give notice to the Company
110 Recommendation and explanator conducted at the Annual General Meeting on 29
May notes relating to
by 2008usiness to be
The board of G4S plc considerand are in the best interests of its
shareholders the resolutions set out in the Notice of s as a whole.
The directors unanimouslAnnual Genery recommend that memberal
Meeting are likely to promote the success of the Compans vote in
favour of the resolutions asy they intend to do in respect of their
own beneficial holdings. Explanatory notes in relation to cer tain
of the business to be conducted at the meeting are set out below: 1
AtAuthority to 1985 the last Act”) to allot ordinarAGM of the
Compan Allot Shares (Resolution 7)y,held on 31 May 2007,the
directors were given authority under section 80 of the
Companies Act 1985 (“the
33% of the Company's then issued ordinary shares in the capital of the
Company share
capital.This authory up to a maximity was granted fum nominal amount
of £105,500,000
representing approor a period ending on 1 May 2012.ximately The 1985
such authorAct provides
for such authority to be granted either by a company in general
meeting or by the articles of
association,and in both cases authority be renewity must be renewed
annualled at least every
five years.Notwithstanding the statutory provisions,institutional best
practice indicates that
thisissued share capital.y and that the authority be limited to the
lesser of the authorised
but unissued share capital and one third of the
Accordinglup to a maximy,the board considerum nominal amount of
£106,500,000,s it appropriate
that a furrepresenting a little less than one-third of the Companther
similar authority be
granted to allot ordinary shares in the capital of the Company 7 April
2008, during the period
up to the conclusion of the next AGM in 2009.
y's
issued ordinary share
capital as at
The intention of the directorthe Company's shares.The directors is to
allot shares upon the
exs do not have any other present intention of exercise of options
granted oercising this
authorver Securicor plc shares and rolled oity.ver into options over
The Companpage 92 (note
37 to the consolidated fy does not hold any treasurinancial
statements) are accounted fy
shares as such.However,the 5,209,320 shares held within the emploor as
treasury shares.yee
benefit trust and referred to on
2 Resolution 8 will empoDisapplication of Pr connection with a rights or similar
issue and (b) (otherwise than in connection with a rwer the director
e-emption Rights (Resolution 8)s to allot ordinary shares in the capital of
the Compan ights issue) up to a maximy for cash on a non pre-emptivum nominal
value of £16,000,000,e basis (a) inrepresenting appro that this authority
should be renewximately 5% of the issued ordinared annually.y share capital of
the Company as at 7 April 2008. Again, institutional best practice suggests
3 Resolution 9 givPurchase of Own Shar nshare capital as at 7 umber of shares
which could be purchased to a maximes the Compan
es (Resolution 9)y authority to buy back its o April 2008) and sets minimum
and maximum of 128,000,000 (representing a little wn ordinary shares in the
market as per um prices. This authority will expire at the conclusion of the
less than 10% of the Compan mitted by the 1985 Act. The author AGM in 2009.y's
issued o ity limits therdinary
The directorresources of the Compans
have no present intention of ex that
to do so w
y,the Company's share pr ercising this authorice and future
funding
oppority,but will keep the matter under review,taking into
account the
financial pursuant to the equivalent authorould result in an
increase in earity
granted to the directornings per share and ws at the Companould
be in the
interests of shareholder tunities. The authority will be ex
y's last AGM. s gener ercised onlally.No shares wy if
the directere
purchasedors believe
111
4 The CompanAmendment of
or will come,y proposes
to amend its ar
Articles
(Resolution 10)
into effect in 2007 and 2008.ticles of association to reflect the proAs
the 2006 Act will
not be fully in fvisions of the Companies orce until October 2009,Act
2006 (the and it is
not y“2006 et possibAct”) which camele fully to reflect,the 2006 The pr
Act changes, it is anticipated that shareholders will be asked to approve
further changes
to the ar ticles of association at the 2009 AGM.transferincipal changes
to the ars of
shares and directors'ticles of association proposed to be made fconflicts
of
interest.ollowing the 2008 AGM relate to shareholder meetings and
resolutions, The
proprovisions of the 1985 visions of the 2006 Act. The new arAct
regarding shareholder
meetings and resolutions came into fticles incorporate amendments in
relation to meetings
and resolutions to ensure consistency with orce in October 2007,
replacing the
corresponding the 2006 Act. From 1 October 2008,interest which
conflicts,under the 2006 or
possibly may conflict,Act a director has a statutorwith the company's
interests.y duty to
aThe 2006 void a situation where he has,Act allows directoror can have,a
direct or
indirect conflicts or potential conflicts where the articles of
association contain a
provision.vision allo
s of public companies to authorisenew articles of
association should
include such a prowing this authorisation.It is
proposed that the
Company's
The principal changes to the articles of association can be summarised as
follows:
(a) Under the 2006 Transfer of shar
transfer. Any registrAct,
es (ar
ation of a tra compan
ticle 40)y m
ansfust either register a trer or notice of refusal mansfer or give the
transferee notice of,and
reasons for,its refusal to register thefrom the date that the transfer is
lodged with the company.ust
be made or givReasons fen as soon as practicable and in any event within two
months transferee. The
revised article will reflect these requirements.
or refusal must also be provided if a
reasonable request is
made by the
(b) The proDisclosurvisions relating
to the disclosure of interests in
shares contained in the 1985 e of
interests (article 48) pow
Act, including section 212 on company
investigationcompaners,
of section 212 of the 1985 y in were
repealed in Janvestigation poweruar
Act with section 793 of the 2006 s
previousl y 2007.y contained in
section 212,Section 793 and related
sections in P Act. were brought into f
art 22 of the 2006 orce
simultaneouslAct,which contain the
cory.Article 38 reflects the
replacementresponding
(c) The proNotice of gvisions in the revised areneral meetings (article 57)
meetings are in line with the relevant proticles dealing with the convisions of
the 2006 vening of generAct.In particularal meetings and the length of notice
required to convene generalto consider a special resolution can be convened on
14 days'notice whereas previousl,a general meeting (other than the anny 21
days'notice was required.ual general meeting)
(d) The arQuorum (ar porticle
has been amended to mak ticle
70) cor
ate can constitute a e it clear that two persons who are proxies for
the same
quorum. member or representatives of the same body
(e) The (ar conferred on a proticle has been amended to a
arPolls
ticle 78)
xy to demand a poll in varvoid any potential conflict with the proious
circumstances.visions of section 329 of the 2006 Act which details the
rights
(f) Under the 2006 Votes of members,Act,proxies are entitled to vproxies and
corporate rote on a shoeprw
of hands as wesentatives (articles 90 and 99) anthe ry of their rights attached
to a diffights to
attend,erent share or shares.speak and vote at meetings.The amendments reflect
these new proMultiple
proxies maell as on a poll,y be appointed proand members may appoint a proxy to
exercise all orxy rights
(arvided that each proticle 90).The 2006 xy is appointed to exercise multiple
corporate representatives to
be appointed and the articles therefore refer to the right to appoint m
Act also provides for(article
99).ultiple corporate
representatives
(g) The arReceipt of aticle pro s, or such
shorvides that pro
ppointments of pr
ter time ter time as the ter time as the
directorxies f
as the directorxies f
director-
ies f
oxy and oxy and termination of oxy
and
terminat- proxy authority (article
terminat-
on of 93) 24 hour on of
proxy proxy
authority
authority
(article
(article
93) 24 93)
24
hour hour
or a poll or a poll to be taks may or a
poll
to be deteren after the date of to be
taks may a meeting or taks
may
deteren adjourmine,before the
deteren
after the time of the poll.ned after
the
date of a meeting must be received date
of a
meeting not less than
meeting
or or
adjourmi-
adjourmi-
e,before
e,before
the time the
time
of the of
the
poll.ned
poll.ned
meeting
meeting
must be must
be
received
received
not less not
less
than than
(h) The arAvailability of
to circumstances beyticle provides that proceedings at shareholder's meetings
will
not be invalidated as a result of an y's expensey,accidental omission or the
failure duefacilities for appointing proxies.The
appoint proxies. ond the Company's control ond the Company's control
to
to send or make available send or make available to
to shareholders shareholders appointments
of
appointments of proxy or proxy or invitations to
invitations to
112 Recommendation and explanator conducted at the Annual General Meeting on 29
May notes relating to by 2008 usiness to be(continued)
4 Amendment of Articles (Resolution 10) (continued)
(i) The 2006 Directors' aAct sets out directorppointments,s'generinteral duties
which larests and conflicts of
intergely codify the existing laest (articles 127,127A and 132)
1 October 2008 a director has a statutory duty to avoid a situation where
he has,w but with some
changes.Under the 2006 Act, from or possibly may conflict, with the
company'
or can have, a direct or indirect
interest which conflicts,
director of another compan
s interests. The requirement is
very broad and could apply, for
example, if a director becomes aand
potential conflicts where
appropry or a trustee of another
organisation.The 2006 Act allows
directors of public companies to
authorise conflicts to contain
other provisions for dealing with
directoriate,if the articles of
association contain a
pros'conflicts of interest to avoid a breach
of dutyvision to this eff.ect.The
2006 Act also allows the articles
Aran offticle 127,icer of or
emplowhich is the proyvision for
dealing with conflicts in the
current articles,allowing directors
to be interested in transactions
and to be such interests, offices
or emploed by or interested in a
body coryment will not infringe
the conflicts duty as codifporate
in which the Companied in the
2006 y is interested,Act.has been
amended so that it confirms that
New arincludes other proticle 127A
givvisions to alloes the
directorw conflicts of interest to
be dealt with in a similar was
authority to approve conflict
situations including other directory
to the current position.ships held
by the Company's directors and
There are safwho haeguards which will apply when directors decide whether
or not to authorise a conflict or
potential conflict.First,only directors directorvs me no interest in the
matter being considered will be
able to take the relevant decision and,secondly,in taking the decision
theimpose limits or conditions when
giving authorust act in a way they consider,in good faith,isation if they
think this is approprwill be most
likely to promote the Companiate.y's success.The directors will be able to
The proposed new arboard papers to protect a director from being in breach
of duty if a conflict of
interest or potential conflict of interest article 127A also contains
provisions relating to confidential
information,attendance at board meetings and availability of will only
apply where the position giving rise
to the potential conflict has previously been authorised by the directors.
ises. These provisions
The proposed amendment to quorum will be This will mean that
determined separArticle 132,ately in
relation to each matter or resolution
considered or vwhich deals with the
quorum requirement for board
meetings,oted on at the meeting.clarifies
that the presence of a if a director
cannot count in the quorum for a
particular resolution (because f he may
still count in the quorum for the other
resolutions to be voted on at the
meeting.or example he is interested in
the outcome of the resolution) (j)
PArermitted interticle 137 identifies
cerests and vtain matteroting (article
137) 2006 Act contains a much wider defs
in relation to which directorinition of
“connected per
s are permitted to vote
notwithstanding an interest in those
matters. Thedeclaration by
directors of relevant interests very
diffson”of a director than had
applied under the 1985 Act which
would make definition of connected
person which applied under the
1985 icult in prAct.actice.It is
therefore proposed to retain the
status quo by preserving the The
previous exception relating to
retirement schemes was
confcombined with a broader exception which
relates to all ar y awarded to the
emplorangements including
retirement benef ined only to
schemes approved b
yees to whom the arrangements
relateit schemes in respect of which
director y the Inland Revenue.
This has now been
no special privilege or advantage not . s have
generall
aThe other change in this arcompany to which the resolution relates.ticle
relates to the question of whether or not a director is interested in a
resolution bThe proposed amendment excludes shares which are held as
treasuryvirtue of holding shares indirectors'interests.y shares when calculating
such
(k) The arMiscellaneousticles
have also been amended to:
(1) approprdelete Act and replace them with references to
corresponding
refiate;erences to sections sections of the 2006 Act, where
resolutions).account for
of the 1985 and (2) the fact that certain concepts under the 1985 Act
have
been done away with (for example, the concept of
“extraordinary”
Financial calendar and corporate addresses 1 13
Results Auditor
announceme-
tsInter
Final KPMG Audit Char PlcRegistered Auditortered
Accountants
results -
Marchim
results -
August
Dividend 8
paInteryme-
t
Final paim London EC4Y 8BB Salisbury Square
paid - 16
Noyable - 6
June
2008vember
2007
Deutsche Bank ok ers
Winchester HouseAG LondonGreat Winchester
RegisterThe London EC2N 2DBStreet
Manored
office
Manor Financial advisors
RoCrayal
West Sussex Greenhill & CoTelephone +44 (0) 1293 554 400Lansdowne
House.International LLP57 Ber
RH10
9UNwley
London W1J keley Square6ER
Register49- Great Winchester
2207ed
number
The London EC2N 2DB Street
Registry
34 G4S w
BeckBecken-
amenham
Road
Kent BR3 www.g4s.com ebsite
4TU
Tplus netwelephone:orwithin the UK 0871 664 0300 (calls cost 10p per mink
extras);from outside the UK +44 208 639 3399ute Fax:Email:+44 (0) 20 8658
3430ssd@capitaregistrars.com
Please note that benefnominated bicial owner
inf y the registered holder of those s of shares who ha shares to receivve
beene
required to direct all commormation rights under S.146 of the Companies
unications to the registered holder of theirAct 2006 areshares rather than to
the company or the company's registrar.
This reporECF (Elemental Chlort is printed on paperine Free) fs that meet ine
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Argentina
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G4S plc ANNUAL REPORT AND
BarbadosGBelgiumACCOUNTS 2007
Bhutan
Bolivial
Botswana
Brunein
B ulgaria
Cambodia
Cameroon
Canada
Chiler
Chinaa
Colombiad
C osta Rica
Cote d'Ivoirec
Cyprusu
Czech Republict
Democratic Republic of
Congo
Denmark
Dominican Republic
Ecuador
Egyptd
El Salvador1Estonia
Finland
G ambia
Ghana
Greece
Guam
A World of Guatemala0
Guinea
Honduras
Hong Kong
Hungary
India
Security
SolutionsIndonesiaIrelandIsrael
Jamaica
Jordan
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Kenya
Kuwait
Latvia
Lebanon
Lesotho
Lithuania
Luxembourg
Macau
Madagascar
Malawi
Malaysia
Mali
Malta
Mauritania
Mauritius
Mexico
Morocco
Mozambique
Namibia
Nepal
Netherlands
Nicaragua
Nigeria
Northern
Mariana Islands
Norway
Oman
Pakistan
Papua New Guinea
Paraguay
Peru
Philippines
Poland
Puerto Rico
Qatar
Romania
Russia
Saudi Arabia
Serbia
Sierra Leone
Singapore
Slo vakia
Slovenia
South Africa
South Korea
Sri Lanka
Sweden
SyriaTaiwan
Crawley, West Sussex Tanzania
RH10 9UN, UK
Thailand
Telephone:+44 (0)1293 554 400 Trinidad & Tobago
Turkey
Registered no. 4992207 Turkmenistan
Uganda
www.g4s.com Ukraine
United Arab Emirates
United Kingdom
United States
Uruguay
Uzbekistan
Yemen
Zambia
Annual Report 2007
| Source: G4S plc
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