9 April 2019
G4S plc
(the “Company”)
Integrated Report and Accounts and Notice of Annual General Meeting
Further to the preliminary announcement of its results for the year ended 31 December 2018 made on 12 March 2019, G4S plc, the global, integrated security solutions provider, announces that it has published its Integrated Report and Accounts 2018 for the same period.
The Company confirms that the following documents have been posted or otherwise made available to shareholders:
- Integrated Report and Accounts 2018
- Notice of the Company’s Annual General Meeting (“AGM”) dated 2 April 2019
- associated form of proxy
The AGM will be held on Thursday, 16 May 2019 at 12 pm in The Orchard Suite at the Holiday Inn, Gibson Road, Sutton, Surrey, SM1 2RF, UK.
The Integrated Report and Accounts 2018 and the Notice of Meeting with the explanatory notes accompanying it have been submitted to, and will be available from, the National Storage Mechanism. These documents are also available on the Company’s website: g4s.com/Investors.
A condensed set of the Company’s financial statements and extracts of the management report were included in the Company’s preliminary final results announcement, which is available at g4s.com/Investors. That information, together with the Appendix to this announcement, which contains additional information extracted from the Integrated Report and Accounts 2018 for the year ended 31 December 2018, constitutes the material required for the purposes of compliance with the Transparency Rules.
This announcement should be read in conjunction with, and is not a substitute for, reading the full Integrated Report and Accounts 2018. Together these constitute the information required by DTR 6.3.5, which must be communicated in unedited full text, through a Regulatory Information Service.
References in this announcement to the Company’s website are intended to refer only to the specific documents mentioned herein and not to other information available on that website.
Page and note references in the text below refer to page numbers and notes in the Integrated Report and Accounts 2018.
APPENDIX
The group’s principal risks and uncertainties:
A description of the principal risks and uncertainties that the Company faces is extracted from pages 67 to 71 of the Integrated Report and Accounts 2018.
HEALTH AND SAFETY (H&S)
Risk
The provision of security services, often in hostile or dangerous circumstances, presents health and safety (H&S) challenges. In addition to the significant impact on individuals, serious H&S incidents could disrupt the Group’s businesses, have a negative impact on our reputation and lead to financial and regulatory costs. In 2018, 24 (2017: 25) employees lost their lives in work-related incidents, of which 14 (2017: 8) were as a result of armed attacks and 7 (2017: 11) were road-traffic incidents, as the year-on-year improvement in road safety continued. There were 9 (2017: 3) non-natural deaths of people in our custody.
Risk mitigation
We are committed to protecting the health, safety and well being of our employees, people in our care or custody and third parties. G4S uses a systematic approach to managing H&S which is consistent with internationally recognised standards. We monitor H&S performance regularly and intervene if performance does not meet the continuous improvement targets set. The Group’s mandatory standards target the critical safety risks in the Group including road and firearm safety, and are supplemented by controls and training for front line staff through to business leaders. The annual self assessment by countries of compliance with our standards is supported by site reviews from local, regional and group managers and is included in the scope of country internal audit visits.
During 2018 we continued the roll-out of safety induction training, which included a focus on the risks facing security officers. Four wide-ranging H&S reviews were conducted in high-priority businesses, as well as two follow-up audits to monitor improvement. Safety improvement plans are required for all businesses, with business leaders being responsible for leading safety performance, developing and monitoring action plans and putting H&S at the forefront of their day-to-day activities.
Good practice and progress in delivering H&S improvements are recognised and rewarded, while poor practice and insufficient progress lead to close executive scrutiny, and can impact performance-related pay for business leaders.
Mitigation priorities for 2019
We will continue to refine our standards, policies and controls where we see an opportunity to reduce H&S risks further, using lessons learned from serious incidents to drive actions to prevent recurrence. Compliance with our standards will continue to be monitored through self assessments, region and Group reviews and internal audits. Topics which will be prioritised are risk assessment processes, training on road safety and improving controls to prevent attacks.
CULTURE AND VALUES
Risk
G4S provides security for people, premises and valuable assets. The Care & Justice Services business provides services to detainees, victims of crime, people needing assistance, and other members of the public. We operate in many different countries with a diversity of local and national cultures. Having an appropriate set of values deeply embedded in our corporate culture is key to ensuring that employees meet our expectations including compliance with our ethical business conduct standards. Failure to do so risks not delivering on our commitment to our colleagues, customers and other stakeholders, and businesses failing to comply with legislation and international standards.
Risk mitigation
Our values, detailed on page 6, are continually reinforced through a variety of processes including recruitment, induction training and recognition schemes, as well as communication materials. Our values-based training materials for front-line employees have been developed to reflect common experiences or particular challenges which are identified through whistleblowing cases, internal grievances or feedback from the global employee engagement survey.
Nominated values ambassadors in businesses are helping to cascade values-related communications. For managers, the enhanced competency framework has helped guide the development of mandatory online training. This also uses realistic scenarios to guide managers in making value based decisions from a range of options in order to achieve the right outcomes in real-life situations. We continue to build awareness of the importance of living our values in our day-to-day activities, no matter how challenging the circumstances.
In the event that employees notice unethical behaviour contrary to our values we encourage them to use our confidential whistleblowing facility, Speak Out.
In 2018, we received 519 Speak Out reports (2017: 300) as we continue to raise awareness of this facility. While all calls are investigated, matters of a serious nature are investigated at a senior and independent level, with 105 investigations completed during 2018 (2017: 59).
Mitigation priorities for 2019
For our front-line employees, we will continue to provide updated training materials to reinforce the behaviours expected in line with our values and will use the global employee engagement survey, due to be completed in 2019, to assess levels of awareness and understanding. Where gaps are identified we will develop remediation plans.
All new managers will be required to complete the online training developed in 2018 and to confirm their understanding of and commitment to compliance with the Group’s Business Ethics Policy. Further updated training on anti-bribery and corruption will also be made available to all managers and employees with responsibilities relating to financial transactions or supplier and customer relationships.
Our reward and recognition schemes will continue to be aligned with our values, to ensure they are promoted in everything we do. The Group-wide scheme will be enhanced to supplement local efforts and enable us to showcase the types of behaviour which exemplify our values and reflect the great work that our employees do.
PEOPLE
Risk
In a global and diverse security business such as ours, there are risks associated with recruiting, training, engaging, rewarding and managing people, as well as ensuring we retain critical talent to deliver increasingly sophisticated services through our 546,000 employees. Screening and vetting is a particular challenge in some territories which lack supporting infrastructure from the relevant authorities. Any incident where our people fail to meet the expectations of customers and other stakeholders could lead to financial and reputational damage. Whilst our controls are robust, we still face the risk of an employee not behaving in line with our values.
Risk mitigation
The Group’s Human Resource (HR) standards cover core requirements for delivering the HR strategy, such as ensuring there are effective organisational structures in place, that employees are screened, inducted and trained to perform their jobs, and that there are appropriate mechanisms in place for managing ongoing performance and recognising service excellence. Compliance is self-assessed annually and reviewed by local, regional and Group teams. Additionally, core HR controls are tested by internal audit during visits to the businesses. The performance and potential of managers across the Group is reviewed to identify development needs and build succession plans. We also deliver regional leadership programmes to nurture talented individuals early in their careers, and help them develop into more senior roles as they move through the organisation. Feedback from our global employee survey is used to develop initiatives which support employee engagement and development at all levels of the organisation. Examples include the introduction of two health and wellbeing initiatives for employees in G4S Peru, the development of a new employee handbook in the UAE and the launch of a new quarterly briefing by managers for employees in the UK Cash Solutions business.
Staff turnover is a key indicator of employee satisfaction, and reducing it improves service standards and reduces recruitment costs. During the year staff turnover reduced from 25.3% in 2017 to 24.7% in 2018 (see page 20).
Mitigation priorities for 2019
Compliance with our core HR Standards will again be self assessed during 2019 and reviewed by local, regional and Group teams as well as tested by internal audit. Direct support will be provided as necessary to enhance compliance with our standards. Further, more detailed training is being prepared to ensure HR teams have a strong understanding of the core standards, why they are important and what actions they need to take to ensure compliance if there are any gaps.
MAJOR CONTRACTS
Risk
The Group operates a number of long-term, complex, high-value contracts with multinational companies, governments or strategic partners. Key risks include; accepting onerous contractual terms; poor mobilisation of contracts; not transitioning effectively from mobilisation to on-going contract management; not delivering contractual requirements; inaccurate billing for complex contracts; ineffective contract-change management; and not managing sub-contractors appropriately.
Risk mitigation
We have strict thresholds for the approval of major bids, involving detailed legal and commercial review and senior management oversight. For a selection of our most significant contracts in the UK, independent reviews of all aspects of contract management and performance are completed with appropriate actions agreed and monitored to completion. We also perform a quarterly financial review of the top 25 and the low margin contracts in each region.
For our large multinational customers, account managers oversee performance of these contracts across relevant countries and have regular updates with customers to ensure we meet our contractual commitments.
We have embedded into the Salesforce opportunity management tool our updated approval requirements, to make compliance and monitoring more effective.
Mitigation priorities for 2019
While improvements have been made in reducing the risk of taking on onerous contracts, as the impact can be significant, we will continue to enhance the quality of the analysis used in the bidding process and ensure that lessons are learnt from underperforming contracts. Internal audit will perform more contract reviews to ensure the risks in those contracts are appropriately mitigated.
LAWS AND REGULATIONS
Risk
G4S operates under many complex and diverse regulatory frameworks, some of which have extraterritorial reach and many where regulations change frequently. Risks include: new or changed restrictions on foreign ownership; difficulties obtaining relevant licences to operate; complying with employment legislation covering a wide range of requirements; complying with often complex and broad ranging local tax regulations; increasing litigation and class actions; bribery and corruption and complying with human rights legislation. Failure to meet the required standards can lead to higher costs from claims and litigation; inability to operate in certain jurisdictions, through either direct ownership or joint ventures; loss of management control; damage to our reputation; and loss of customer confidence.
The investigation opened by the Serious Fraud Office (SFO) in 2013 in respect of the Group’s Electronic Monitoring contract remains on-going and the Group continues to engage and co-operate fully with the investigation. Based on currently available information, the Group is unable to make a reliable estimate of the financial effect of the SFO’s investigation, and no provision has been made in respect of it.
Risk mitigation
Our policies and procedures clearly set out the requirement for local management teams to comply with relevant laws and regulations. Group and regional leadership, together with our Ethics Committees at Group and regional level provide oversight and support our businesses in mitigating the risks. Group legal and regional leadership closely monitor changes in foreign ownership laws and make appropriate plans to respond. G4S continues to liaise with relevant governments and authorities to influence positively the regulatory environments in which we work.
Mitigation priorities for 2019
Given the increased exposure and high penalties for non-compliance in respect of this risk, the board and Executive team will focus as a priority on the enhancement of compliance with laws and regulations across all jurisdictions we operate in. This will include direct enquiry and oversight by Group and region of local management to ensure awareness of these risks become fully understood and ensure that concerns are addressed appropriately with mitigation plans implemented promptly.
GROWTH STRATEGY
Risk
Our focus is on investing in the development of innovative and integrated products and services and improving business efficiency to strengthen service excellence and support improved margins. There are risks with adopting such a strategy: that we fail to create higher-value solutions that differentiate us from local commoditised competitors; that we fail to deliver our core services effectively and consistently; that we lose contracts or growth opportunities through price competition and market changes; that we fail to enter target markets successfully; that we become over reliant on large customers; and that our business transformation initiatives do not deliver as expected.
Risk mitigation
We continue to focus on delivering excellent service through the best-practice service delivery guidelines in place for both our Secure Solutions and Cash Solutions service lines. We have implemented a sales methodology focused on consultative selling which enables our sales teams to promote innovative integrated solutions. We use our centres of excellence to develop innovative solutions for customers, particularly in electronic security and Retail Cash Solutions. We leverage our global network to offer integrated solutions internationally and our global accounts programme supports and promotes our multinational accounts initiatives. Our consistent focus on delivering excellent service to customers helps to drive customer satisfaction, retention and growth.
Through the diversity of industries and markets we serve and the portfolio of products offering cost efficient solutions, we are able to mitigate the risk of local reduced growth opportunities. We focus our investment on innovative products and transforming our cost base, with projects closely monitored by Group and regional teams.
Mitigation priorities for 2019
Secure Solutions and Cash Solutions are strong businesses with clear strategies and prospects. In 2019, we will review the options for separation of these into two independent businesses, ensuring even greater focus on customers and innovation. The new sales methodology will continue to focus on customer need and how our innovative and integrated service will add value and drive increased win rates. To improve customer retention rates we will systematically leverage the existing structural approach we have to understanding customers requirements to proactively improve relationships and customer satisfaction. We will continue to innovate our product offering within each business, which will include: proprietary security systems, video and intelligent camera systems, video management systems, global security intelligence systems, and software tools including incident-management systems such as RISK360 in our Secure Solutions business. For Cash Solutions, our service offering will include Retail Cash Solutions and solutions for our SME customers. Business transformation projects will be embedded to ensure efficiency and margin improvements are delivered.
GEOPOLITICAL
Risk
We operate in many countries across the world, with wide-ranging government and political structures, different cultures with varying degrees of compliance with laws and human rights, particularly within conflict and post-conflict zones. Associated risk factors include: political volatility, including the outcome of elections and referendums affecting trade rules and regulations and changes in policies towards business, revolution, terrorism, and military intervention, and mistreatment of migrant workers and employees working for our suppliers. These risks impact us in many ways: the health and safety of our staff and customers; the continued operation of our businesses; and the ability to secure our assets and deliver good financial performance.
Risk mitigation
In markets where policy or trade agreements have a significant impact on our ability to trade we engage with governments to promote the benefits that G4S brings to a market and an economy, to ensure that we minimise potential adverse impacts of trade restrictions or trade policy.
We collaborate with local partners, conduct early risk assessments before and during security assignments, develop robust operating procedures and work closely with our local and global customers in managing the risks of operating in such environments.
Our Risk Management business has particular expertise in providing secure solutions in very high-risk, low-infrastructure environments.
We have a clear commitment to respect human rights. All business units are required to annually self-assess their compliance with human rights standards which are reviewed by the Group and included in internal audits for the higher risk countries. We have also built awareness of human rights responsibilities across the business and our partners and are increasing engagement with suppliers to ensure they are also complying with international human rights standards. This is governed by a mandatory supplier code of conduct which includes anti-bribery and modern slavery requirements.
Mitigation priorities for 2019
In markets where potential government policy or trade agreements may have a significant impact on our ability to trade we will continue to engage with governments to promote the benefits that G4S brings. We will continue to monitor the results of human rights control self assessments, providing support with training and guidance where needed to further embed awareness and understanding of expectations. We will also continue to increase engagement with suppliers to ensure their compliance with human rights standards.
INFORMATION SECURITY
Risk
Increased regulations and sanctions relating to the potential failure to secure sensitive and confidential data, which we are entrusted with by customers, staff, suppliers and other stakeholders, have increased our risks in this area. Like all organisations, we face cyber attacks from a variety of sources which, if successful, could result in censure and fines by national governments, loss of confidence in the G4S brand and specific loss of trust by customers, especially those in government and financial sectors. Additionally, we face the risk of disruption to service delivery and data loss from system failures, incomplete backup routines, and inadequate business continuity and disaster recovery plans.
Risk mitigation
The IT function is centrally managed to control the way our systems are supported and run. We have 'defence-in-depth' technologies (i.e. multiple layers of defence) in key systems to protect information entrusted to us. This helps to ensure policies and standards are applied consistently across all operating businesses. A programme of investment in cyber defence tools was delivered during 2018 which has strengthened the security of our IT systems and infrastructure, including managed cyber security products, centralised infrastructure management tools and cyber vulnerability assessments. We have introduced standards and guidance to ensure compliance with the General Data Protection Regulation (GDPR) across the UK and Europe.
Mitigation priorities for 2019
We will augment the cyber toolset with new network management systems as well as a global programme to migrate legacy data processing systems to the Cloud. By moving our data processing systems to the Cloud we will establish a global standard for disaster recovery using the latest technologies available. The programme of cloud migration will be complete by mid-2020.
CASH LOSSES
Risk
We provide a wide range of cash management services, including cash processing, fit-sorting of notes for recycling, holding funds on behalf of customers, secure storage, ATM services, as well as transporting high values of cash and valuables including international shipments. Our Retail Cash Solutions offering can provide a full outsourcing of the cash cycle. Our cash business face risks related to external attacks, internal theft, gaps in cash reconciliations and weak management supervision, which could lead to loss of profit, increased cost of insurance and health and safety considerations for our staff and the public.
Risk mitigation
The introduction of the Global Cash Solutions division in 2018 has given us additional focus to drive improvement in the effective performance of physical security and cash reconciliations throughout our cash businesses, to reduce both the number and value of losses. Our Reconciliation and Operational Cash Controls continue to be implemented across our cash businesses with direct support from regions and Group to ensure awareness and effective performance improvement. Self assessments against these standards are performed twice a year by each branch and country head office. Compliance is supported and monitored by regional teams and through internal audit. We also have clearly defined standards for physical cash security for our employees, vehicles and processing centres. The Group, region and local cash security teams are responsible for monitoring compliance with these through self assessments of Mandatory Security Principles performed by local management There are processes in place for monitoring attacks and other cash losses to ensure lessons learned are communicated across the Group. Innovative security-defence products such as cash box tracking, vehicle protection foam and protective boxes are used in a number of businesses.
Mitigation priorities for 2019
The recently implemented merger of cash reconciliation and physical cash security teams, will provide greater focus on these key controls across our cash businesses. In addition we will refine both sets of controls to ensure they are relevant and efficient and there will be more reviews to check compliance by both regional teams and internal audit.
Related party transactions (note 39 to the consolidated financial statements, page 202)
Transactions and balances with joint ventures
Transactions between the company and its subsidiaries have been eliminated on consolidation and are not disclosed in this note. Details of transactions between the Group and other related parties are disclosed below. All transactions with related parties are entered into in the normal course of business.
Transactions with joint ventures included revenue recorded of £60m (2017: £56m) and purchases recorded of £nil (2017: £6m). Amounts due from related parties include £2m (2017: £5m) from joint ventures. Amounts due to related parties include £nil (2017: £2m) to joint ventures.
No expense (2017: £nil) has been recognised in the year for impairment in respect of amounts owed by related parties.
The Group has a legal interest in a number of joint ventures and joint arrangements, where the economic interest was divested by the Global Solutions Group prior to its acquisition by G4S plc in 2008. Transactions with these entities during the year comprised:
| 2018 Services/ sales to £m | 2017 Services/ sales to £m | |
| White Horse Education Partnership Limited | 3 | 3 |
| Integrated Accommodation Services plc | 50 | 46 |
| Fazakerley Prison Services Limited | 41 | 39 |
| Onley Prison Services Limited | 17 | 17 |
| UK Court Services (Manchester) Limited | 2 | 2 |
| East London Lift Company Limited | 2 | 1 |
| Total | 115 | 108 |
The Group had outstanding balances of £12m due from these entities at 31 December 2018 (2017: £11m).
Transactions with post-employment benefit schemes
Details of transactions with the Group’s post-employment benefit schemes are provided in note 31. Unpaid contributions owed to schemes amounted to £0.2m at 31 December 2018 (31 December 2017: £0.3m).
Transactions with other related parties
In the normal course of the Group’s business the Group provides services to and receives services from certain non-controlling interests on an arm’s-length basis.
Remuneration of key management personnel
The Group’s key management personnel are deemed to be the non-executive directors and those individuals, including the executive directors, whose remuneration is determined by the Remuneration Committee. Their remuneration is set out below. Further information about the remuneration of individual directors included within key management personnel is provided in the audited part of the Directors’ Remuneration report on pages 105 to 127.
| 2018 £ | 2017 £ | |
| Short-term employee benefits | 8,168,995 | 11,112,484 |
| Post-employment benefits | 21,788 | 121,781 |
| Other long-term benefits | 33,514 | 27,833 |
| Share-based payment | 4,596,918 | 7,349,358 |
| Total | 12,821,215 | 18,611,456 |
Statement of directors’ responsibilities:
The following responsibility statement is repeated here solely for the purpose of complying with Disclosure and Transparency Rule 6.3.5. This statement relates to and is extracted from page 131 of the Company’s Integrated Report and Accounts 2018. Responsibility is for the full Integrated Report and Accounts 2018, not the extracted information presented in this announcement and in the preliminary final results announcement.
“Statement of directors’ responsibilities in respect of the annual report and the financial statements
The directors are responsible for preparing the Integrated Report and Accounts and the Group and parent company financial statements in accordance with applicable law and regulations.
Company law requires the directors to prepare group and parent company financial statements for each financial year. Under that law they are required to prepare the group financial statements in accordance with IFRSs as adopted by the EU and applicable law and have elected to prepare the parent company financial statements in accordance with UK Accounting Standards comprising FRS101 and applicable law.
Under company law the directors must not approve the financial statements unless they are satisfied that they give a true and fair view of the state of affairs of the Group and parent company and of their profit or loss for that period. 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;
- make judgments and estimates that are reasonable and prudent;
- for the group financial statements, state whether they have been prepared in accordance with IFRSs as adopted by the EU, subject to any material departures disclosed and explained in the group financial statements;
- for the parent company financial statements, state whether applicable UK Accounting Standards comprising FRS101 have been followed, subject to any material departures disclosed and explained in the parent company financial statements; and
- prepare the financial statements on the going concern basis unless it is inappropriate to presume that the Group and the parent company will continue in business.
The directors are responsible for keeping adequate accounting records that are sufficient to show and explain the Group and parent company’s transactions and disclose with reasonable accuracy at any time the financial position of the Group and parent company and enable them to ensure that its financial statements and Directors’ Remuneration Report comply with the Companies Act 2006 and, as regards the group financial statements, Article 4 of the IAS Regulation. They have general responsibility for taking such steps as are reasonably open to them to safeguard the assets of the Group and to prevent and detect fraud and other irregularities.
Under applicable law and regulations, the directors are also responsible for preparing a strategic report, Directors’ report, Directors’ remuneration report and Corporate governance statement that comply with that law and those regulations.
The directors are responsible for the maintenance and integrity of the corporate and financial information included on the company’s website. Legislation in the UK governing the preparation and dissemination of financial statements may differ from legislation in other jurisdictions.
Directors’ responsibility statement
Each of the directors, the names of whom are set out on pages 74 and 75 of this Integrated Report and Accounts, confirm that, to the best of his or her knowledge:
- the financial statements in this Integrated Report and Accounts have been prepared in accordance with the applicable accounting standards and give a true and fair view of the assets, liabilities, financial position and results of the company and the Group; and
- the management report required by DTR4.1.8R (contained in the strategic report and the Directors’ report) includes a fair review of the development and performance of the business and the position of the parent company and the Group taken as a whole, together with a description of the principal risks and uncertainties they face.
The strategic report from the inside front cover to page 71 includes information on the Group structure, the performance of the business and the principal risks and uncertainties it faces. The financial statements on pages 144 to 226 include information on the Group and the company’s financial results, financial outlook, cash flow and net debt and balance sheet positions. Notes 22, 25, 26, 29 and 30 to the consolidated financial statements include information on the Group’s investments, cash and cash equivalents, borrowings, derivatives, financial risk management objectives, hedging policies and exposure to interest, foreign exchange, credit, liquidity and market risks.
Pages 144 to 216 contain information on the performance of the Group, its financial position, cash flows, net debt position and borrowing facilities. Further information, including financial risk management policies, exposures to market and credit risk and hedging activities, is given in note 30 to the financial statements. After making enquiries, the directors have a reasonable expectation that the Group has adequate resources to continue in operational existence for the foreseeable future. For this reason the directors consider it appropriate to adopt the going concern basis in preparing the financial statements.
Directors are also required to provide a broader assessment of viability over a longer period, which can be found on page 89 of the Integrated Report and Accounts.
The directors consider that the Integrated Report and Accounts, taken as a whole, is fair, balanced and understandable and provides the information necessary for shareholders to assess the group and parent company’s performance, business model and strategy.
The statement of directors’ responsibilities and the strategic report are approved by a duly authorised committee of the board of directors on 12 March 2019 and signed on its behalf by Tim Weller, Group Chief Financial Officer.”
Celine Barroche
Company Secretary
G4S plc
LEI 549300L3KWKK8X35QR12
Notes to Editors:
G4S is the leading global, integrated security company, specialising in the provision of security services and solutions to customers. Our mission is to create material, sustainable value for our customers and shareholders by being the supply partner of choice in all our markets.
G4S is quoted on the London Stock Exchange and has a secondary stock exchange listing in Copenhagen. G4S is active in around 90 countries and has around 550,000 employees. For more information on G4S, visit www.g4s.com.