GLOBALFOUNDRIES

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A World of Security Solutions

G4S plc
The Manor, Manor Royal,
Crawley, West Sussex
RH10 9UN, UK
Telephone: +44 (0)1293 554 400

Registered no. 4992207

www.g4s.com

G4S plc ANNUAL REPORT AND ACCOUNTS 2007

A World of
Security Solutions

Argentina
Austria
Azerbaijan
Bahrain
Bangladesh
Barbados
Belgium
Bhutan
Bolivia
Botswana
Brunei
Bulgaria
Cambodia
Cameroon
Canada
Chile
China
Colombia
Costa Rica
Cote d’Ivoire
Cyprus
Czech Republic
Democratic Republic of Congo
Denmark
Dominican Republic
Ecuador
Egypt
El Salvador
Estonia
Finland
Gambia
Ghana
Greece
Guam
Guatemala
Guinea
Honduras
Hong Kong
Hungary
India
Indonesia
Ireland
Israel
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
Slovakia
Slovenia
South Africa
South Korea
Sri Lanka
Sweden
Syria
Taiwan
Tanzania
Thailand
Trinidad & Tobago
Turkey
Turkmenistan
Uganda
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 for 2007
4 Chairman’s Statement
6 Chief Executive’s Review
10 Security Services
14 Cash Services
16 Financial Review
22 Our People
24 Corporate Citizenship
28 Board of Directors
30 Executive Management

31 Report of the Directors
34 Corporate Governance Statement
37 Directors’ Remuneration Report
45 Statement of directors’ responsibilities in respect of the annual report

and the financial statements

46 Independent auditor’s report to the members of G4S plc
48 Consolidated income statement
49 Consolidated balance sheet
50 Consolidated cash flow statement
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 GROUP VISION IS TO BE RECOGNISED AS THE
GLOBAL LEADER IN PROVIDING SECURITY SOLUTIONS.

IN 2007 WE UNDERTOOK A STRATEGIC REVIEW TO
DEVELOP THE NEXT PHASE OF THE GROUP STRATEGY
FOCUSED ON DELIVERING ACCELERATED GROWTH
AND DEVELOPMENT FOR THE FUTURE.

‘

On the following pages we provide a brief overview
of the group strategy, which was launched to the
capital markets in November 2007.

PHASE I

MERGER & INTEGRATION DELIVERY

1
Successfully
completed merger
& integration

7
Delivered strong
growth and EBITA
performance

2
Delivered synergy
benefits

6
Created
one brand and
one vision

3
Spread Cash
Services expertise
to key businesses

5
Confirmed
multi-service
strategy

4
Created unique
geographic footprint
in developing markets

From 2004 to 2007 the group strategy focused on integrating two international
organisations, achieving the benefits of the merger that we promised to our
stakeholders and continuing to deliver strong business performance.

PHASE II

ACCELERATED GROWTH & DEVELOPMENT

1
Underlying trend
in core basic services
is for continued
margin pressure

7
Will require phased
organisational
development – which
will take time to show
benefits

6
Our growth story
requires the addition of
further ‘intelligence’ to our
capabilities in order to
create markets

2
Strategic evolution
of our services
provides further
opportunity for our
longer term plans

3
Demonstrating our
capabilities outside of
core basic services will
enhance reputation and
perception

5
Extending from current
core competencies is
logical, believable and
achievable and we
have strong references
already

4
Repositioning around
long-term growth has
the potential to
improve our 
market rating

Our strategy review in 2007 supported the view that in order to drive
accelerated growth and development, we would need focus on developing
from our core capabilities to develop total risk management and
outsourcing solutions across our service range and geographies.

DEVELOPING FROM OUR CORE CAPABILITIES

Strategic Goals

Deliver fully outsourced solutions:

MANAGE

‘ Output based contracts
‘ Ability to share in gains

ANALYSIS
AND
DESIGN

OPERATE

Provide expertise:

‘ Market segmentation/specialisation
‘ Risk assessment & consultancy
‘ Solutions & bid design capability

Enhancement of core services with supervision & IT:

‘ Delivery of core services

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Deliver across all services according to market need, in a phased and evolutionary implementation

At the heart of our strategy is the need to take greater responsibility for the identification and
management of risk – and therefore delivering fully outsourced secure solutions to a wide range
of customer segments.

EXAMPLE:

HIGH SECURITY FACILITY OUTSOURCING

MANAGE

High Security Facility Outsourcing

ANALYSIS
AND
DESIGN

Solutions Design

Risk Management & Consultancy

Safety Consultancy

Health & Safety Training

Security Facilities Management

Sector Expertise & Understanding

Infrastructure Management

Health & Safety Certification

Supervision / Integration

Subcontractor Management

Measurement & Reporting Systems

OPERATE

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EXAMPLE:

CASH OUTSOURCING

Cash Centre Outsourcing

Retail Solution – Outsourcing Cash Management

MANAGE

E2E ATM Estate Management

Secure Back Office Outsourcing

ANALYSIS
AND
DESIGN

Bank Note Integrity /
Quality Certification

Secure Processing Site
Security Certification

Reconciliation and Cash
Procedures Compliance

ATM / Retail
Machine Monitoring

Bank Note Cycle Consultancy

Retailer Cash Cycle Consultancy

Reconciliation and Cash
Procedure Training

Cash Pipe-line
Management / Efficiency

Security Procedures Audit

Central Bank Note Integrity

Central Bank Reporting

Bank & Retailer Cash Services
Staff Security Training

Cash Centre
Production Planning

Cash Forecasting

Note / Coin Issuage / Destruction

Reconciliation Reporting

Storage & Retrieval

In-Transit

Bulk Processing On-Site Processing

ATM / Retail Machine

OPERATE

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EXAMPLE:

CRIMINAL JUSTICE SYSTEM

Criminal Justice System Outsourcing

MANAGE

Police
Outsourcing

Court
Outsourcing

Prison
Outsourcing

Probation
Outsourcing

Immigration
Outsourcing

ANALYSIS
AND
DESIGN

OPERATE

Offender Management Programmes eg EM

Facility Design – Prisons, police, courts

Sentencing / Policy

Criminal Justice Training

Government Sector Expertise

Measurement & Reporting Systems

Supervision / Integration

Subcontractor Management

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FROM THE WORLD’S LARGEST SECURITY COMPANY
TO THE GLOBAL LEADER IN SECURITY SOLUTIONS

Repositioning
the group

Sustainable growth
(above market
growth rates)

Improved
quality of
earnings

Increasing
customer
relationship

Competitive
differentiation

Seen as
“critical” service

Appropriate
market rating

Aligned with
world class
outsourcing
providers

Increased
shareholder
return

The new strategy will deliver the accelerated growth and development required
by the group and will also benefit the entire range of G4S stakeholders.

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.

‘ INTEGRITY

‘ CUSTOMER FOCUS

We can always be trusted
to do the right thing

We have close, open relationships
with our customers that generate
trust and we work in partnership
for the mutual benefit of our
organisations

‘ BEST PEOPLE

‘ PERFORMANCE

We always take care to employ
the best people, develop their
competence, provide opportunity
and inspire them to live our values

We challenge ourselves to improve
performance year-on-year to create
long-term sustainability

‘ TEAM WORK &

‘ EXPERTISE

COLLABORATION
We collaborate for the benefit
of G4S as a whole

We develop and demonstrate our
expertise through our innovative
and leading edge approach to
creating and delivering the right
solution

2

CONTINUING TURNOVER BY SERVICE

CONTINUING PBITA BY SERVICE*

Cash
Services 22%

Cash
Services 31%

Security
Services 78%

2007

Security
Services 69%

Cash
Services 21%

Security
Services 79%

2006**

Cash
Services 30%

Security
Services 70%

CONTINUING TURNOVER BY GEOGRAPHY

CONTINUING PBITA BY GEOGRAPHY*

New
Markets 22%

North
America 25%

Europe 53%

2007

New
Markets 27%

North
America 18%

Europe 55%

New
Markets 18%

North
America 27%

Europe 55%

2006**

New
Markets 21%

North
America 21%

Europe 58%

Financial
Performance
for 2007

*

PBITA= Profit before interest, taxation and amortisation of acquisition-related intangible assets.

** 2005 & 2006 at 2007 exchange rates.

G4S plc | Annual Report & Accounts 2007

3

Group Total**

TURNOVER

PBITA

£m
5,000

4,000

3,000

2,000

1,000

0

4,490.4

3,923.2

3,633.9

2005

2006

2007

£m
350

300

250

200

150

100

50

0

312.1

267.1

241.9

MARGIN

%
7.00

6.75

6.7

6.8

7.0

6.50

6.25

6.00

2005

2006

2007

2005

2006

2007

Security Services

TURNOVER

PBITA

MARGIN

£m
4,000

3,500

3,000

2,500

2,000

1,500

1,000

500

0

3,503.8

3,094.1

2,870.9

2005

2006

2007

Cash Services

TURNOVER

PBITA

£m
1,000

800

600

400

200

0

986.6

829.1

763.0

2005

2006

2007

£m
250

200

150

100

50

0

£m
120

100

80

60

40

20

0

234.8

204.7

185.9

2005

2006

2007

107.7

86.4

77.7

2005

2006

2007

%
7.00

6.75

6.50

6.25

6.00

6.7

6.6

6.5

2005

2006

2007

MARGIN

%
11.0

10.5

10.0

9.5

9.0

10.9

10.4

10.2

2005

2006

2007

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 markets. 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 OUR DEVELOPMENT, INVOLVING
GREATER EMPHASIS ON LONGER-TERM RELATIONSHIPS WITH CUSTOMERS
REQUIRING EVER GREATER EXPERTISE, I AM VERY OPTIMISTIC ABOUT THE
OPPORTUNITIES TO CONTINUE THIS PROCESS AND TO GROW OUR BUSINESS
EVEN FURTHER.

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 very pleased to be able to report that the board continues to work

well; combining a broad spectrum of experience with great enthusiasm for the task of growing and developing

the business.

As mentioned elsewhere in this report, Sir Malcolm Williamson has decided to retire from the board this year

and so will not be seeking re-election at the Annual General Meeting in May. Malcolm’s contribution to the

‘ JANUARY

G4S divests its German cash
services business.

‘ FEBRUARY

G4S announces the acquisition
of Fidelity Cash Management Services
(Pty) Ltd, the market leader in cash
services in South Africa.

‘ MARCH

G4S reports 2006 operating profits
up by 10% and turnover growth of
8.4%.

‘ APRIL

Dungavel House Immigration
Removal Central, operated by G4S
Justice Services (UK) is declared as
being “… the best-run IRC we have
inspected” by Her Majesty’s Chief
Inspector of Prisons.

board since the company was formed in 2004 has been extremely valuable and his experience has contributed

‘ MAY

much to ensure the board has functioned efficiently. I would like to record my personal thanks to Malcolm for

all that he has done for the group. Lord Condon has kindly agreed to take over from Malcolm as senior

independent director.

Our Staff The board takes every opportunity it can to meet the 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

customers in so many parts of the world. We never fail to be impressed by the enthusiasm and dedication

which we find amongst management and staff at all levels.

We have seen that this spirit manifests itself not only during working hours and in the performance of the

services undertaken for customers, but also in the dedication which managers show to their staff and which

The U.S. Department of Energy
and National Nuclear Security
Administration select Wackenhut
Services, Inc for the Oak Ridge
Complex Protective Services
contracts.

‘ JUNE

G4S launches its innovative global
sports development programme to
support the next generation of sports
stars, the G4S 4teen, and Group 4
Securicor plc becomes G4S plc.

both management and staff show towards the communities in which they live. Some of the ways in which

‘ JULY

individuals within the G4S family seek to improve the lives of those around them are described elsewhere in

this report in greater detail. I am very proud of these examples and of all the many other similar projects

undertaken by G4S companies and employees around the world.

The Future As I have mentioned already, the group does not intend to stand still. As we have indicated, we

intend to implement a strategy which will bring us closer to our customers and which will involve the provision

of more complex solutions to a wider spectrum of customers under longer term agreements. I believe our

company is in excellent shape to execute this strategy and to reap the benefits it will bring.

Alf Duch-Pedersen
Chairman

G4S acquires Omada Fire & Security
Group, the Irish manned security
and fire suppression business.

‘ AUGUST

G4S is awarded Norway’s largest
security contract at OSL, Oslo
airport and reports 11.8% turnover
growth and 15.9% growth in group
operating profits for the six months
to 30 June 2007.

‘ SEPTEMBER

G4S wins a new contract to provide
electronic monitoring equipment
and services to the Department of
Corrections in New Zealand.

‘ OCTOBER

G4S Cash Services (UK) partners
with SmartWater Technology Ltd,
specialists in forensic security,
to protect its valuable cargoes.

‘ NOVEMBER

G4S launches next phase of strategy,
to drive accelerated growth and
development, to the capital markets.

‘ 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%)
> 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)
> 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)

*

at constant (2007) exchange rates

Operating
& Financial
Review

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 organic growth of around 7% and margins in line

with the previous year. The increased organic growth of 17% and improved margins in new markets have

driven an overall margin improvement of 0.2% across the group.

We have introduced the investment community to the next phase of our strategy which we believe will drive

accelerated growth and development for the group and we have already announced a number of acquisitions

which will help us steer the strategy forward.

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

to be a part of that winning team.

Strategic Development

2007 Review – In 2007, we set about reviewing the group strategy with a focus on driving accelerated growth

and development for the future.

Our review confirmed a growing trend of pricing pressure in core basic services and a demand from customers

for G4S to take a broader role in managing their risks.

‘ WE ACHIEVED ORGANIC

GROWTH OF 9.1%
– 2% ahead of target.

‘ PBITA MARGINS REACHED 7% 

– 18 months ahead 
of schedule.

‘ CASH FLOW GENERATION

WAS 89% OF PBITA
against a target of 85%.

‘ WE HAVE INTRODUCED
A NEW STRATEGY
to drive accelerated growth
and development.

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Strategic Goals

Deliver fully outsourced solutions:

MANAGE

‘ Output based contracts
‘ Ability to share in gains

ANALYSIS
AND
DESIGN

Provide expertise:

‘ Market segmentation/specialisation
‘ Risk assessment & consultancy
‘ Solutions & bid design capability

OPERATE

Enhancement of core services with supervision & IT:

‘ Delivery of core services

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 sectors

> Cash cycle management

> ATM network management and servicing

> Prison design and management

> Risk management and consultancy
> 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.

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:

‘ Build relationships via increased and more senior contact points
‘ Demonstrate awareness of customer needs

Develop customer driven propositions:

‘ Create tailored solutions for specific industry sectors

Add Intelligence:

‘ Add risk assessment capability
‘ Acquire consulting, audit certification and design capabilities
‘ Enable identification of value added solutions to customer issues

Develop solid foundation:

‘ Develop appropriate organisational structure
‘ Further develop market segment understanding

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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.

8

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

performance of our businesses in these countries.

We have introduced the investment community to the next phase of our strategy which we believe will drive

accelerated growth and development for the group. The strategy focuses on taking greater responsibility for

managing risk on behalf of our customers – extending from our core capabilities to develop total risk

management and secure outsourcing solutions across our service range and geographies.

‘ INCREASED ORGANIC
GROWTH OF 17%
and improved margins in new
markets have driven an overall
margin improvement of 0.2%
across the group.

In order to achieve this, we need to invest in building our own capabilities and expertise by continuing to share

‘ OUR BUSINESS MODEL IS

best practice, by developing our senior management population and by acquiring businesses and individuals who

bring expertise to the organisation. We have already announced a number of acquisitions which help us drive

the strategy forward, the most significant being Global Solutions Ltd (GSL).

Overall, the outlook for the business is good and we are not expecting the recent economic uncertainties to

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.

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

exchange rates

Turnover
£m

PBITA
£m

Europe*
North America*
New Markets*
Total Security Services*
Exchange differences
At actual exchange rates

2007

2006

1,671.3
1,043.8
788.7
3,503.8
–
3,503.8

1,534.1
970.8
589.2
3,094.1
106.7
3,200.8

2007

109.9
61.5
63.4
234.8
–
234.8

2006

101.2
58.2
45.3
204.7
6.8
211.5

Margins

2007

6.6%
5.9%
8.0%
6.7%

2006

6.6%
6.0%
7.7%
6.6%

Organic
Growth

2007

6.3%
7.3%
17.0%
8.7%

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

exchange rates

UK & Ireland*
Continental Europe*
Total Europe*

Turnover
£m

PBITA
£m

2007

2006

593.0
1,078.3
1,671.3

539.7
994.4
1,534.1

2007

48.4
61.5
109.9

2006

44.1
57.1
101.2

Margins

2007

8.2%
5.7%
6.6%

2006

8.2%
5.7%
6.6%

Organic
Growth

2007

6.0%
6.5%
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 contract 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 increasing the expertise of the

‘ THERE WAS GOOD ORGANIC

GROWTH OF 6.0%
in the UK & Ireland and
margins remained strong 
at 8.2%.

‘ IN THE BALTICS, GROWTH 

WAS OVER 20%
and margins improved
significantly on the prior year.

‘ IN ROMANIA THE BUSINESS
ACHIEVED EXCELLENT
GROWTH,
largely as a result of
outsourcing by the 
Romanian post office.

‘ IN MARCH 2008

we announced a process 
had commenced for the
divestment of our security
services businesses in France
and Germany.

group in key sectors in line with the group strategy. The acquisition of GSL was announced

in December 2007 and this should complete within the first half of 2008.

The Netherlands had a strong year, increasing revenue and achieving very strong margins.
The company successfully retained the Schiphol airport contract for a further 5 years.

Capability-building acquisitions were made in the fire and safety training sector consolidating

its market leading position as a safety and security solutions provider in the country.

In the Baltics, growth was over 20% and margins improved significantly on the prior year
due to strong price increase programmes across all services and the completion of large

systems installation projects at Tallinn airport, Riga port and for the Lithuanian customs

service.

There was good growth and strong margins in Denmark despite the business incurring
significant re-branding costs. Growth in Belgium was slow, but there was a significant

improvement in margins from the systems business and through performance management

improvements across the business.

In Sweden, margins were impacted negatively by restructuring and the loss of the Arlanda
airport contract in February although there were some good contract wins in the second
half of the year. 2007 was a consolidation year focusing upon strengthening the management
team, right-sizing the company and developing a solid platform to execute the new strategy.

In Romania, the business achieved excellent growth, 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

exchange rates

North America*

Turnover
£m

PBITA
£m

Margins

2007

2006

1,043.8

970.8

2007

61.5

2006

58.2

2007

5.9%

2006

6.0%

Organic
Growth

2007

7.3%

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, largely 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

exchange rates

Asia*
Middle East*
Africa*
Latin America & Caribbean*
Total New Markets*

Turnover
£m

PBITA
£m

Margins

2007

268.9
177.9
183.9
158.0
788.7

2006

221.9
115.9
139.7
111.7
589.2

2007

2006

2007

22.9
14.2
16.0
10.3
63.4

17.6
10.1
11.3
6.3
45.3

8.5%
8.0%
8.7%
6.5%
8.0%

2006

7.9%
8.7%
8.1%
5.6%
7.7%

Organic
Growth

2007

17.0%
19.7%
15.2%
16.6%
17.0%

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 contracts.

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

‘ ORGANIC GROWTH 
IN ASIA WAS 17.0%
and margins improved to 8.5%.

‘ IN THE MIDDLE EAST,
ORGANIC GROWTH 
WAS VERY STRONG
at 19.7% and margins were
at 8.0%.

‘ IN AFRICA ORGANIC
GROWTH WAS 15.2%
and margins improved strongly
to 8.7%.

‘ IN THE LATIN AMERICA 
& CARIBBEAN REGION,
GROWTH WAS STRONG
at 16.6% and margins
improved to 6.5%.

In the Middle East, organic growth was very strong at 19.7% and margins were at 8.0%,

driven by the continuing economic boom in the region coupled with a surge in tourism.

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.

In Africa, organic growth was 15.2% and margins improved strongly to 8.7%. In South Africa
the business is improving, largely as a result of increasing efficiency in the operations.

The business in Kenya performed very well this year with 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.

Elsewhere in Africa, Botswana, DRC, Malawi, Mozambique and Namibia all performed well
as a result of strong organic growth.

In the Latin America & Caribbean region, growth was strong at 16.6% and margins
improved to 6.5%.

Argentina improved significantly from 2006 through a targeted effort to increase cost

recovery from customers and from an expansion into the security of gas and oil facilities in

the southernmost part of the country.

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

exchange rates

Turnover
£m

PBITA
£m

Margins

2007

706.3
78.0
202.3
986.6
–
986.6

2006

629.7
83.0
116.4
829.1
6.9
836.0

2007

77.4
0.6
29.7
107.7
–
107.7

2006

2007

2006

11.0%
0.8%
14.7%
10.9%

10.9%
2.3%
13.8%
10.4%

68.4
1.9
16.1
86.4
0.6
87.0

Europe*
North America*
New Markets*
Total Cash Services*
Exchange differences
At actual exchange rates

Europe 

Organic
Growth

2007

11.6%
(6.0)%
17.0%
10.6%

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, largely 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
implemented in 2008. The successful introduction of the euro in Cyprus and Malta
contributed to strong growth and margin development.

Operating
& Financial
Review
(continued)

G4S plc | Annual Report & Accounts 2007

15

‘ THE CASH SERVICES BUSINESS
PERFORMED VERY STRONGLY
in 2007, with organic growth 
of 10.6% and margins of 
almost 11%.

‘ ORGANIC GROWTH IN 

EUROPE WAS EXCELLENT 
at 11.6% with strong margins 
of 11.0%.

‘ THERE WAS NEGATIVE ORGANIC

GROWTH IN CANADA
and margin performance was
affected by the loss of two
significant contracts.

‘ ORGANIC GROWTH IN NEW
MARKETS WAS VERY STRONG 
at 17.0% with margins
improving to 14.7%.

North America 

There was negative organic growth in Canada and margin performance was affected by the
loss of two significant contracts. A new CEO joined the business in 2007 and is already
beginning to have a positive impact.

New Markets 

Organic growth in New Markets was very strong at 17.0% with margins improving to

14.7%. There were excellent results across the regions in Asia, Middle East, Africa and 

Latin America.

Cash outsourcing opportunities are beginning to develop in Malaysia and Indonesia as
financial institutions and central banks are focusing on their core services and driving

efficiencies in the cash cycle.

In Hong Kong pricing pressure remains in the market, but there are opportunities for
growth from the deployment of self service terminals in the banking sector.

In the UAE, the business has extended its cash management offer into credit card
management and distribution services and India has been awarded the contract for
distribution of the new national ID cards. In Thailand, a new 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
of profit 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

£2.7m in 2006.

Operating
& Financial
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.

‘ NET INTEREST PAYABLE

on net debt was £57.4m.
This is an increase of 36%
over 2006.

‘ THE TAXATION CHARGE
of £71.1m provided upon
PBITA less interest represents
a tax rate of 27.5% compared
to 28.6% in 2006.

Acquisitions and acquisition-related intangible assets

Also included within financing are other net interest

Investment in acquisitions in the year amounted to

costs of £1.3m (2006: net income of £2.2m),

£217.6m, of which £151.6m was a cash outflow,

including the unwinding of the discount on put

£1.0m is deferred consideration and £65.0m the
recognition of put options over their interests held
by minorities. This investment generated goodwill of

options over minority interests, and a net income of
£5.0m (2006: £1.0m) in respect of movements in the
group’s net retirement benefit obligations.

£179.2m and other acquisition-related intangible
assets (customer-related) of £37.2m. Larger
acquisitions included the purchase of controlling

interests in Fidelity Cash Management in South Africa
and the business of al Majal Facilities Management
in Saudi Arabia, the purchase of RIG, a police

recruitment business in the UK, and the recognition

of put options that increased to 100% the group’s

interest in the multi-service businesses in the Baltic

states. The contribution made by acquisitions to the

results of the group during the year is shown in note

17 on page 70.

Taxation The taxation charge of £71.1m provided

upon profit from operations before amortisation of

acquisition-related intangible assets less net interest

represents a tax rate of 27.5%, compared to 28.6% in

2006. The group believes that an effective tax rate of

around this level is sustainable going forward. The

amortisation of acquisition-related intangible assets

gives rise to the release of the related proportion of

the deferred tax liability established when the assets

were acquired, amounting to £14.9m, including the

adjustment of the deferred tax liability for the

forthcoming reduction in the UK corporation tax

The charge for the year for the amortisation of

rate from 30% to 28%. In addition, a tax credit of

acquisition-related intangible assets other than

£0.3m has been included within the results from

goodwill amounted to £41.6m. Goodwill is not

discontinued operations. Potential tax assets in

amortised. Acquisition-related intangible assets
included in the balance sheet at 31 December 2007
amounted to £1,332.4m goodwill and £219.9m other.

respect of losses amounting to £107.2m have not
been recognised as their utilisation is uncertain.

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 services 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, principally comprising Group 4 Securicor

expected to complete following receipt of such
approval during 2008.

SAS, G4S Sicherheitsdienste GmbH and G4S
Sicherheitssysteme GmbH. It is anticipated that these

On 20 March 2008 the group announced a cash

offer of approximately £43.6m for the shares of

ArmorGroup International plc, a leading provider of

defensive, protective security services.

Financing items Finance income was £92.6m and
finance costs £146.3m, giving a net finance cost of
£53.7m. Net interest payable on net debt was
£57.4m. This is an increase of 36% over the 2006
cost of £42.1m due principally to the rising costs of
borrowing and the increase in the group’s average
gross debt. The group’s average cost of gross
borrowings in 2007 was 5.7% compared to 4.6% in
2006. The cost based on prevailing interest rates at
31 December 2007 was 5.7% compared to 5.2% at

31 December 2006.

disposals will be concluded during 2008. The assets and

liabilities of these businesses have therefore been

classified as held for sale and their results have been
included within discontinued operations. The result
from discontinued operations comprises a loss of

£12.0m in respect of post-tax trading losses of
discontinued businesses, a profit of £9.1m in respect
of disposals made in the current year and a profit 

of £2.9m in respect of adjustments to prior 
year disposals.

Businesses disposed of in 2006 included G4S Geld-

und Wertdienste GmbH, the cash services business 

in Germany, and the US transportation business,

being the remaining business of Cognisa Security, Inc.

18

‘ BASIC EARNINGS PER SHARE
was 11.5p compared to 7.6p
for 2006.

‘ OVERALL OPERATING
CASH GENERATION
for the year was good.
Operating cash flow as a
percentage of group PBITA
was 89%.

FINANCIAL REVIEW (continued)

The loss from discontinued operations in 2006

Cash flow The primary cash generation focus of

comprises £19.0m in respect of trading losses of

group management is on the percentage of operating

both the 2006 and the 2007 disposals and £19.2m 

profit converted into cash. For 2007, the group’s

in respect of disposal losses, offset by a £5.2m

target conversion rate was raised from 80% to 85%.

adjustment in respect of prior periods.

Operating cash flow, as defined for management

The net cash proceeds from business disposals

received in 2007 were £7.9m, comprising payment of

£12.4m in respect of the cash services business in

Germany, and receipt of £20.3m in respect of the

cash services business in France.

The contribution to the turnover and operating profit

of the group from discontinued operations is shown
in note 6 on pages 61 to 64 and their contribution
to net profit and cash flows is detailed in note 7 on

pages 64 and 65.

Profit for the year 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.

Minority interests Profit attributable to minority

interests was £13.4m in 2007, the same as in 2006,

reflecting minority partner shares in the group’s organic

and acquisitive growth, less a reduction in minority

share consequent upon the recognition as liabilities of

the group of certain put options held by minorities.

Earnings per share Basic earnings per share from

continuing and discontinued operations was 11.5p

compared to 7.6p for 2006. These earnings are

unchanged when calculated on a fully diluted basis,

which allows for the potential impact of outstanding

share options.

Adjusted earnings, as analysed in note 16 on pages

68 and 69, excludes amortisation of acquisition-

related intangible assets and retirement benefit

obligations financing items, both net of tax, and better

purposes, was as follows:

2007
£m

2006
£m

PBITA
Less share of profit from associates

312.1
(3.0)

274.4
(2.8)

PBITA before share of profit from

associates (Group PBITA)
Depreciation and amortisation

of intangible assets other than
acquisition-related

Profit on disposal of property, plant

309.1

271.6

99.6

92.7

and equipment

(14.4)

(1.6)

Increase in working capital and

provisions before exceptional items

(8.9)
Net cash flow from capital expenditure (109.0)

(45.8)
(82.5)

Operating cash flow

276.4

234.4

Operating cash flow as a percentage

of group PBITA

89%

86%

Working capital increased in both 2007 and 2006

due principally to the growth in turnover, but this

increase was restricted in 2007 as a result of the

commencement of a programme of billing process

improvements that is being rolled out across the

group. Capital expenditure relative to the

depreciation charge can vary from year to year due

to the timing of asset replacements. It was 109% of

depreciation in 2007, compared to 91% in 2006.

Overall operating cash generation for the year was

good, as a result of the maintenance of financial

discipline across the organisation.

The management operating cash flow calculation is
reconciled to the net cash from operating activities
as disclosed in accordance with IAS7 Cash Flow
Statements as follows:

2007
£m

2006
£m

allows the assessment of operational performance,

Cash flow from operating activities

the analysis of trends over time, the comparison of
different businesses and the projection of future

performance. Adjusted earnings per share was 13.4p,

an increase of 10.7% over 12.1p for 2006.

Dividends The directors recommend a final dividend

of 2.85p (DKK 0.2786) per share. This represents an

increase of 13.1% upon the final dividend for the year

to 31 December 2006 of 2.52p (DKK 0.2766) per

share. The interim dividend was 2.11p (DKK 0.2319)

per share and the total dividend, if approved, will be

4.96p (DKK 0.5105) per share, representing an

increase of 17.8% over the 4.21p (DKK 0.4629) per

share total dividend for 2006.

The proposed dividend cover is 2.7 times (2006:
2.9 times) on adjusted earnings. This is in accordance
with the group’s reaffirmed intention to increase
dividends so as to reduce dividend cover to around
2.5 times by 2008.

Operating
& Financial
Review
(continued)

(IAS7 definition)

291.3
Net cash flow from capital expenditure (109.0)
Add-back cash flow from exceptional
items and discontinued operations
Add-back additional retirement benefit

1.8

contributions
Add-back tax paid

26.1
66.2

197.1
(82.5)

25.3

24.2
70.3

Operating cash flow (G4S definition) 276.4

234.4

The group’s free cash flow, as defined by management,
is analysed as follows:

Operating cash flow
Net interest paid
Tax paid
New finance leases

Free cash flow

2007
£m

2006
£m

276.4
(55.0)
(66.2)
(10.3)

234.4
(47.8)
(70.3)
(19.6)

144.9

96.7

G4S plc | Annual Report & Accounts 2007

19

Free cash flow is reconciled to the total movement in

The proceeds of the issue were used to reduce

net debt as follows:

Free cash flow
Cash flow from exceptional items and

discontinued operations
Additional retirement benefit

contributions

Net cash outflow on acquisitions
Net cash inflow from disposals
Net cash flow from associates
Dividends paid to minority interests
Loan to minority interests
Share issues less share purchase
Dividends paid to equity holders of

the parent

Net cash flow from hedging financial

2007
£m

2006
£m

144.9

96.7

(1.8)

(25.3)

(26.1)
(162.9)
7.9
1.0
(3.8)
(13.3)
(2.2)

(24.2)
(95.7)
9.9
2.7
(3.0)
–
6.0

(59.3)

(49.8)

drawings against the revolving credit facility. At the

time of receipt the group had, in accordance with

treasury policy, converted 55% of its US dollar

interest exposure from floating rates into fixed rates

through interest rate swaps. Therefore, the fixed

interest rates payable on the notes were swapped

into floating rates for the term of the notes, at an

average margin of 0.60% over Libor, so that the

proportion of group debt held under fixed interest

rates remained at 55%.

On 7 March 2008 the group signed committed bank
facilities amounting to £350m. These facilities expire
on 31 December 2008, although the group can
exercise an option to extend the facilities to 30 June

2009. The margin is 0.35% over Libor. The purpose

instruments

(4.3)

11.8

of these facilities is to provide the group with

Movement in net debt in the year
Foreign exchange translation
adjustments to net debt

Net debt at 1 January

(119.9)

(70.9)

(12.2)
55.4
(672.8) (657.3)

Net debt at 31 December

(804.9) (672.8)

Net debt represents the group’s total borrowings less

cash, cash equivalents and liquid investments. The

components of net debt are detailed in note 39 on

page 93.

Financing and treasury activities The group’s

treasury function is responsible for ensuring the

availability of cost-effective finance and for managing

the group’s financial risk arising from currency and

interest rate volatility and counterparty credit.

Treasury is not a profit centre and is not permitted
to speculate in financial instruments. The treasury
department’s policies are set by the board. Treasury

is subject to the controls appropriate to the risks it

manages. These risks are discussed in note 33 on

pages 82 to 84.

Financing The group’s primary source of finance 

is a £1,000m multicurrency revolving credit facility

provided by a consortium of lending banks at a
margin of 0.225% over Libor. During 2007, the

lending banks exercised their options to extend the

term of this facility to 28 June 2012. An additional

£87m facility with another bank on the same terms

was added on 1 February 2007.

On 1 March 2007, to further diversify its sources of
funding and lengthen the maturity of its debt, the
group completed a $550m private placement of
unsecured senior loan notes, with maturity and
interest as follows:

Interest
rate
%

Maturity
date

5.77
5.86
5.96
6.06

March 2014
March 2017
March 2019
March 2022

Value
$m

100
200
145
105

Series “A”
Series “B”
Series “C”
Series “D”

headroom whilst assessing options in the capital

markets. The group does not expect to draw down

on these facilities.

The group has other short-term committed facilities

of £30m and uncommitted facilities of £411m.

The group’s net debt at 31 December 2007 of

£804.9m represented a gearing of 72%. The group has

sufficient capacity to finance current investment plans.

Interest rates The group’s investments and

borrowings at 31 December 2007 were, after taking

into account the swap in respect of the loan notes

issued in March, at variable rates of interest linked to

Libor and Euribor, with the group’s exposure being

predominantly to interest rate risk in US dollar and

euro. The group’s interest risk policy requires treasury
to fix a proportion of net debt on a sliding scale, with
a maximum of 80% short term debt held at fixed
rates, reducing to a maximum of 20% of medium
term debt held at fixed rates, utilising interest rate
swaps. The maturity of these interest rate swaps at
31 December 2007 was limited to five years. The
market value of the loan note related pay-variable
receive-fixed swaps outstanding at 31 December
2007, accounted for as fair value hedges, was a gain
of £14.3m. The market value of the pay-fixed receive-
variable swaps outstanding at 31 December 2007,
accounted for as cash flow hedges, was a loss 
of £5.1m.

Foreign currency The group has many overseas
subsidiaries and associates whose results and net
assets are denominated in various different

currencies. Treasury policy is to manage significant
translation risks in respect of net operating assets and
income denominated in foreign currencies by using

borrowings denominated in foreign currency
supplemented by forward foreign exchange contracts.

‘ THE GROUP’S NET DEBT
at 31 December 2007
of £804.9m represented
a gearing of 72%.

20

‘ THE GROUP OPERATES

a global cash management
system.

‘ THE GROUP’S RETIREMENT
BENEFIT OBLIGATIONS
FUNDING SHORTFALL
was £136m before tax
or £98m after tax.

Operating
& Financial
Review
(continued)

FINANCIAL REVIEW (continued)

The most significant currency movements during

The valuation of gross liabilities was broadly

both 2007 and 2006 were the in the US dollar.

unchanged from 2006, with the charge of the year’s

The average rate for the dollar during 2007 was

finance cost being offset by an increase in the

$2.00=£1 compared to $1.85=£1 for 2006. However,

appropriate AA corporate bond rate from 5.2% to

the rate at 31 December 2007 of $1.99=£1 was

5.8%. The value of the assets held in the funds

closer to the rate of $1.96=£1 at 31 December

increased by £77m during 2007, assisted by additional

2006. This variance has impacted the group’s dollar-

company contributions of £26m.

denominated assets and assets denominated in New

Market currencies that follow the dollar. In contrast,

the average rate for the euro during 2007 of

€1.46=£1 was very close to the average for 2006

of €1.47=£1. But the rate for December 2007 of

€1.36=£1 was significantly below the rate of

€1.48=£1 at 31 December 2006. This variance has

impacted the group’s euro-denominated assets and

assets denominated in European currencies that

follow the euro. Exchange differences on the

translation of foreign operations included in the

statement of recognised income and expense

amount to gain of £18.4m (2006: loss of £31.0m).

These differences include a £12.2m loss (2006:

£55.4m gain) on the retranslation of net debt, a

£4.3m cash outflow (2006: £11.8m inflow) from

forward exchange contracts and a £19.0m loss

(2006: £11.6m gain) on the market valuation of

outstanding forward contracts.

The market value of forward contracts outstanding at

31 December 2007 was a loss of £13.6m.

Cash management To assist the efficient management

of the group’s interest costs and its short term

deposits, overdrafts and revolving credit facility

drawings, the group operates a global cash

management system. At 31 December 2007, 83

group companies participated in the pool, with the

number continuing to grow. Debit balances of

£82.9m and credit balances of £84.5m were held

within the cash pool. IFRS does not permit the

netting off of these balances, which are therefore

disclosed gross within current assets and current

liabilities.

Retirement benefit obligations The group’s primary
defined benefit retirement benefit schemes are those
operated in the UK, but it also operates such schemes
in a number of countries, particularly in Europe and
North America. The latest full actuarial assessments of
the UK schemes were carried out at 31 March 2007
in respect of the Group 4 scheme (approximately
8,000 members in total) and at 5 April 2006 in
respect of the Securicor scheme (approximately
20,000 members in total). These assessments and
those of the group’s other schemes have been
updated to 31 December 2007, including the review
of longevity assumptions. The group’s funding
shortfall on the valuation basis specified in IAS19
Employee Benefits was £136m before tax or £98m
after tax (2006: £226m and £158m respectively).

The group believes that the short-term volatility in

reported retirement benefit obligations, in response to

movements in asset prices and financial circumstances,

is of limited relevance in the context of liabilities which

are exceptionally long-term in nature and furthermore

that, over the long term, investment returns on the

retirement benefit scheme assets will be sufficient to

fund retirement benefit obligations. However, in

recognition of the regulatory obligation upon pension

fund trustees to address reported deficits if they arise,

the group anticipates that additional cash contributions

will continue to be made at a similar level to that in

2007. This level of contributions will be reviewed
annually and formally reassessed at the next actuarial

valuation dates, which are 5 April 2009 in respect of

the Securicor scheme and 31 March 2010 in respect

of the Group 4 scheme.

Corporate governance The group’s policies regarding

risk management and corporate governance are set

out in the Corporate Governance Statement on

pages 34 to 36.

Going concern The directors are confident that, after

making enquiries and on the basis of current financial

projections and available facilities, they have a

reasonable expectation that the group has adequate

resources to continue in operational existence for

the foreseeable future. For this reason they continue
to adopt the going concern basis in preparing the
financial statements.

Risks All businesses are subject to risk and many
individual risks are macro-economic or social and
common across many businesses. Many risks are to a
greater or lesser extent controllable, but some are

not controllable. Through its internal risk management
process, the group identifies business-specific risks. It
classifies the key risks as those which could materially

damage the group’s strategy, reputation, business,
profitability or assets and these risks are listed below.
This list is in no particular order and is not an

exhaustive list of all potential risks. Some risks may be
unknown and it may transpire that others currently
considered immaterial become material.

1. Price competition
The security industry comprises a number of very

competitive markets. In particular, manned security
markets can be fragmented with relatively low
economic barriers to entry and the group competes

with a wide variety of operators of varying sizes.

Actions taken by the group’s competitors may place

pressure upon its pricing, margins and profitability.

G4S plc | Annual Report & Accounts 2007

21

‘ THE GROUP HAS A ROBUST
RISK ASSESSMENT AND
CONTROL PROCESS IN PLACE
to identify and mitigate the
controllable risks faced by the
organisation.

‘ THE GROUP IS COMMITTED
to a policy of proactive
engagement with customers,
industry associations,
government regulators and
employee representatives.

2. Major changes in market dynamics

for which the group is contracted to provide security,

Such changes in dynamics could include new

they could result in brand and reputational damage

technologies, government legislation or customer

and so affect earnings and profitability.

consolidation and could, particularly if rapid or

unpredictable, impact the group’s revenues and

profitability.

10. Regulatory requirements

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

Outsourcing activities carried out by the group

comply with such regulations may adversely affect the

include cash processing and cash management

group’s revenues and profitability.

functions on behalf of financial institutions, manned

security on behalf of a range of different customers

and justice services on behalf of government
institutions. If the trend towards such outsourcing
were for any reason to be reversed, the group’s
revenue and profitability may be adversely affected.

4.

Inappropriate investment decisions

Were the group to make acquisitions or capital

expenditures that were inappropriate to its strategy

or over-priced, or to take on onerous contractual

obligations, the group’s profitability and returns on

capital may be adversely affected.

5. Cash losses

The group is responsible for the cash held on behalf

of its customers. Increases in the value of cash lost

through criminal attack may increase the costs of the

group’s insurance. Were there to be failures in the

control and reconciliation processes in respect to

customer cash these could also adversely affect the

group’s profitability.

6.

IT systems

The group makes widespread use of IT systems both

for operational management, including tasks such as
scheduling and route-planning, and for financial
management, including calculating employee wages and
billing customers. Failure in these systems, including the
failure of business continuity procedures in the event
of physical damage to or inaccessibility of day-to-day
operating systems, could result in reputational damage
and the loss of revenue and profitability.

7. Deterioration in labour relations
The group’s most significant asset is its large and
committed work force. Were the good relationships

between the group and its employees to become
strained, the group’s operational performance and
reputation may be adversely affected.

8. Defined benefit pension schemes

A prolonged period of poor asset returns and/or

unexpected increases in longevity could require

increases in the current levels of additional cash

contributions to defined benefit pension schemes,

which may constrain the group’s ability to take

advantage of growth opportunities.

9. Terrorist attacks

The group operates in an industry which is

sometimes involved in seeking to protect its

customers against acts of terrorism. Were terrorist

incidents in the future to involve premises or events

The group has a robust risk assessment and control

process in place to identify and mitigate the

controllable risks faced by the organisation. Mitigation

measures include:

1. The group’s diversity

The group operates around 150 businesses across
over 110 countries and across a range of product
areas. Most of the risks detailed above are market-
specific and, therefore, any particular issue is likely to
impact only part of the group’s operations.

2. Management structure

The group operates a management structure that is

appropriate to the scale and breadth of its activities.

Business performance and strategies are reviewed

continuously by regional, divisional and group

management. Potential issues requiring management

attention are therefore identified and there is a wide

range of expertise available throughout the

organisation, which is utilised as necessary to address

these issues.

3. Authorisation procedures

The group has clear authorisation limits and procedures
which are cascaded throughout the organisation. For
example, all acquisition proposals have to be submitted

for approval to the group capex committee, assessed
against the group’s return requirements, evaluated for
risk and subject to appropriate due diligence.

4. Group standards
Each of the group’s businesses applies systems and

procedures appropriate to its size and complexity.
However, the group requires that these conform to
group standards in respect of matters such as

operational and financial controls, financial reporting,
business continuity planning and project management
techniques. Further standards, particularly in respect of

IT systems, are applied on a divisional or regional basis.

5.

Internal audit

The Internal Audit department operates under a wide

remit, which includes ensuring adherence to group

authorisation procedures and control standards.

6. Market engagement
Most of the risks to which the group is exposed are
market risks. So as to better understand and
influence the market, the group is committed to a
policy of proactive engagement across its geographic
range, with customers, industry associations,
government regulators and employee 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

Investing in the workforce – we place great focus on

Programmes such as these ensure that we grow our

attracting and retaining the right talent at all levels, to

talent from within local communities alongside an

ensure the continued success of the organisation.

internationally mobile team of top managers, helping

Our international spread requires great strength and

depth in management to allow us to continue

operating and growing throughout diverse markets.

In addition to our award-winning international

leadership development programme, we are investing

in regional and country level employee development

us to develop markets, create new businesses and

operate consistently in often challenging circumstances.

Succession planning at the most senior levels also

ensures that our group can continue to lead the

industry on a global scale, and helps build our

reputation as the employer of choice in our industry.

programmes around the world, such as:

At front line level too, we continue to invest in

> Asia Pacific – tailor-made programmes

supporting competency development and

reinforcing the G4S values have been introduced

in China, Hong Kong,Taiwan and across the region.

> Sub Saharan Africa – the region is launching an

advancement programme for talented African

managers in association with a premier South

African business school.

practical training programmes to help refine the skills

and capability of our service delivery staff. Through
the commitment of our international training
community, we share best practice, training materials

and approaches around the world, ensuring that our
employees benefit from the most appropriate training
to enable them to deliver a great service to our

customers.

> UK – the cash services business is using an on-

Raising standards – as one of the world’s largest

line learning portal to support continual personal
development and assist managers at various

private sector employers, we place great value on
creating sustainable employment in diverse markets,

levels to achieve recognised management

thereby contributing to the communities in which

qualifications.

our employees live.

> Global Learning Portal – this portal facilitates

the sharing of learning and expertise between

businesses on a global basis. The group has many

centres of excellence for operational, supervisory

and management learning within G4S and these

centres have provided materials for the portal.

For example, Wackenhut in the US is

acknowledged for the quality of training it

provides for employees and our business in India

is able to share many of its specialist programmes.

Our success has brought with it the responsibility
to lead employment practices wherever we operate,
setting the standards to which other employers in
our industry aspire.

We are committed to continually raising these
already high standards and ensuring that the way we
operate delivers both commercial returns and a
positive result for our employees and their families.

‘ WE ARE INVESTING

in regional and country 
level employee development
programmes around 
the world.

‘ WE CONTINUE TO INVEST

in practical training
programmes to help refine 
the skills and capability of 
our service delivery staff.

‘ AS ONE OF THE WORLD’S 
largest private sector
employers, we place great
value on creating sustainable
employment in diverse
markets.

Operating
& Financial
Review
(continued)

G4S plc | Annual Report & Accounts 2007

23

‘ RIGOROUS PRE- AND POST-
EMPLOYMENT SCREENING
practices are embedded.

‘ A NUMBER OF KEY INITIATIVES 

were launched at our
European Works Council 
to ensure that we work
cooperatively on the matters
that can affect our staff most 
of all.

‘ ACROSS THE GROUP 

WE ENGAGE 
in genuine and active social
dialogue with a wide range 
of social partners.

This commitment to being a good employer means we also insist that new recruits have

the necessary qualities to be trustworthy and reliable, helping safeguard the safety of their

colleagues as well as our customers.

Rigorous pre- and post-employment screening practices are therefore embedded

throughout our businesses, and we continue to work with governments and industry bodies

to drive up standards in many countries around the world.

Employee representation – our drive to improve performance across the industry is aided

by our positive relationships with trade unions and other employee representatives.

We are proud that we are able to work hand in hand with these bodies to positively

influence the whole sector, as well as working together on employee relations programmes

within G4S.

For example, in 2007 a number of key initiatives were launched at our European Works
Council to ensure that we work collaboratively on the matters that can affect our staff most
of all, such as training, health & safety and employee 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 organisation, G4S

This policy is communicated to managers throughout

plays a significant role in the lives of hundreds of

the group and, on an annual basis, they are required

thousands of people – both directly through

to declare individually their personal commitment by

employment and indirectly through its approach to

endorsing the policy and confirming compliance

the communities in which it operates.

within their own area of responsibility.

We take that role very seriously and encourage all of

Strict adherence to the principles of the business

our businesses to actively raise standards and invest

ethics policy is required of all group employees.

in the communities in which they operate. At a

Compliance with the policy is monitored through our

group level, we also invest in programmes which

internal and external audit functions and through the

contribute positively to the community and

group’s whistle-blowing facilities.

We take our responsibilities in this area very
seriously and take swift and robust action against any
non-compliance.

environment and we set international standards and

policies to which our businesses must operate.

Business Ethics G4S is committed to operating to
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 corruption
> Compliance with the law
> Accounting standards

> National regulations and guidelines
> ILO Declaration on Fundamental Principles and

Rights at Work

> Equal opportunities
> Health & safety
> Whistle-blowing and complaints

Operating
& Financial
Review
(continued)

G4S plc | Annual Report & Accounts 2007

25

Environment Whilst the service industry is not a sector which has a

Employee Welfare & Support The group has established an employee

major impact on the environment, we do realise that G4S has a

trust fund which offers monetary support, at the discretion of the fund’s

responsibility to ensure that we play our part in protecting and

trustees, to those employees and former employees in need of urgent

preserving the environment for future generations.

financial assistance.

We already comply with the relevant standards on vehicle emissions and,

During 2007, the fund was utilised in a number of ways to provide

to date, fuel conservation has been achieved through enhanced vehicle

emergency assistance to employees across the group in areas such as:

design and regular maintenance. We also make use of environmentally-

friendly products and services wherever possible. We are committed to

recycling of materials where possible and where the means to recycle

materials exist. This includes the recycling of cash bags, uniforms, toner

cartridges, paper and paper-based products.

> Victims of political turbulence and violence in Kenya

> Employees affected by severe flooding in the UK

> Staff who have suffered injury or attack whilst on duty

> Colleagues diagnosed with life-threatening or debilitating diseases

> Families of employees who have died whilst carrying our their duties

We have recently established a working group which is responsible for

> Relief from the effects of natural disasters in Peru and Jamaica

delivering a number of projects related to the group’s “integrity” value.

One such project is to create a G4S international environmental strategy

during 2008.

Investing in the Community – Local Initiatives G4S encourages its

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

rest of the group – our cash services businesses. This part of the

organisation represents 43,000 employees, 9,000 vehicles and 22% of

group revenues.

We have estimated that, in 2007, the carbon emissions of the group’s cash
services businesses amounted to some 153t CO2 emissions per £1m of
revenue.

In 2008 we will select a partner organisation, with strong environmental

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.

In Guam & Saipan, G4S employees have been involved in a number of
education initiatives; adopting a public school and carrying out
renovations and cleaning; and providing much needed equipment such as
desks and cabinets for a high school that sustained significant fire and
smoke damage.

G4S Uganda took part in the Habitat for Humanity Uganda initiative and
helped to build homes for orphans and widows who had been caught up
in the rebel activities in Northern Uganda. So relentless were the efforts
of the G4S team, they made one family’s dream come true by building

them a home in just four months.

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 expect

the lives of thousands of sick or disadvantaged children.

our strategy to cover key areas such as:

> Fuel consumption
> Energy consumption

> Water usage

> Recycling

> Use of environmentally-friendly products

> Use of modern communications to reduce the need for air travel

In India, G4S supports a wide range of community projects. One of
these, Future Hope, is a centre which provides a home, education,

medical aid and opportunities for street children in Kolkata.

26

Operating
& Financial
Review
(continued)

CORPORATE CITIZENSHIP (continued)

During August 2007, the employees of G4S Greece

Training will continue with further family members

provided vital assistance to 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

14-day period over €14,000 was raised and 80 boxes

of supplies gathered through the generosity of G4S

employees.

In the USA, amongst a whole range of charitable
activities, G4S Wackenhut employees take an active

role in mentoring disadvantaged high school students

through a community programme “Take Stock in

Children”. The employees meet with the students

weekly to review their academic progress and

encourage them to study and continue to college.

Investing in the Community – Major Initiatives
In 2006 G4S plc commenced five major community
projects in key markets. Managers and staff in our

developing markets selected projects which they

believed would benefit greatly from G4S central

funding and local G4S business support.

Jamaica – G4S Gifts for Schools Project – G4S Gifts

for Schools aims to make life a little easier for young

people living in some of the most deprived

communities in Jamaica by providing them with

equipment and toys, and ensuring that repairs to

their accommodation take place.

G4S Jamaica has provided support to a range of

institutions for young people during 2007, such as a
boys’ home in a remote area of the country, a hostel
for young mothers suffering from HIV, and

community housing for both able-bodied and

disabled children.

One such facility, the Little Angels Basic School, has

seen some substantial improvements through its

involvement with G4S. G4S Gifts for Schools is
renovating two school buildings used to teach

physically and mentally handicapped children. New

classrooms have been built, repairs undertaken to the

The main aim of these projects was to engage our

roof, electrical repairs have been made and existing

workforce in their 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 contractors and the staff who run

We are very proud of our community projects and

the time and commitment invested in the projects by

the facility. The whole community is joining together

to make a difference to the lives of young people.

our colleagues in the different countries.

India – G4S School for Under Privileged Children –

Malawi – G4S Community Trees in Malawi – Malawi

has low levels of energy available to the rural and

urban population, and as a result timber is the main

source of energy 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
approximately 150,000 tonnes of charcoal.

G4S Community Trees in Malawi was developed to

provide a sustainable forestry farming project which

provides for own-grown fuels to Malawians living in a
rural areas in the Karonga region of Northern Malawi.

50,000 acacia saplings were placed in the plantation

area in 2007. With the saplings safely in place, the

project’s employees were given training in planting

trees, transplanting trees, how to irrigate the soil, how

to tend to the trees that were not faring so well and

finally how to use crop rotation in order to grow staple

foods, such as maize, at the same time as the trees.

The villagers involved in the project are earning a
recurring living wage from the G4S Community Trees
project and their training in the maintenance and
care of the tress is ongoing, making a real difference
to the lives of the villagers involved in the project.

Plans are already underway to plant a new crop of
trees in 2008 to ensure the plantation grows further.

The aim of the G4S School for Under Privileged

Children is to provide free education, food and

uniforms to children of working parents allowing
them to continue to work whilst their children are in
a place of safety.

In 2007, G4S India engaged with a national NGO,
The Hope Foundation, a charitable organisation

involved in providing sustainable education for
children. The school will be located in the Papankala
area of New Delhi. This area has about 1,500 homes

populated by about 15,000 people, with a child
population above 3,000. Many of these children are
not currently at school and the G4S School for

Under Privileged Children will provide their best

hope of an education.

A building has been located and is being redesigned

and refurbished to transform it into a school. G4S

India will provide books and other school equipment,

along with teachers to provide a structured

curriculum of education for the children. The school

will provide education facilities for up to 300 students.

The school’s seven classrooms will each accommodate

30-35 pupils. Additional facilities will incorporate a

staff room, an administration block, a principal’s office,

a media room and a computer lab for students. The

aim is to open the school in the second half of 2008.

G4S plc | Annual Report & Accounts 2007

27

China – G4S China Jifu Action Project – G4S Jifu Action is an

The G4S 4teen programme was developed to provide support to

educational project in Shanghai, which aims to provide a purposeful

aspiring young athletes from developing markets, with a view to them

learning environment for the children of the Nanhui Taoyuan Orphans’

achieving their sporting dream of competing in a future Olympic Games.

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

children who are offered this structured education will increase over the

life of the project with over 80 children benefiting from the G4S Jifu

Action Project education programme.

Russia – G4S for Children Project – The G4S for Children Project has

found a positive way of helping support the work of two children’s

homes, which are known as “Internats”, in the Moscow region, both of

which care for children with disabilities; the two beneficiaries are the

Municipal Institution, Special Secondary School – Internat for Children

with Sight Disabilities, and the Specialised School – Internat for Orphans

with Health or Physical Development Disabilities.

The aim of the G4S for Children Project is to improve the lives of the

children living in the Internats through the provision of specialist

education, general equipment and sporting equipment for the 

children at the specialised school.

G4S for Children has provided for three classrooms in the special

secondary school and equipment such as interactive white boards,

projectors and computers – all of which were installed in time for the

school’s 70th anniversary celebrations in March 2008.

G4S Russia hopes its community project will throw a lifeline to many

children, giving them the opportunity to pursue lives as adults that are

promising and rewarding.

Developing Young People – G4S 4teen – Engaging a large international
workforce in a major global brand is a challenging target. In 2007, we

launched an international sporting programme for young people, aimed
at inspiring G4S employees throughout the world and making them
proud to be a part of G4S – in a way which is not limited to a particular

language, race or religion.

As well as providing financial and other support to the 14 selected

athletes, G4S is proud to have attracted a global sporting icon to act as

a project ambassador and a mentor to the G4S 4teen members.

Haile Gebrselassie is a double gold medal winning Olympian and the

current world record holder for the Marathon following his win at the

Berlin Marathon in October 2007.

Haile has provided inspiration and practical support to the athletes,

offering his advice to some of the 4teen to help them overcome the

barriers they have faced during their training. He is a national hero for

Ethiopia and in the world of sport and has become an inspirational

member of the G4S global family.

Future Development – launched to the world in June 2007, the G4S

4teen programme continues to grow from strength to strength. Many

of the 4teen have achieved great success at major sporting competitions

around the world, some have won national sporting awards, and we

expect at least four of the 4teen to represent their countries in the

Olympic Games in Beijing in 2008.

In addition to financial support, some of the athletes have received very

practical support from their local G4S businesses, such as computer skills

training, English language lessons, mentoring and media training –

all of which have helped them prepare themselves to compete on the

international stage.

G4S has played a significant role in helping these young people to

become the best they can be in their chosen sport during 2007 and 

is fully committed to continuing to provide practical and financial help

to our very special 14 talented sportsmen and women for the next

five years.

28

Board of
Directors

Alf Duch-Pedersen (61)

CHAIRMAN

Nick Buckles (47)

CHIEF EXECUTIVE

Alf was appointed to the board in May 2004
and became chairman of the board in June
2006. He is also chairman of the Nomination
Committee. Alf ’s career has involved
managing multi-national companies covering
a range of industries from manufacturing and
financial services to food and food products.
He was president and chief executive of
Tryg-Baltica A/S from 1991 to 1997 and
fulfilled the same roles at Danisco A/S from
1997 to 2006. He is now chairman of the
board of Danske Bank A/S, a member of the
board of the Technical University of Denmark,
chairman of the British Chamber of
Commerce in Denmark and chairman of the
Danish government’s committee to
modernise Danish corporate legislation.

Nick was appointed to the board in May
2004 and was the company’s deputy chief
executive and chief operating officer.
He became chief executive in July 2005.
Nick joined Securicor in 1985 as a projects
accountant. In 1996 he was appointed
managing director of Securicor Cash
Services and became chief executive of the
security division of Securicor in 1999. He
was appointed to the board of Securicor plc
in 2000 and became its chief executive in
January 2002. Nick is a non-executive
director of Arriva plc.

Trevor Dighton (58)

Grahame Gibson (55)

CHIEF FINANCIAL OFFICER

CHIEF OPERATING OFFICER

Trevor was appointed to the board in May
2004. An accountant, he joined Securicor in
1995 after a previous career which included
posts in both the accountancy profession
and in industry, including five years in Papua
New Guinea, three years in Zambia and
seven years with BET plc. He joined
Securicor’s vehicle services division in 1995,
was appointed finance director of its security
division in 1997 and became its deputy
group finance director in 2001. He was
appointed to the board of Securicor plc as
group finance director in June 2002. Trevor
became the company’s chief financial officer
in July 2004.

Grahame was appointed to the board in
April 2005. He joined Group 4 in 1983,
starting as finance director (UK) and then
deputy managing director (UK), followed by
a number of senior group roles, including
vice president (corporate strategy), vice
president (finance and administration), vice
president operations (UK, Central & South
Eastern Europe) and, in 2000, chief operating
officer of Group 4 Falck. In July 2004, he
became the company’s divisional president
for Americas & New Markets. Grahame
became the company’s chief operating
officer in July 2005.

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 the board in May
2004 and is chairman of the Audit
Committee. A former chairman of TDC
(Tele Danmark Corporation) and former
group chief executive of Nykredit A/S,
Unibank A/S and Nordea AB,Thorleif is
currently chairman of Exiqon A/S and Sport
One Danmark A/S. He is also deputy
chairman of H. Lundbeck A/S, ALK-Abello
A/S and LFI A/S and a director of Bang &
Olufsen A/S, Brightpoint Inc. and the
Lundbeck Foundation.

Malcolm was appointed to the board in May
2004 and is the senior independent director
and a member of the Audit and Nomination
Committees. After a 28-year career with
Barclays Bank plc, he became managing
director of Girobank plc and a member of
the UK Post Office board in 1985. In 1989
he joined Standard Chartered plc, being
group chief executive from 1993 to 1998.
Between 1998 and 2004 he was president
and CEO of Visa International, Inc. He is
chairman of Signet Group plc, CDC Group
plc, National Australia Group Europe Limited
and Clydesdale Bank plc, deputy chairman of
Resolution plc and a non-executive director
of National Australia Bank Ltd and JP
Morgan Cazenove Holdings.

Mark was appointed to the board in
September 2006 and is a member of the
Remuneration Committee. Until he retired
in April 2008, Mark was General Manager,
Global Solution Sales, for IBM. Based in the
USA, he joined IBM in 1970 and occupied a
number of senior management positions in
that company including General Manager,
IBM Europe, Middle East and Africa where
he was responsible for that company’s
operations in over 120 countries. Mark is a
non-executive director of Reed Elsevier PLC
and Reed Elsevier NV and serves on the
Dean’s Advisory Council and the Technology
Advisory Council at Indiana University.

Lord Condon (61)

DEPUTY CHAIRMAN

Bo Lerenius (61)

Mark Seligman (52)

NON-EXECUTIVE DIRECTOR

NON-EXECUTIVE DIRECTOR

Lord Condon was appointed to the board in
May 2004. He became deputy chairman of
the board in September 2006 and is chairman
of the Remuneration Committee and a
member of the Nomination Committee. Paul
joined the Metropolitan Police in 1967 and,
after holding various senior appointments in
the police force, including a period as Chief
Constable of Kent, served as Commissioner of
the Metropolitan Police between 1993 and
2000. He was created a life peer in 2001 and
is President of the British Security Industry
Association, an advisor to international sports
governing bodies, a director of Tenix
(Holdings) UK Limited and a member of the
advisory board of Vidient Systems Inc.

Bo was appointed to the board in May 2004
and is a member of the Audit and
Remuneration Committees. After a diverse
early business career, he served as chief
executive of Ernstromgruppen, a Swedish
building materials business, between 1985
and 1992 when he joined Stena Line where
he was chief executive and vice chairman.
In 1999 he became group chief executive of
Associated British Ports Holdings plc. He is a
non-executive director of Land Securities
Group plc and Thomas Cook Group plc,
chairman of the Swedish Chamber of
Commerce for the United Kingdom and an
advisor to the infrastructure fund of Swedish
venture capital group, EQT.

Mark was appointed to the board in January
2006 and is a member of the Audit and
Remuneration Committees. Having qualified
as a chartered accountant with Price
Waterhouse, Mark spent 12 years with
SG Warburg before joining BZW in 1995
and then, following the takeover of BZW,
becoming head of UK Investment Banking at
CSFB and subsequently deputy chairman of
CSFB Europe. In 2003 he became chairman
of UK Investment Banking for CSFB and in
2005 became a senior adviser to Credit
Suisse Europe. He is an alternate member
of the Panel on Takeovers and Mergers and
is a director of the Industrial Development
Advisory Board.

30

Nick Buckles

CHIEF EXECUTIVE

Grahame Gibson 

Søren Lundsberg-Nielsen

COO & DIVISIONAL PRESIDENT – 

GROUP GENERAL COUNSEL

Nick has worked in the security industry for
23 years, focusing throughout this time on the
commercial and strategic aspects of all areas of
security services.

After a variety of commercial roles throughout
the group, he was responsible for driving
significant profit improvements in many Securicor
businesses throughout the 1990s as a business
unit managing director and divisional chief
executive of the security division. He was also
instrumental in the development of Securicor’s
security sector focus and in bringing together
Group 4 Falck and Securicor to create the new
combined group. Nick became chief executive of
G4S in July 2005.

Nick is chairman of the Ligue Internationale des
Societes de Surveillance, the international
association of leading security companies.

SECURITY SERVICES

Grahame has been involved in the security
industry for 25 years, having joined Group 4’s UK
operating company in 1983 as finance director.
Since that time, Grahame has held a number of
operational, management and board positions in
the UK, Denmark, the Netherlands and Austria.
His broad experience of the security industry and
management of businesses across a diverse range
of cultures has been invaluable to the group
throughout its development. Grahame joined the
board of Group 4 Securicor in April 2005.

Grahame is a board member of the Ligue
Internationale des Societes de Surveillance.

Søren began his career as a lawyer in Denmark
and since 1984 he has had a wide range of legal
experience as general counsel for international
groups in Denmark, Belgium and the US before
joining Group 4 Falck in 2001 as general counsel.
Søren has been involved in a wide range of
successful mergers and acquisitions during his
career, including the acquisition of Wackenhut and
the merger of Group 4 Falck and Securicor. Søren
now has overall responsibility for all internal and
external legal services for G4S as well as the
group’s insurance programme.

Søren is a member of the Danish Bar and Law
Society, a board member of the Danish Blood
Donation Society and author of the book
“Executive Management Contracts”, published 
in Denmark.

Trevor Dighton

Ken Niven 

Irene Cowden 

CHIEF FINANCIAL OFFICER

DIVISIONAL PRESIDENT – CASH SERVICES

GROUP HR DIRECTOR

Trevor has worked in the security industry for
22 years. After several years in both the
accountancy profession and commerce working
in the finance function and general management,
he joined BET in 1986 as finance director of their
Security and Communications Division.

Trevor joined Securicor in 1995 and, following a
number of years as finance director of the
security division, he was appointed to the board
of Securicor plc in June 2002 as group finance
director. He became chief financial officer of G4S
in July 2004.

Trevor is a member of the Chartered Institute
of Management Accountants.

Ken has 12 years’ experience in the security
industry, having joined Securicor in 1996 as
operations director of the UK cash services
business where he was later promoted to
managing director and was instrumental in the
development of new product areas, including cash
centre outsourcing and establishing Securicor’s
independent ATM network.

Ken was appointed to his current role in July
2004 and is responsible for the group’s cash
services division, which includes all of the major
cash services business units, and for sharing cash
services best practice throughout the entire
organisation. Ken joined the security industry
following a successful career within the logistics
management industry where he held senior roles
at Express Foods, Excel Logistics and Coca Cola.

Ken is president of ESTA, the European cash
services association and is a member of the
Chartered Institute of Logistics and Transport.

Irene has spent her career in HR management,
specialising in employee relations, organisational
development, talent management and
compensation issues. She has been involved in
major change projects including the cultural and
integration aspects of mergers and acquisitions as
well as large scale organisational change involving
workforce restructuring, working in partnership
with major trade unions.

Irene has worked in the security industry for 
30 years and has held director level positions at
business unit, divisional and corporate level. She
was appointed to the Board of Securicor plc in
2002 as Group HR Director.

Irene is a member of the Chartered Institute of
Personnel and Development (MCIPD).

Executive
Management

Report of the Directors

For the year ended 31 December 2007

31

The directors have pleasure in presenting their Annual Report together with the audited financial statements of G4S plc and the consolidated financial

statements of that company and its subsidiaries, associated undertakings and joint ventures (“the group”) for the year ended 31 December 2007.

G4S plc has its primary listing on the London Stock Exchange and a secondary listing on the Copenhagen Stock Exchange.

1 Principal activities of the group

G4S plc is a parent company with subsidiaries, associated undertakings and joint ventures.

The principal activities of the group comprise the provision of security services (including manned security services, justice services and security

systems) and the management and transportation of cash and valuables.

2 Group results

The consolidated result for the year is shown in the consolidated income statement on page 48.

Details of major business activities during the year, future developments, principal risks and uncertainties and prospects of the group and

information which fulfills the requirements of the Business Review are contained in the Operating and Financial Review on pages 6 to 27 and are

incorporated in this report by reference. The group’s financial risk management objectives and policies in relation to its use of financial instruments,

and its exposure to price, credit, liquidity and cash-flow risk, to the extent material, are set out in note 33 to the consolidated financial statements

on pages 82 to 84.

3 Dividends

The directors propose the following net dividend for the year:

> Interim dividend of 2.11p (DKK 0.2319) per share paid on 16 November 2007.

> Final dividend of 2.85p (DKK 0.2786) per share payable on 6 June 2008.

Shareholders on the Danish VP register will receive their dividends in Danish Kroner. Shareholders who hold their shares through CREST or in

certificated form will receive their dividends in sterling unless they prefer to receive Danish Kroner, in which case they should apply in writing to the

Registrars by no later than 30 April 2008.

4 Significant business acquisitions, disposals and developments

In January 2007, the disposal of G4S Geld-und Wertdienste GmbH was completed.

In February 2007, 50% of Security and Management Services (PVT) Limited in Pakistan was acquired.

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 July 2007, A.1 Omada Limited, together with the manned security and fire suppression business and related assets of the Omada Fire and

Security Group, were acquired in Ireland.

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, an agreement to acquire De Facto 1119 Limited, the holding company of the Global Solutions group, was entered into.
Completion remains subject to regulatory approvals.

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 Significant business acquisitions, disposals and developments (continued)

In March 2008, the Rock Steady group of companies was acquired in the UK.

In March 2008, G4S announced an offer for the shares of ArmorGroup International plc.

In March 2008, 25% of Aktsiaselts G4S Baltics, the holding company of the G4S subsidiaries in Estonia, Latvia and Lithuania, was acquired, bringing

G4S's holding in this company to 90%.

In March 2008, MJM Investigations, Inc. was acquired in the US.

In April 2008, RONCO Consulting Corporation was acquired in the US.

5 Capital

The authorised and issued share capital of G4S plc at 31 December 2007 is set out on page 91 (note 37 to the consolidated financial statements).

There were 1,281,190,738 shares in issue as at 7 April 2008.

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 granting the directors power, subject to certain conditions, to allot and make market purchases of the company’s shares will be

proposed at the company’s annual general meeting. The resolutions are set out in the Notice of Meeting on page 107 and further explanation is

provided on page 110.

The company does not hold any treasury shares as such. However the 5,209,320 shares held within the Group 4 Securicor Employee Benefit Trust

(“The Trust”) and referred to on page 92 (note 37 to the consolidated financial statement) are accounted for as treasury shares. The Trust has

waived its right to receive dividends in respect of the company’s shares which it held during the period under review.

6 Research and development expenditure

Research in connection with the development of new services and products and the improvement of those currently provided by the group is

carried out continuously. Research and development written off to profit and loss during the year amounted to £2.1m (2006: £1.4m).

7 Payment of suppliers

It is the company’s and the group’s policy to pay suppliers in accordance with the payment terms negotiated with them. Thus, prompt payment is

normally made to those suppliers meeting their obligations. The company and the group do not follow any formal code or standard on payment practice.

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 Employees

Involving the group’s employees in the success and future plans of the business is a key strand of its approach to retaining the best people. G4S

supports ongoing consultation and communication with employees by helping spread best practice among local management teams, managing
direct communications with key internal stakeholders and ensuring its overall policies and strategies support this commitment. Business units use
the most effective processes and tools to establish practical and effective employee involvement within the local context and adopt a range of

direct employee communication approaches alongside consultation with trade union and other employee representatives as appropriate.

Attracting and retaining talented individuals continues to be essential to the success of G4S, and the diversity of the group’s workforce helps it

meet its customers’ expectations. The overall approach of the group to diversity and inclusion therefore ensures that G4S appoints, promotes and
develops employees in accordance with their talents and aptitudes, regardless of any disability, and to encourage loyalty and retain employees’ skills
the group also aims to retain existing employees who become disabled wherever possible.

9 Political and charitable contributions

The group remains committed to the support of charities, the community, job creation and training. Charitable contributions by the group during
the year amounted to £311,000 (2006: £94,000).

There were no political contributions requiring disclosure under the Companies Acts.

10 Substantial holdings

The directors have been notified of the following substantial shareholdings at 7 April 2008 in the ordinary capital of G4S plc:

Skagen Stichting Administratiekantoor

INVESCO Limited
Legal and General Group Plc

11 Auditor

33

171,939,961 (13.42%)

63,004,626 (4.92%)
51,880,641 (4.05%)

A resolution to re-appoint KPMG Audit Plc, chartered accountants, as auditor to the company and for their remuneration to be fixed by the

directors will be submitted to the Annual General Meeting.

12 Directors

The directors, biographical details of whom are contained on pages 28 and 29, held office throughout the year.

The directors retiring by rotation are Grahame Gibson, Bo Lerenius and Sir Malcolm Williamson. Messrs Gibson and Lerenius, being eligible, offer

themselves for re-election. The board believes that they possess experience and expertise relevant to the company’s operations, that they continue

to be effective, that they are committed to the success of the company and that they should be re-elected at the Annual General Meeting. Sir

Malcolm Williamson has decided not to seek re-election and will therefore retire on 29 May 2008 at the end of the Annual General Meeting.

Of those directors proposed for re-election, Mr Lerenius does not have a contract of service and Mr Gibson’s contract of service has no unexpired

term since it is not for a fixed term.

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 company has executed deeds of indemnity for the benefit of each of the directors in respect of liabilities which may attach to them in their

capacity as directors of the company. These deeds are qualifying third party indemnity provisions as defined by S.309 B of the Companies Act 1985

and have been in effect since 3 November 2006. A copy of the form of indemnity is available on the company’s website. The company has

maintained a directors’ and officers’ liability insurance policy throughout the year under review.

Details of directors’ interests (including their families’ interests) in the share capital of G4S plc and of the directors’ remuneration are set out on

pages 37 to 44.

The directors who held office at the date of approval of this directors’ report confirm that, so far as they are each aware, there is no relevant audit

information of which the company’s auditor is unaware and each director has taken all the steps that he ought to have taken as a director to make

himself aware of any relevant audit information and to establish that the company’s auditor is aware of that information.

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

Peter David

Secretary

7 April 2008

The Manor

Manor Royal

Crawley

West Sussex RH10 9UN

34

Corporate Governance Statement

The board’s statement on the company’s corporate governance performance is based on the Combined Code on Corporate Governance published 

in June 2006 (“the Combined Code”).

The Combined Code requires companies to disclose how they apply the code’s principles, and to confirm that they comply with the code’s provisions

or, where they do not comply, to provide an explanation.

(a) Application of Combined Code principles

The board comprises the non-executive chairman (Alf Duch-Pedersen), a non-executive deputy chairman (Lord Condon), five other non-executive

directors, the chief executive (Nick Buckles), the chief financial officer (Trevor Dighton) and the chief operating officer (Grahame Gibson). The

board considers all the non-executive directors to be independent. The senior independent director is Sir Malcolm Williamson.

All continuing directors are subject to election by shareholders at the next Annual General Meeting following their appointment and will submit

themselves for re-election at least every three years.

Membership of the three board committees is as follows:

Audit Committee

Thorleif Krarup (chairman)

Bo Lerenius

Mark Seligman

Sir Malcolm Williamson

Remuneration Committee

Lord Condon (chairman)

Mark Elliott (joined March 2007)

Bo Lerenius

Mark Seligman

Nomination Committee

Alf Duch-Pedersen (chairman)

Lord Condon

Sir Malcolm Williamson

Mr Elliott joined the Remuneration Committee in March 2007. Mr Seligman is the member of the Audit Committee with recent and relevant
financial experience. The terms of reference of each of the above committees are available on the company’s website.

It is intended that the chairmen of the three committees will be available to answer questions at the Annual General Meeting which is an important

opportunity for communication between the board and shareholders, particularly private shareholders. Following each resolution at the Annual

General Meeting, the meeting is informed of the numbers of proxy votes cast and the same information is subsequently published on the

company’s website.

There were ten board meetings during the year ended 31 December 2007. One of the meetings was an extended, two-day, board and strategy
session, at which presentations on some of the group’s key businesses were made to the board by senior executives and at which the group’s
business plan and its commercial and HR strategies were discussed. Two of the board meetings were held at subsidiary companies’ offices, one in

the UK, the other in South Africa, to facilitate greater inter-action between the board and the group’s businesses. Thorleif Krarup was absent from
one board meeting and Sir Malcolm Williamson and Mark Seligman were each absent from two meetings.

At each meeting, the board receives reports from the chief executive, the chief financial officer and the company secretary, an HR report which

includes summaries of developments on HR matters and an investor relations report which includes analysts reviews and any comments received

from major shareholders since the previous board meeting. After meetings of the board committees, the respective committee chairmen report 

to the board on the matters considered by each committee. In addition, the board receives monthly management accounts.

There are nine board meetings scheduled for the current year, including a one-day strategy session.

35

(a) Application of Combined Code principles (continued)

There is a detailed schedule of matters reserved to the board which are set out under five separate categories: (1) Board and management;

(2) Operations; (3) Finance; (4) Business control; and (5) Secretarial. By way of example, board approval is required for (a) acquisitions, disposals,

investments and capital projects exceeding £4m; (b) any changes to the group’s business strategy; and (c) the annual trading, capital expenditure 

and cash flow budgets.

In the year under review, the Audit Committee met three times, the Remuneration Committee five times and the Nomination Committee once.

All members attended each of the meetings except for Sir Malcolm Williamson who was absent from one meeting of the Audit Committee and

Mark Seligman who was absent from one meeting of the Remuneration Committee.

The performance of the board and its committees has been evaluated in a number of ways. A questionnaire-based self-assessment of the

performance of the board as a whole was conducted and the findings have been considered during the year under review. Based on this feedback,

steps are to be taken to review the manner in which the board communicates with its stakeholders and the number of board meetings to be held

and the way in which reports are given to the board has been reviewed. In addition, the chairman has conducted individual evaluations of the

performance of each of the directors and his findings have been discussed by the board.

The chairman held meetings with the non-executive directors without the executives present and a review of the performance of the chairman 

by the non-executive directors, without the chairman present, was led by the senior independent director.

Both the Audit and Remuneration Committees have evaluated their performance by questionnaire-based self-assessment, completed, in the case 

of the Audit Committee, by both the committee’s members and by the regular attendees of its meetings. The results of the assessments were

reviewed by the committees concerned and some areas for improvement were identified. As a result, some committee members will undertake

more systematic external training, an additional audit committee meeting will be held at a time not related to a board meeting and more

presentations will be made to the Audit Committee by regional finance managers and others.

The chief executive and the chief financial officer hold regular meetings with individual institutional shareholders to discuss the group’s strategy and

financial performance, although price sensitive information is never divulged at these meetings. It is intended that all the directors will attend the

company’s Annual General Meeting and will be available to answer questions from shareholders.

The Nomination Committee is responsible for making recommendations on board appointments and on maintaining a balance of skills and

experience on the board and its committees.

Audit Committee meetings are attended by representatives of the group auditor, the chief financial officer, the head of internal audit and the

company secretary. The committee considers the group’s annual and interim financial statements and any questions raised by the auditor on the

financial statements and financial systems. It also reviews, amongst other matters, whistle blowing arrangements, risk management procedures and

internal controls.

The Audit Committee has established a policy on the provision by the external auditor of non-audit services, so as to ensure that the independence
of the audit is not compromised. Besides the formal audit function, the auditor is permitted to provide consultation and due diligence services
related to mergers and acquisitions, audits of employee benefit plans, reviews of internal accounting and control policies, general advice on financial
reporting standards and corporate tax services. The auditor is prohibited from providing other services without specific permission from the Audit
Committee. The value of non-audit services provided by the auditor must not exceed the fees charged for the statutory audit, save in the event of
a major transformation deal. The auditor has written to the Audit Committee confirming that, in its opinion, it is independent.

The work of the Remuneration Committee is more fully described in the Directors’ Remuneration Report which appears on pages 37 to 44.

(b) Compliance with provisions of Combined Code

The company complied throughout the year under review with the provisions set out in Section 1 of the Combined Code.

36

Corporate Governance Statement (continued)

(c) Risk management and internal control

The directors acknowledge their responsibility for the group’s system of internal control and for reviewing its effectiveness. The system is designed

to manage rather than eliminate the risk of failure to achieve business objectives and can only provide reasonable and not absolute assurance

against material misstatement or loss.

The risks associated with the group’s activities are reviewed regularly by the board, which considers major risks and evaluates their impact on the

group. Policies and procedures, which are reviewed and monitored by the head of internal audit, are in place to deal with any matters which may

be considered by the board to present significant exposure.

The key features of the group’s risk management process are:

> A common risk management framework* is used to provide a profile of those risks which may have an impact on the achievement of business

objectives.

> Each significant risk is documented, showing an overview of the risk, how the risk is managed, and any improvement actions. The risk profiles

ensure that internal audit reviews of the adequacy, application and effectiveness of risk management and internal controls are targeted on the

key risks.

> Risk management committees have been established at regional, divisional and group level. The regional committees meet at least annually and

the divisional and group committees meet quarterly. A standard agenda covering risk and control issues is considered at each meeting and risk

profiles are reviewed and updated at each meeting.

> Risk and control self-evaluation exercises are undertaken for each operating company, for most companies at least twice a year, and updated risk

profiles are prepared. Similar exercises are undertaken as part of the integration process for all major acquisitions. The results of the company

risk evaluations are assessed by the regional and divisional risk management committees*.

The process, which is reviewed regularly by the board in accordance with the internal control guidance for directors in the Combined Code,

is carried out under the overall supervision of the group risk management committee. This committee, which reports to the Audit Committee,

includes both the chief executive and the chief financial officer.

The Audit Committee undertakes a high level review of risk management and internal control. Both the divisional risk management committees

and the group risk management committee receive internal audit reports and regular reports on risks. They monitor the actions taken to 

manage risks.

The internal control system includes clearly defined reporting lines and authorisation procedures, a comprehensive budgeting and monthly

reporting system, and written policies and procedures. In addition to a wide range of internal audit reports, senior management also receive
assurance from other sources including security inspections, third party reviews, company financial control reviews, external audit reports,
summaries of whistle blowing activity, and risk and control self-evaluations.

The board has reviewed the group’s risk management and internal control system for the year to 31 December 2007 by considering reports from
the Audit Committee and has taken account of events since 31 December 2007.

Peter David

Secretary
7 April 2008

* Because Wackenhut Services, Inc. (“WSI”) is governed through a proxy agreement under which the group is excluded from access to operational information, it is not
subject to the same risk management process as is applied to other group companies. The board has however satisfied itself as to the adequacy of the internal control
processes adopted by WSI.

Directors’ Remuneration Report

At 31 December 2007

37

This report, prepared on behalf of and approved by the board, provides details of the remuneration of each of the directors and sets out the

company’s remuneration policies for the current financial year and, subject to ongoing review, for subsequent financial years. The report will be put 

to the company’s Annual General Meeting for approval by the shareholders.

The Remuneration Committee met five times during the period under review. The members of the committee, all of whom are considered to be

independent, are Lord Condon (chairman), Mark Elliott, Bo Lerenius and Mark Seligman. Mark Elliott joined the committee on 1 March 2007. The

committee is responsible for setting all aspects of the remuneration of the chairman, the executive directors, the three other members of the group

executive committee and the company secretary. It is also responsible for the operation of the company’s share plans. Its terms of reference are

available on the company’s website.

Towers, Perrin, Forster & Crosby, Inc.* (“Towers Perrin”) has been appointed by the committee to provide executive and senior management

remuneration advice to the company. Their terms of appointment are available on the company’s website. In addition Alithos Limited (“Alithos”) has

been appointed by the committee to verify the calculation of certain elements of payments due under the company’s performance share plan. Neither

Towers Perrin nor Alithos has provided any other services to the company during the period under review.

Nick Buckles, chief executive, provided guidance to the committee on remuneration packages for senior executives within the group. Further guidance

was received from the group’s HR director, Irene Cowden. Neither Mr Buckles nor Mrs Cowden participated in discussions regarding their own

remuneration.

Remuneration policy

The policy for the remuneration of the executive directors and the executive management team aims to achieve:

> the ability to attract, retain and motivate high calibre executives;

> a strong link between executive reward and the group’s performance;

> alignment of the interests of the executives and the shareholders; and

> provision of incentive arrangements which focus on both annual and longer-term performance.

A significant proportion of total remuneration is related to performance, through participation in both short-term and long-term incentive schemes.

The performance-related element amounts to around 43% of the total package for target performance and around 63% of the total package for stretch

performance. The committee believes that the current balance is appropriate, although it is kept under review.

The committee is satisfied that the incentive structure for the board does not raise environmental, social or governance risks by inadvertently motivating

irresponsible behaviour.

Bonus payments do not form part of salary for pension purposes.

Elements of remuneration

(a) Base salary and benefits

The salaries of the executive directors are reviewed with effect from 1 January each year. Interim salary reviews may be carried out following
significant changes in responsibility. The salaries take account of a benchmarking exercise based on similarly sized companies with a significant part 
of their business overseas and also reflect responsibility, individual performance, internal relativities and salary and other market information supplied
by Towers Perrin. The overall objective is to achieve salary levels which provide a market competitive base salary, with the opportunity to earn
above market norms, on the delivery of superior performance, through the company’s incentive schemes. Benefits include pension arrangements
and the provision of a company car (or a cash allowance in lieu of a car), health insurance and life assurance.

* Towers Perrin and Alithos have each given, and not withdrawn, their written consent to the issue of this document with the inclusion of the reference to their
respective names in the form and content in which they appear. Copies of the consent letters are available for inspection at the company's registered office.

38

Directors’ Remuneration Report (continued)

At 31 December 2007

(b) Performance-related bonus scheme

For the year under review, the executive directors participated in an annual performance-related bonus scheme, payments under which were

dependent on the attainment of defined PBTA (profit before tax and amortisation) targets of the group, adjusted for the effect of any exceptional

items and discontinued operations and using constant exchange rates. The committee believes that PBTA best reflects the various key drivers of

business success within the group. For achievement of a threshold level of profits which is slightly below the budgeted profit target, a bonus

payment of 25% of base salary was due. 40% of base salary was payable on achievement of the budgeted target and the amount of bonus

increases on a straight line basis up to 80% of base salary for achievement of a stretch profit target. A further 20% was payable on achievement 

of pre-defined key business objectives approved by the Remuneration Committee. These objectives vary for each individual according to their

responsibilities and support longer-term business development. Any such bonus up to the value of 50% of the executive director’s salary was

payable in cash with any excess balance being awarded in the form of deferred shares. Any deferred shares will normally only be transferred to the

executive director if he remains in employment (otherwise than where he leaves in certain specified circumstances) for a period of three years

from the date of the award of the shares.

The PBTA budgeted targets used for the above scheme are the same as the company’s budgeted PBTA for the corresponding period (assuming

constant exchange rates).

The company performed well in 2007, with PBTA exceeding target but below maximum full stretch target performance. As a result the

Remuneration Committee agreed that the resulting payment for this component of the bonus should be at the 75.2% of base salary level. In

addition the committee agreed that the element of bonus dependent on achievement of pre-defined key business objectives should be paid at

between 16% and 20% of base salary.

(c) Performance Share Plan (Long-term incentive plan)

The Performance Share Plan was introduced in July 2004. Under the plan, the executive directors and certain other senior executives receive

conditional allocations of the company’s shares which are released to them only on the achievement of demanding performance targets.

Following approval of revisions to the plan at the company’s 2007 Annual General Meeting, the maximum annual award of shares payable under

the plan has increased to two and a half times base salary. The annual award approved by the committee for the year under review is one and a

half times base salary for the executive directors and one times salary for senior executives below board level. The extent to which allocations of

shares under the plan vest is determined, as to two thirds of the award, by the company’s normalised earnings per share growth relative to the RPI

over a single three-year period and, as to the remaining third of the award, by the company’s ranking by reference to TSR (total shareholder return;

being share price growth plus dividends paid) using a bespoke global group of 16 support services companies as a comparator group, again over 

a single three-year period.

In relation to awards made in previous years, the conditions subject to which allocations of shares vest under this plan differ in a number of
respects: half of any award is determined by the company’s normalised earnings per share growth relative to the RPI over a single three year period
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 the
award as a comparator group, again over a single three year period. There is no provision for retesting.

The following targets apply to two-thirds of awards granted in the year under review, with the three-year EPS (earnings per share) period ending

on 31 December 2009:

Average annual growth in EPS

Less than RPI + 6% per annum
RPI + 6% per annum (18% over three years)
RPI + 6 – 11% per annum
RPI + 11% per annum (33% over three years)

The same targets apply to the first half of awards granted in previous years.

Proportion of allocation vesting

Nil
25%
Pro rata between 25% and 100%
100%

39

(c) Performance Share Plan (Long-term incentive plan) (continued)

The following targets apply to the remaining one third of each award granted in the year under review:

Ranking of the company against the bespoke
comparator group by reference to TSR

Below median
Median
Between median and upper quartile
Upper quartile

Proportion of allocation vesting

Nil
25%
Pro rata between 25% and 100%
100%

The same targets apply to the second half of each award granted in previous years, but the ranking applied is that of the company against the

FTSE-100 constituent companies as at the date of the award.

In addition, participants in the PSP will receive a further share award with a value equivalent to the dividends which would have been paid in

respect of PSP awards vesting at the end of the performance period.

In relation to awards made before 2007, there will only be a transfer of shares under the second half if the growth in EPS of the company has

exceeded the growth in RPI by 10% over a performance period of three financial years.

Furthermore, there will only be a transfer of shares under the final third (or second half in respect of awards made before 2007) if the

Remuneration Committee is satisfied that the company’s TSR performance is reflective of the company’s underlying performance.

The Remuneration Committee believes that a combination of earnings per share growth and total shareholder return targets is the most

appropriate performance measure for the performance share plan, as it provides a transparent method of assessing the company’s performance,

both in terms of underlying financial performance and returns to shareholders. The company calculates whether the EPS performance targets have

been achieved by reference to the company’s audited accounts which provide an accessible and objective measure of the company’s earnings per

share, whilst TSR ranking will be determined by Towers Perrin whose findings are verified by Alithos.

Awards will not normally vest where an employee ceases to be employed within the group unless cessation of employment is due to death, injury,

disability, redundancy, retirement or following a change of control of, or sale outside the group of, his or her employing company. In these situations,

vesting will occur in the normal course and the performance targets will need to be satisfied pro rata to the time the allocation has been held.

Only a proportion of the award, based on the time which has elapsed from the award date to the end of the last complete month in which the

employee was employed, will vest in these circumstances in most cases. The Remuneration Committee does however retain the ability to allow for

a greater award to vest if it considers it to be appropriate in exceptional circumstances.

The company’s current policy is to use market purchased shares to satisfy performance share plan awards.

The Remuneration Committee believes that continued shareholding by executive directors will strengthen the alignment of their interests with
shareholders’ interests. Accordingly, executive directors of the company will be expected to retain shares to the value of 30% of the after-tax gains

made on the vesting of performance share plan awards until they have built up a shareholding equivalent to one times base salary.

Chief executive’s remuneration review

A review of the company’s executive remuneration conducted for the committee by Towers Perrin identified that the chief executive’s total pay 
over the past few years has been somewhat behind competitive market norms. Following a consultation with major shareholders and shareholder

representative bodies, the Remuneration Committee has therefore approved a change to the Performance Share Plan element of the chief
executive’s remuneration with effect from 1 January 2008 whereby he will receive annual awards up to a face value of 200% of base salary
(maintaining the same 2/3 and 1/3 split on EPS and TSR respectively). This change results in the chief executive’s total direct compensation being at
a level which is closer to, but still some way behind, market norms. The Remuneration Committee will keep this position under review.

40

Directors’ Remuneration Report (continued)

At 31 December 2007

Fees, service contracts and letters of appointment

The chairman’s annual fee is £250,000. The annual fee for the non-executive directors, which is set by the chairman and the executive directors, is

£51,030, with a further £42,000 for the role of deputy chairman, £15,750 for the chairmanship of each of the Audit and Remuneration Committees

and £15,750 for the role of senior independent director. No other fees are paid for membership of the board committees. These fees are subject to

periodic review which takes into account comparative fee levels in other groups of a similar size and the anticipated time commitment for the non-

executive directors.

The service contracts of those who served as executive directors during the period are dated as follows:

Nick Buckles

Trevor Dighton

Grahame Gibson

2 June 2004

2 June 2004

6 December 2006

The contracts of Messrs Buckles, Dighton and Gibson are terminable by the company on 12 months’ notice. The contracts are terminable by the

executive directors on 12 months’ notice. There are no liquidated damages provisions for compensation payable upon early termination, but the

company reserves the right to pay salary in lieu of notice. It is the company’s policy that it should be able to terminate service contracts of executive

directors on no more than 12 months’ notice and that payments for termination of contract are restricted to the value of salary and other contractual

entitlements for the notice period. The Remuneration Committee is satisfied that the current arrangements are appropriate and in line with best

practice.

The chairman and the other non-executive directors do not have service contracts but letters of appointment which provide for three-year terms.

In the case of Mr Seligman, this term began on 1 January 2006, and in the case of Mr Elliott, it began on 1 September 2006. The other non-executive

directors have been granted three year extensions to their initial letters of appointment beginning on 19 May 2007. All continuing directors are

required to stand for re-election by the shareholders at least once every three years.

It is the company’s policy that executive directors may each hold not more than one external non-executive appointment and may retain any associated

fees. Mr Buckles is a non-executive director of Arriva plc for which he received fees of £35,500 in the year ended 31 December 2007. Neither of the

other executive directors currently holds an external non-executive appointment.

Performance graph

The performance graph below shows the total cumulative shareholder return of the company from its first day of listing, 20 July 2004, until 31 December

2007, based on a hypothetical shareholding worth £100, compared with the return achieved by the FTSE-100 constituent companies over the same

period. The directors believe this to be an appropriate form of broad equity market index against which to base a comparison given the size and

geographic coverage of the company and the fact that, since December 2007, the company has itself become a FTSE 100 company. The graph also

compares the company’s performance over the same period with the bespoke group of companies which is used now for comparative total
shareholder return purposes in the company’s performance share plan. (Until 2007, the FTSE-100 constituent companies were used for this purpose).
The values attributable to the bespoke comparator group companies have been weighted in accordance with the market capitalisation of the

companies and spot exchange rates were used at each of the relevant dates to obtain constant currency.

230

210

190

170

150

130

110

)
£
(

l

e
u
a
V

G4S plc
FTSE 100 Index
Bespoke comparator group

90
20 Jul
2004

31 Dec
2004

31 Dec
2005

31 Dec
2006

31 Dec
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

Benefits
(excluding
pension
contribution)
£

Salary 
and fees
£

Performance
related
bonus
£

2007
Total
£

2006
Total
£

237,500

–

–

–

–

–

237,500

161,250

–

90,000

705,000

30,111

671,160

1,406,271

1,182,990

436,000

18,083

397,632

851,715

724,763

482,016

29,521

448,721

960,258

828,994

106,190

49,815

65,190

49,815

–

49,815

65,190

–

–

–

–

–

–

–

–

–

–

–

–

–

–

106,190

49,815

65,190

49,815

–

49,815

65,190

67,633

16,200

60,550

46,800

22,500 

46,800

61,800

2,246,531

77,715

1,517,513

3,841,759

3,310,280

THE FOLLOWING INFORMATION HAS BEEN AUDITED

Base salaries and bonuses

Chairman

(non-executive)
Alf Duch-Pedersen

Jørgen Philip-Sørensen
(retired 30 June 2006)

Executive directors

Nick Buckles
(see note 1 below)

Trevor Dighton
(see note 1 below)

Grahame Gibson
(see notes 1 & 2 below)

Other non-executive directors

Lord Condon

Mark Elliott

Thorlief Krarup

Bo Lerenius

Waldemar Schmidt
(retired 30 June 2006)

Mark Seligman

Sir Malcolm Williamson

Total

Notes:

1

The performance-related bonuses derived from the company’s bonus scheme were paid as 50% of basic salary in cash and the remainder through

the award of deferred G4S shares, based on a share price of 222.67p, being the average middle market closing price of the company’s ordinary
shares over the three days immediately following the date of the company’s preliminary results announcement, 11 March 2008. The deferred share
awards were:

Nick Buckles
Trevor Dighton
Grahame Gibson

143,110 shares
80,673 shares
90,826 shares

2 Grahame Gibson was reimbursed £64,761 for expenses associated with his relocation from the West Midlands to Surrey. This sum is subject to UK

income tax. The company also paid air fares amounting to £29,013 for 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 Buckles
Trevor Dighton
Grahame Gibson

Non-executive directors

Alf Duch-Pedersen (chairman)
Lord Condon
Mark Elliott
Thorleif Krarup
Bo Lerenius
Mark Seligman
Sir Malcolm Williamson

£

705,000
436,000
490,875

£

250,000
108,780
51,030
66,780
51,030
51,030
66,780

42

Directors’ Remuneration Report (continued)

At 31 December 2007

Directors’ share options

Nick Buckles

Trevor Dighton

Option

At 31.12.06

Granted
during 2007

Outstanding
at 31.12.07

A
B
C
D
E

B
C
D
E

72,901
95,000
75,000
55,000
700,000

55,000
40,000
30,000
350,000

–
–
–
–
–

–
–
–
–

72,901
95,000
75,000
55,000
700,000

55,000
40,000
30,000
350,000

Option
price (p)

107.98
164.00
133.75
153.00
108.00

164.00
133.75
153.00
108.00

Option A = 1996 Securicor Executive Share Option Scheme, exercisable until June 2008

Option B = Securicor Executive Share Option Scheme, exercisable until December 2009

Option C = Securicor Executive Share Option Scheme, exercisable until June 2010

Option D = Securicor Executive Share Option Scheme, exercisable until December 2010

Option E = Securicor Executive Share Option Scheme, exercisable until December 2011

The above options, which had been granted over Securicor plc shares, were rolled over into options over G4S plc shares. No further grants of options

under these schemes will be made.

Neither of the above directors exercised options under any of the above schemes during the year.

As a result of implementation of the Scheme of Arrangement of Securicor plc in July 2004, the performance conditions for the executive share options

referred to above ceased to apply. This would not occur under the current Performance Share Plan.

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
conditionally

At 31.12.06

during year Date of award

Market price at
date of award

Vesting date

2004 awards

At 31.12.07

Nick Buckles
Trevor Dighton
Grahame Gibson

1,062,075
746,500
735,110

483,250
298,860
336,480

06.06.07
06.06.07
06.06.07

212.50p
212.50p
212.50p

06.06.10
06.06.10
06.06.10

368,830
276,130
252,460

1,176,495
769,230
819,130

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 Buckles

Trevor Dighton

Grahame Gibson

232,362 shares gross (368,830 maximum award; 63% vested; 136,902 shares released after tax, NIC etc)

173,961 shares gross (276,130 maximum award; 63% vested; 102,493 shares released after tax, NIC etc)

159,049 shares gross (252,460 maximum award; 63% vested; 114,575 shares released after tax, 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.

Directors’ interests in shares of G4S plc (unaudited)

(including awards of deferred shares but excluding shares under option and shares awarded conditionally under the performance share plan, both 

as shown above)

Nick Buckles
Lord Condon
Trevor Dighton
Alf Duch-Pedersen
Mark Elliott
Grahame Gibson
Thorleif Krarup
Bo Lerenius
Mark Seligman
Sir Malcolm Williamson

All interests shown above are beneficial.

At 31.12.07

At 31.12.06

1,079,849
2,000
729,427
128,560
–
512,409
3,206
16,000
50,496
2,000

975,043
2,000
650,964
128,560
–
397,834
3,206
16,000
50,000
2,000

Changes in the executive directors’ holdings have taken place since 31 December 2007 relating to the vesting of the 2005 Performance Share Plan and
the award of deferred shares relating to the 2007 annual bonus scheme as a result of which their interests as at 7 April 2008 are:

Nick Buckles

Trevor Dighton

Grahame Gibson

1,202,544

821,284

641,878

As at 31 December 2007, each of Nick Buckles,Trevor Dighton and Grahame Gibson also had a deemed interest in 5,209,320 ordinary shares held 

in the Group 4 Securicor Employee Benefit Trust.

44

Directors’ Remuneration Report (continued)

At 31 December 2007

Directors’ pension entitlements

For the period under review, both Nick Buckles and Trevor Dighton participated in non-contributory categories of a group defined benefit pension

scheme with a normal retirement age of 60. Trevor Dighton accrued pension at a rate of 1/30ths and Nick Buckles accrued pension at a rate of

1/52ths of their final pensionable salaries. An actuarial reduction is applied to pensions payable before normal retirement age and an increase is applied

where retirement is deferred beyond normal retirement age.

For death before retirement a capital sum equal to four times pensionable salary is payable, together with a spouse’s pension of 50% of the member’s

prospective pension at the age of 60 plus a return of any contributions paid prior to the admission to the non-contributory category.

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):

Gross
increase in 
accrued pension
(1)

Increase
in accrued 
pension net
of inflation
(2)

Total 
accrued
pension
at 31/12/07
(3)

Value of 
net increase 
in accrual
over period
(4)

Total 
change in
transfer value 
during period
(5)

Transfer value 
of accrued 
pension
at 31/12/07
(6)

Transfer value
of accrued 
pension 
at 31/12/06
(7)

31
17
11

21
15
3

294
62
217

248
273
48

606
362
607

3,735
1,128
2,975

3,129
766
2,368

Nick Buckles
Trevor Dighton
Grahame Gibson

Notes

(i) Pension accruals shown are the amounts which would be paid annually on retirement based on service to the end of the year with the exception

of Mr Gibson whose accrual ended on 5 April 2006.

(ii) Transfer values have been calculated in accordance with version 8.1 of guidance note GN11 issued by the actuarial profession.

(iii) The value of net increase (4) represents the incremental value to the director of his service during the year, calculated on the assumption that
service terminated at the year-end. It is based on the increase in accrued pension (2) with the exception of Mr Gibson whose accrual ended 
on 5 April 2006.

(iv) The change in transfer value (5) includes the effect of fluctuations in such value due to factors beyond the control of the company and the

directors, such as stock market movements.

(v) Mr Gibson receives a salary supplement in lieu of pension of 40% of his basic salary.

Lord Condon

Chairman of the Remuneration Committee

7 April 2008

45

Statement of directors’ responsibilities in respect of the
annual report and the financial statements

The directors are responsible for preparing the Annual Report 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 and applicable law (UK Generally Accepted Accounting Practice).

The group financial statements are required by law and IFRSs as adopted by the EU to present fairly the financial position and the performance of the

group; the Companies Act 1985 provides in relation to such financial statements that references in the relevant part of that Act to financial statements

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;

> 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;

> for the parent company financial statements, state whether applicable UK Accounting Standards 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 proper accounting records that disclose with reasonable accuracy at any time the financial position of the

parent company and enable them to ensure that its financial statements comply with the Companies Act 1985. 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 Report of the Directors, Directors’ Remuneration Report and

Corporate Governance Statement which comply with that law and those regulations.

46

Independent auditor’s report to the members of G4S plc

We have audited the group and parent company financial statements (‘the financial statements’) of G4S plc for the year ended 31 December 2007

which comprise the Consolidated Income Statement, the Consolidated and Parent Company Balance Sheets, the Consolidated Cash Flow Statement,

the Consolidated Statement of Recognised Income and Expense and the related notes. These financial statements have been prepared under the

accounting policies set out therein. We have also audited the information in the Directors’ Remuneration Report that is described as having been audited.

This report is made solely to the company’s members, as a body, in accordance with section 235 of the Companies Act 1985. Our audit work has been

undertaken so that we might state to the company’s members those matters we are required to state to them in an auditor’s report and for no other

purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the company and the company’s

members as a body, for our audit work, for this report, or for the opinions we have formed.

Respective responsibilities of directors and auditors

The directors’ responsibilities for preparing the Annual Report and the Consolidated Financial Statements in accordance with applicable law and

International Financial Reporting Standards (IFRSs) as adopted by the EU and for preparing the Parent Company financial statements and the Directors’

Remuneration Report in accordance with applicable law and UK Accounting Standards (UK Generally Accepted Accounting Practice) are set out in the

Statement of Directors’ Responsibilities on page 45.

Our responsibility is to audit the financial statements and the part of the Directors’ Remuneration Report to be audited in accordance with relevant

legal and regulatory requirements and International Standards on Auditing (UK and Ireland).

We report to you our opinion as to whether the financial statements give a true and fair view and whether the financial statements and the part of the

Directors’ Remuneration Report to be audited have been properly prepared in accordance with the Companies Act 1985 and, as regards the group

financial statements, Article 4 of the IAS Regulation. We also report to you if, in our opinion, the Directors’ Report is not consistent with the financial

statements. This information given in the Report of the Directors includes that specific information presented in the Operating and Financial Review

that is cross referred from the group results section of the Report of the Directors. In addition we report to you if, in our opinion, the company has not

kept proper accounting records, if we have not received all the information and explanations we require for our audit, or if information specified by law

regarding directors’ remuneration and other transactions is not disclosed.

We review whether the Corporate Governance Statement reflects the company’s compliance with the nine provisions of the Combined Code specified

for our review by the Listing Rules of the Financial Services Authority, and we report if it does not. We are not required to consider whether the

board’s statements on internal control cover all risks and controls, or form an opinion on the effectiveness of the group’s corporate governance

procedures or its risk and control procedures.

We read other information contained in the Annual Report and consider whether it is consistent with the audited financial statements. We consider the
implications for our report if we become aware of any apparent misstatements or material inconsistencies with the financial statements. Our

responsibilities do not extend to any other information.

Basis of audit opinion

We conducted our audit in accordance with International Standards on Auditing (UK and Ireland) issued by the Auditing Practices Board. An audit

includes examination, on a test basis, of evidence relevant to the amounts and disclosures in the financial statements and the part of the Directors’
Remuneration Report to be audited. It also includes an assessment of the significant estimates and judgements made by the directors in the preparation
of the financial statements, and of whether the accounting policies are appropriate to the group’s and company’s circumstances, consistently applied and

adequately disclosed.

We planned and performed our audit so as to obtain all the information and explanations which we considered necessary in order to provide us with
sufficient evidence to give reasonable assurance that the financial statements and the part of the Directors’ Remuneration Report to be audited are free
from material misstatement, whether caused by fraud or other irregularity or error. In forming our opinion we also evaluated the overall adequacy of

the presentation of information in the financial statements and the part of the Directors’ Remuneration Report to be audited.

47

Opinion

In 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 

at 31 December 2007 and of its profit for the year then ended;

> the group financial statements have been properly prepared in accordance with the Companies Act 1985 and Article 4 of the IAS Regulation;

> the parent company financial statements give a true and fair view, in accordance with UK Generally Accepted Accounting Practice, of the state 

of the parent company’s affairs at 31 December 2007;

> the parent company financial statements and the part of the Directors’ Remuneration Report to be audited have been properly prepared 

in accordance with the Companies Act 1985; and

> the information given in the Report of the Directors is consistent with the financial statements.

KPMG Audit Plc

Chartered Accountants

Registered Auditor

7 April 2008

8 Salisbury Square

London

EC4Y 8BB

48

Consolidated income statement

For the year ended 31 December 2007

Continuing operations

Revenue

Profit from operations before amortisation of acquisition-related intangible assets and share

of profit from associates
Share of profit from associates

Profit from operations before amortisation of acquisition-related intangible assets (PBITA)

Amortisation of acquisition-related intangible assets

Profit from operations before interest and taxation (PBIT)

Finance income
Finance costs

Profit before taxation (PBT)

Taxation:

– Before amortisation of acquisition-related intangible assets
– On amortisation of acquisition-related intangible assets

Profit after taxation

Loss from discontinued operations

Profit for the year

Attributable to:
Equity holders of the parent
Minority interests

Profit for the year

Earnings per share attributable to equity shareholders of the parent

For profit from continuing operations:
Basic
Diluted

For profit from continuing and discontinued operations:
Basic
Diluted

Notes

2007
£m

2006
£m

5, 6

4,490.4

4,036.8

6

6, 8
12
13

14

7

16

309.1
3.0

312.1
(41.6)

270.5
92.6
(146.3)

216.8

(71.1)
14.9

(56.2)

160.6

–

160.6

147.2
13.4

160.6

11.5p
11.5p

11.5p
11.5p

271.6
2.8

274.4
(36.0)

238.4
79.5
(118.4)

199.5

(67.4)
10.8

(56.6)

142.9

(33.0)

109.9

96.5
13.4

109.9

10.2p
10.2p

7.6p
7.6p

Consolidated balance sheet

At 31 December 2007

ASSETS
Non-current assets

Goodwill
Other acquisition-related intangible assets
Other intangible assets
Property, plant and equipment
Investment in associates
Trade and other receivables
Deferred tax assets

Current assets

Inventories
Investments
Trade and other receivables
Cash and cash equivalents
Assets classified as held for sale

Total assets

LIABILITIES
Current liabilities

Bank overdrafts
Bank loans
Obligations under finance leases
Trade and other payables
Current tax liabilities
Retirement benefit obligations
Provisions
Liabilities associated with assets classified as held for sale

Non-current liabilities

Bank loans
Loan notes
Obligations under finance leases
Trade and other payables
Retirement benefit obligations
Provisions
Deferred tax liabilities

Total liabilities

Net assets

EQUITY

Share capital
Share premium and reserves

Equity attributable to equity holders of the parent
Minority interests

Total equity

49

Notes

2007
£m

2006
£m

1,175.6
220.6
22.2
354.9
7.3
49.9
115.7

1,946.2

49.5
73.7
798.3
307.5
–

1,229.0

3,175.2

(97.5)
(70.1)
(13.6)
(710.2)
(26.3)
(42.2)
(41.3)
–

19
19
19
20
22
25
36

23
24
25
28
27

1,332.4
219.9
31.3
400.9
10.2
69.4
84.2

2,148.3

57.1
73.2
885.0
381.3
130.9

1,527.5

6

3,675.8

(109.9)
(80.6)
(16.2)
(845.7)
(18.0)
(47.3)
(23.6)
(78.3)

28, 29
29
30
31

34
35
27

29
29
30
31
34
35
36

(1,219.6)

(1,001.2)

(729.1)
(290.4)
(46.0)
(38.7)
(120.1)
(33.9)
(75.0)

(830.3)
–
(42.5)
(1.0)
(208.3)
(38.7)
(81.7)

(1,333.2)

(1,202.5)

6

(2,552.8)

(2,203.7)

1,123.0

971.5

37
38

320.2
766.9

1,087.1
35.9

1,123.0

320.0
615.2

935.2
36.3

971.5

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 Buckles

Director

Trevor Dighton

Director

50

Consolidated cash flow statement

For the year ended 31 December 2007

Profit before taxation

Loss before taxation from discontinued operations

Adjustments for:
Finance income
Finance costs
Finance costs attributable to discontinued operations
Depreciation of property, plant and equipment
Amortisation of acquisition-related intangible assets
Amortisation of other intangible assets
Impairment of other intangible assets
Profit on disposal of property, plant and equipment and intangible assets other than acquisition-related
(Profit)/loss on disposal of discontinued operations
Share of profit from associates
Equity-settled transactions

Operating cash flow before movements in working capital

Increase in inventories
Increase in receivables
Increase/(decrease) in payables
Decrease in provisions

Cash generated by operations

Tax paid

Net cash flow from operating activities

Investing activities

Interest received
Cash flow from associates
Purchases of property, plant and equipment and intangible assets other than acquisition-related
Proceeds on disposal of property, plant and equipment and intangible assets other than acquisition-related
Acquisition of subsidiaries
Net cash balances acquired
Disposal of subsidiaries
Purchase of investments
Own shares purchased

Net cash used in investing activities

Financing activities

Share issues
Dividends paid to minority interests
Loan to minority interests
Dividends paid to equity shareholders of the parent
Proceeds on issue of loan notes
Repayment of revolving credit facilities with proceeds from issue of loan notes
Other net movement in borrowings
Interest paid
Net cash flow from hedging financial instruments
Repayment of obligations under finance leases

Net cash flow from financing activities

Net increase in cash, cash equivalents and bank overdrafts

Cash, cash equivalents and bank overdrafts at the beginning of the year
Effect of foreign exchange rate fluctuations on cash held

Cash, cash equivalents and bank overdrafts at the end of the year

Notes

39

28

2007
£m

216.8
(0.3)

(92.6)
146.3
3.3
91.1
41.6
8.5
–
(14.4)
(12.0)
(3.0)
4.1

389.4

(9.6)
(69.7)
84.1
(36.7)

357.5

(66.2)

291.3

24.9
1.0
(134.5)
25.5
(151.6)
11.6
7.9
(0.3)
(3.1)

(218.6)

0.9
(3.8)
(13.3)
(59.3)
280.6
(280.6)
140.4
(79.9)
(4.3)
(4.6)

(23.9)

48.8

210.0
11.9

270.7

2006
£m

199.5
(31.6)

(79.5)
118.4
3.0
82.8
36.0
7.4
2.5
(1.6)
14.0
(2.8)
5.0

353.1

(6.9)
(17.7)
(13.5)
(47.6)

267.4

(70.3)

197.1

11.5
2.7
(93.2)
10.7
(96.7)
3.5
9.9
(21.8)
(3.1)

(176.5)

9.1
(3.0)
–
(49.8)
–
–
95.1
(59.3)
11.8
(8.4)

(4.5)

16.1

205.1
(11.2)

210.0

Consolidated statement of recognised income and expense

For the year ended 31 December 2007

51

Exchange differences on translation of foreign operations
Change in fair value of net investment hedging financial instruments
Change in fair value of cash flow hedging financial instruments
Actuarial gains/(losses) on defined retirement benefit schemes
Tax on items taken directly to equity

Net income/(expense) recognised directly in equity

Profit for the year

Net recognised income

Attributable to:
Equity holders of the parent
Minority interests

Net recognised income

2007
£m

37.4
(19.0)
(7.0)
64.7
(14.0)

62.1
160.6

222.7

209.3
13.4

222.7

2006
£m

(42.6)
11.6
1.1
(33.4)
(1.4)

(64.7)
109.9

45.2

31.8
13.4

45.2

52

Notes to the consolidated financial statements

1 General information

A resolution was passed at the 2007 Annual General Meeting, held on 31 May 2007, to change the company’s name from Group 4 Securicor plc

to G4S plc. G4S plc is a company incorporated in the United Kingdom under the Companies Act 1985. The consolidated financial statements

incorporate the financial statements of the company and entities (its subsidiaries) controlled by the company (collectively comprising the group)

and the group’s interest in associates and jointly controlled entities made up to 31 December each year. The nature of the group’s operations and

its principal activities are set out in note 6 and in the Operating and Financial Review on pages 6 to 27. The group operates throughout the world

and in a wide range of functional currencies, the most significant being the euro, the US dollar and sterling. The group’s financial statements are

presented in sterling, as the group’s primary listing is in the UK. Foreign operations are included in accordance with the policies set out in note 3.

The address of the registered office is given on page 113.

2 Statement of compliance

The consolidated financial statements of the group have been prepared in accordance with International Financial Reporting Standards adopted for

use in the European Union (adopted IFRSs). The company has elected to prepare its parent company financial statements in accordance with UK

Generally Accepted Accounting Practice (UK GAAP). These are presented on pages 97 to 105.

3 Significant accounting policies

(a) Basis of preparation

The consolidated financial statements of the group have been prepared under the going concern basis and using the historical cost basis,

except for the revaluation of certain non-current assets and financial instruments. The principal accounting policies adopted are set out below.

Judgements made by the directors in the application of these accounting polices which have a significant effect on the financial statements, and

estimates with a significant risk of material adjustment, are discussed in note 4.

The comparative income statement for the year ended 31 December 2006 has been re-presented for operations qualifying as discontinued

during the current year. Revenue from continuing operations has been reduced by £316.8m and PBT has been reduced by £0.5m compared

to the figures published previously. Further details of discontinued operations are presented within note 7. In addition, the comparative balance

sheet as at 31 December 2006 has been restated to reflect the completion during 2007 of the initial accounting in respect of acquisitions

made during 2006. Adjustments made to the provisional calculation of the fair values of assets and liabilities acquired amount to £4.7m, with an

equivalent increase in the reported value of goodwill. The impact of these adjustments on the net assets acquired is presented in note 17.

(b) Basis of consolidation

Subsidiaries

Subsidiaries are entities controlled by the group. Control is achieved where the group has the power to govern the financial and operating

policies of an investee entity so as to obtain benefits from its activities, determined either by the group’s ownership percentage, or by the

terms of any shareholder agreement.

On acquisition, the assets and liabilities and contingent liabilities of the acquired business are measured at their fair values at the date of
acquisition. Any excess of the cost of acquisition over the fair values of the identifiable net assets acquired is recognised as goodwill. Any

deficiency in the cost of acquisition below the fair values of the identifiable net assets acquired (i.e. discount on acquisition) is credited to the
income statement in the year of acquisition. The cost of acquisition includes the present value of consideration payable in respect of put
options held by minority shareholders. The interest of minority shareholders is stated at the minority’s proportion of the fair values of 

the assets and liabilities recognised. Subsequently, any losses applicable to the minority interest in excess of the carrying value of the minority
interest are allocated against the interest of the parent, except to the extent that the minority has both a binding obligation and the ability to
make an additional investment to cover the losses.

The results of subsidiaries acquired or disposed of during the year are included in the consolidated income statement from the effective date
of control or up to the effective date of disposal, as appropriate.

Joint ventures

A joint venture is a contractual arrangement whereby two or more parties undertake an economic activity that is subject to joint control,

in that strategic financial and operating decisions require the unanimous consent of the parties.

The group’s interest in joint ventures is accounted for using the proportionate consolidation method, whereby the group’s share of the results
and assets and liabilities of a jointly-controlled entity is combined line by line with similar items in the group’s consolidated financial statements.

53

3 Significant accounting policies (continued)

(b) Basis of consolidation (continued)

Associates

An associate is an entity over which the group is in a position to exercise significant influence, but not control or joint control, through

participation in the financial and operating policy decisions of the investee.

The results and assets and liabilities of associates are incorporated in the group’s consolidated financial statements using the equity method 

of accounting. Investments in associates are carried in the balance sheet at cost as adjusted by post-acquisition changes in the group’s share of

the net assets of the associates, less any impairment in the value of individual investments. Losses of the associates in excess of the group’s

interest in those associates are not recognised.

Transactions eliminated on consolidation

All intra-group transactions, balances, income and expenses are eliminated on consolidation. Where a group company transacts with a joint

venture or associate of the group, profits and losses are eliminated to the extent of the group’s interest in the relevant joint venture or associate.

(c) Foreign currencies

The financial statements of each of the group’s businesses are prepared in the functional currency applicable to that business. Transactions 

in currencies other than the functional currency are translated at the rates of exchange prevailing on the dates of the transactions. At each

balance sheet date, monetary assets and liabilities which are denominated in other currencies are retranslated at the rates prevailing on that

date. Non-monetary assets and liabilities carried at fair value which are denominated in other currencies are translated at the rates prevailing 

at the date when the fair value was determined. Non-monetary items measured at historical cost denominated in other currencies are not

retranslated. Gains and losses arising on retranslation are included in the income statement for the period.

On consolidation, the assets and liabilities of the group’s overseas operations, including goodwill and fair value adjustments arising on their

acquisition, are translated into sterling at exchange rates prevailing on the balance sheet date. Income and expenses are translated into sterling

at the average exchange rates for the period (unless this is not a reasonable approximation of the cumulative effect of the rate prevailing on

the transaction dates, in which case income and expenses are translated at the dates of the transactions). Exchange differences arising are

recognised in equity, together with exchange differences arising on monetary items that are in substance a part of the group’s net investment

in foreign operations and on borrowings and other currency instruments designated as hedges of such investments where and to the extent

that the hedges are deemed to be effective. All such translation differences are recognised in the income statement in the period in which the

operation is disposed of.

In order to hedge its translation exposure to certain foreign currencies in which more than 1% of the group’s consolidated net operating

assets are denominated, the group utilises derivative financial instruments (see note 3(d) for details of the group’s accounting policies in respect

of such instruments).

(d) Derivative financial instruments and hedge accounting

In accordance with its treasury policy, the group only holds or issues derivative financial instruments to manage the group’s exposure to

financial risk, 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’s fixed-rate borrowings, and foreign exchange risk on transactions, on the translation of the group’s results and on the translation of
the group’s net assets measured in foreign currencies, to the extent that these are not matched by foreign currency borrowings. The group

manages these risks through a range of derivative financial instruments, including interest rate swaps, fixed rate agreements, forward foreign
exchange contracts and currency swaps.

Derivative financial instruments are recognised in the balance sheet as financial assets or liabilities at fair value. The gain or loss on re-

measurement to fair value is recognised immediately in the income statement, unless they qualify for hedge accounting. Where derivatives do

qualify for hedge accounting, the treatment of any resultant gain or loss depends on the nature of the item being hedged as described below.

Fair value hedge

The change in the fair value of both the hedging instrument and the related portion of the hedged item is recognised immediately in the

income statement.

Cash flow hedge

The change in the fair value of the portion of the hedging instrument that is determined to be an effective hedge is recognised in equity and
subsequently recycled to the income statement when the hedged cash flow impacts the income statement. The ineffective portion of the fair
value of the hedging instrument is recognised immediately in the income statement.

54

Notes to the consolidated financial statements (continued)

3 Significant accounting policies (continued)

(d) Derivative financial instruments and hedge accounting (continued)

Net investment hedge

The change in the fair value of the portion of the hedging instrument that is determined to be an effective hedge is recognised in equity and

subsequently recycled to the income statement when the hedged net investment impacts the income statement. The ineffective portion of the

fair value of the hedging instrument is recognised immediately in the income statement.

(e) Intangible assets

Goodwill

All business combinations are accounted for by the application of the purchase method. Goodwill arising on consolidation represents the

excess of the cost of acquisition over the group’s interest in the fair value of the identifiable assets and liabilities and contingent liabilities of a

subsidiary, associate or jointly-controlled entity at the date of acquisition. Goodwill arising on the acquisition of an additional interest from a

minority in a subsidiary represents the excess of the cost of the additional investment over the carrying amount of the net assets acquired at

the date of exchange. Goodwill is stated at cost, less any accumulated impairment losses, and is tested annually for impairment or more

frequently if there are indications that amounts may be impaired. In respect of associates, the carrying amount of goodwill is included within

the net investment in associates. On disposal of a subsidiary, associate or jointly controlled entity the attributable amount of goodwill is

included in the determination of the profit or loss on disposal.

Goodwill arising on acquisitions before transition to IFRS on 1 January 2004 has been retained at the previous UK GAAP amounts, subject to

being tested for impairment at that date. Goodwill written off to reserves under UK GAAP prior to 1998 has not been reinstated and is not

included in determining any subsequent profit or loss on disposal.

Acquisition-related intangible assets

Intangible assets on acquisitions that are either separable or arising from contractual rights are recognised at fair value at the date of

acquisition. Such acquisition-related intangible assets include trademarks, technology, customer contracts and customer relationships. The fair

value of acquisition-related intangible assets is determined by reference to market prices of similar assets, where such information is available,

or by the use of appropriate valuation techniques, including the royalty relief method and the excess earnings method.

Acquisition-related intangible assets are amortised by equal annual instalments over their expected economic life. The directors review

acquisition-related intangible assets on an ongoing basis and, where appropriate, provide for any impairment in value.

The estimated useful lives are as follows:

Trademarks

Customer contracts and customer relationships
Technology

up to a maximum of five years

up to a maximum of ten years
up to a maximum of five years

Other intangible assets – development expenditure

Development expenditure represents expenditure incurred in establishing new services and products of the group. Such expenditure is

recognised as an intangible asset only if the following can be demonstrated: the expenditure creates an identifiable asset, its cost can be

measured reliably, it is probable that it will generate future economic benefits, it is technically and commercially feasible and the group has

sufficient resources to complete development. In all other instances, the cost of such expenditure is taken directly to the income statement.

Capitalised development expenditure is amortised over the period during which the expenditure is expected to be revenue-producing, up to a
maximum of ten years. The directors review the capitalised development expenditure on an ongoing basis and, where appropriate, provide for
any impairment in value.

Research expenditure is written off in the year in which it is incurred.

Other intangible assets – software

Computer software is capitalised as an intangible asset if such expenditure (both internally generated and externally purchased) creates an

identifiable asset, if its cost can be measured reliably and if it is probable that it will generate future economic benefits. Capitalised computer
software is stated at cost, net of depreciation and any provision for impairment. Amortisation is charged on software so as to write off the 
cost of the assets to their estimated residual values by equal annual instalments over their expected useful economic lives up to a maximum 

of five years.

55

3 Significant accounting policies (continued)

(f) Property, plant and equipment

Property, plant and equipment is stated at cost, net of accumulated depreciation and any provision for impairment. Depreciation is provided on

all property, plant and equipment other than freehold land. Depreciation is calculated so as to write off the cost of the assets to their

estimated residual values by equal annual instalments over their expected useful economic lives as follows:

Freehold and long leasehold buildings

up to 2%

Short leasehold buildings (under 50 years)

over the life of the lease

Equipment and motor vehicles

10% – 33.3%

Assets held under finance leases are depreciated over their expected useful economic lives on the same basis as owned assets or, where

shorter, over the term of the relevant lease.

Where significant, the residual values and the useful economic lives of property, plant and equipment are re-assessed annually. The directors

review the carrying value of property, plant and equipment on an ongoing basis and, where appropriate, provide for any impairment in value.

(g) Financial instruments

Financial assets and financial liabilities are recognised when the group becomes a party to the contractual provisions of the instruments.

Trade receivables

Trade receivables do not carry interest and are stated initially at their fair value. The carrying amount of trade receivables is reduced through

the use of an allowance account. The group provides for bad debts based upon an analysis of those that are past due in accordance with local

conditions and past default experience.

PFI assets

Under the terms of a Private Finance Initiative (PFI) or similar project, where the risks and rewards of ownership of an asset remain largely

with the purchaser of the associated services, the group’s interest in the asset is classified as a financial asset and included at its discounted

value within trade and other receivables.

Current asset investments

Current asset investments comprise investments in securities, which are classified as held-for-trading. They are initially recognised at cost,

including transaction costs, and subsequently measured at fair value. Gains and losses arising from changes in fair value are recognised in the

income statement.

Cash and cash equivalents 

Cash and cash equivalents comprise cash balances and call deposits. Bank overdrafts that are repayable on demand and form an integral part
of the group’s cash management are included as a component of cash and cash equivalents for the purpose of the cash flow statement.

Interest-bearing borrowings

Interest-bearing bank overdrafts, loans and loan notes are recognised at the value of proceeds received, net of direct issue costs. Finance

charges, including premiums payable on settlement or redemption and direct issue costs, are recognised in the income statement on an accrual

basis using the effective interest method.

Trade payables

Trade payables are not interest-bearing and are stated initially at fair value.

Equity instruments

Equity instruments issued by the group are recorded at the value of proceeds received, net of direct issue costs.

(h) Inventories

Inventories are valued at the lower of cost and net realisable value. Cost represents expenditure incurred in the ordinary course of business 

in bringing inventories to their present condition and location and includes appropriate overheads. Cost is calculated using either the weighted

average or the first-in-first-out method. Net realisable value is based on estimated selling price, less further costs expected to be incurred to

completion and disposal. Provision is made for obsolete, slow-moving or defective items where appropriate.

56

Notes to the consolidated financial statements (continued)

3 Significant accounting policies (continued)

(i) Impairment

The carrying value of the group’s assets, apart from inventories and deferred tax assets, is reviewed on an ongoing basis for any indication 

of impairment, and if any such indication exists, the assets’ recoverable amount is estimated. An impairment loss is recognised in the income

statement whenever the carrying value of an asset or its cash-generating unit exceeds its recoverable amount.

The recoverable amount of an asset is the greater of its net selling price and its value in use, where value in use is assessed as the estimated

future cash flows deriving from the asset discounted to their present value using a pre-tax discount rate which reflects current market

assessments of the time value of money and the risks specific to the asset. For an asset that does not generate largely independent cash flows,

the recoverable amount is determined for the cash-generating unit to which the asset attaches.

The recoverable amount of goodwill is tested annually through assessing the carrying values of the cash generating units to which the goodwill

attaches. An impairment loss recognised in respect of a cash-generating unit is allocated first so as to reduce the carrying value of any goodwill

allocated to the cash-generating unit, and then to reduce the carrying value of the other assets in the unit on a pro-rata basis.

An impairment loss in respect of goodwill is not reversed. In respect of any other asset, an impairment loss is reversed if there has been a

change in the estimates used to determine its recoverable amount. The amount of the reversal is limited such that the asset’s carrying amount

does not exceed that which would have been determined (after depreciation and amortisation) if no impairment loss had been recognised.

(j) Repurchase of share capital

When share capital recognised as equity is repurchased, the amount of the consideration paid, including directly attributable costs net of any

tax effects, is recognised as a deduction from equity. Where repurchased shares are held by an employee benefit trust, they are classified as

treasury shares and presented as a deduction from equity.

(k) Employee benefits

Retirement benefit costs

Payments to defined contribution schemes are charged as an expense as they fall due. Payments made to state-managed retirement benefit

schemes are dealt with as payments to defined contribution schemes where the group’s obligations under the schemes are equivalent to those

arising in a defined contribution retirement benefits scheme.

For defined benefit schemes, the cost of providing benefits is determined using the projected unit credit method, with actuarial valuations being

carried out at each balance sheet date. The discount rate used is the yield at the balance sheet date on AA credit rated corporate bonds that

have maturity dates approximating to the terms of the group’s obligations. The expected finance income on assets and the finance cost on liabilities
are recognised in the income statement as components of finance income and finance cost respectively. Actuarial gains and losses are recognised
in full in the period in which they occur and presented outside the income statement in the statement of recognised income and expense.

Past service cost is recognised immediately to the extent that the benefits are already vested. Otherwise it is amortised on a straight-line basis

over the average period until the benefits vest.

The retirement benefit obligation recognised in the balance sheet represents the present value of the defined benefit obligation as adjusted for
unrecognised past service cost, reduced by the fair value of scheme assets. Any asset resulting from this calculation is limited to unrecognised

past service cost plus the present value of available refunds and reductions in future contributions to the scheme.

Long-term service benefits

The group’s net obligation in respect of long-term service benefits other than retirement benefits represents the present value of the future

benefit that employees have earned at the balance sheet date, less the fair value of scheme assets out of which the obligations are to be

settled directly.

Share-based payments

The group issues equity-settled share-based payments to certain employees. The fair value of share-based payments is determined at the date
of grant and expensed, with a corresponding increase in equity on a straight-line basis over the vesting period, based on the group’s estimate
of the shares that will eventually vest. The amount expensed is adjusted over the vesting period for changes in the estimate of the number of

shares that will eventually vest, save for changes resulting from any market-related performance conditions.

The fair value of share-based payments granted in the form of options is measured by the use of the Black-Scholes valuation technique,
adjusted for future dividend receipts and for any market-related performance conditions.

57

3 Significant accounting policies (continued)

(l) Provisions

Provisions are recognised when a present legal or constructive obligation exists for a future liability in respect of a past event and where the

amount of the obligation can be estimated reliably. Items within provisions include claims against the group’s captive insurance businesses, costs

of meeting lease requirements on unoccupied properties and restructuring provisions for the costs of a business reorganisation where the

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 material, provisions are stated at the present value of the expected expenditure using an appropriate

discount rate.

(m)Revenue recognition

Revenue

Revenue represents amounts receivable for goods and services provided in the normal course of business and is measured at the fair value of

the consideration received or receivable, net of discounts,VAT and other sales related taxes. Revenue for manned security and cash services

products and for recurring services in security systems products is recognised over the period in which the service is provided. Revenue on

security systems installations is recognised either on completion in respect of product sales, or in accordance with the stage of completion

method in respect of construction contracts.

Construction contracts

Where significant, security system installations with a contract duration in excess of one month are accounted for as construction contracts.

Where the outcome of a construction contract can be estimated reliably, revenue and costs are recognised by reference to the stage of

completion of the contract activity at the balance sheet date. This is normally measured by the proportion that contract costs incurred for

work to date bear to the estimated total contract costs, except where this would not be representative of the stage of completion. Variations

in contract work, claims and incentive payments are included to the extent that it is likely that they will be agreed with the customer.

Where the outcome of a construction contract cannot be estimated reliably, contract revenue is recognised to the extent of contract costs

incurred that are deemed likely to be recoverable. Contract costs are recognised as expenses as they are incurred. Where it is likely that total

contract costs will exceed total contract revenue, the expected loss is recognised immediately as an expense.

Construction contracts are recognised on the balance sheet at cost plus profit recognised to date, less provision for foreseeable losses and less

progress billings. Balances are not offset.

Government grants

Government grants in respect of items expensed in the income statement are recognised as deductions from the associated expenditure.
Government grants in respect of property, plant and equipment are treated as deferred income and released to the income statement over

the lives of the related assets.

Interest

Interest income is accrued on a time basis by reference to the principal outstanding and at the effective interest rate applicable. This is the rate

that exactly discounts estimated future cash receipts through the expected life of the financial asset to that asset’s net carrying amount.

Dividends

Dividend income from investments is recognised when the shareholders’ rights to receive payment have been established.

(n) Borrowing costs

All borrowing costs are recognised in the income statement.

(o) Profit from operations

Profit from operations is stated after the share of results of associates but before finance income and finance costs. Exceptional items 

of particular significance, including restructuring costs, are included within profit from operations but are disclosed separately.

58

Notes to the consolidated financial statements (continued)

3 Significant accounting policies (continued)

(p) Income taxes

Tax is recognised in the income statement except to the extent that it relates to items recognised in equity, in which case it is recognised 

in equity. The tax expense represents the sum of current tax and deferred tax.

Current tax is based on taxable profit for the year. Taxable profit differs from net profit as reported in the income statement because it

excludes items of income or expense that are taxable or deductible in other years and it further excludes items that are never taxable or

deductible. The group’s liability for current tax is calculated using tax rates that have been enacted or substantively enacted by the balance

sheet date.

Deferred tax is the tax expected to be payable or recoverable on differences between the carrying amounts of assets and liabilities in the

consolidated financial statements and the corresponding tax bases used in the computation of taxable profit, and is accounted for using the

balance sheet liability method. Deferred tax liabilities are generally recognised for all taxable temporary differences. Deferred tax assets are

recognised to the extent that it is probable that taxable profits will be available against which deductible temporary differences can be utilised.

Such assets and liabilities are not recognised if the temporary difference arises from the initial recognition of goodwill in a business combination

or from the initial recognition (other than in a business combination) of other assets and liabilities in a transaction that affects neither the tax

profit nor the accounting profit.

Deferred tax liabilities are recognised for taxable temporary differences arising on investments in subsidiaries and interests in joint ventures,

except where the group is able to control the reversal of the temporary difference and it is probable that the temporary difference will not

reverse in the foreseeable future.

The carrying amount of deferred tax assets is reviewed at each balance sheet date and reduced to the extent that it is no longer probable

that sufficient taxable profits will be available to allow all or part of the asset to be recovered.

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) Leasing

Leases are classified as finance leases when the terms of the lease transfer substantially all of the risks and rewards of ownership to the lessee.

All other leases are classified as operating leases.

Assets held under finance leases are recognised at the inception of the lease at their fair value or, if lower, at the present value of the minimum

lease payments. The corresponding liability to the lessor is included in the balance sheet as a finance lease obligation. Amounts due from

lessees under finance leases are recorded as receivables at the amount of the group’s net investment in the leases. Lease payments made or

received are apportioned between finance charges or income and the reduction of the lease liability or asset so as to produce a constant rate

of interest on the outstanding balance of the liability or asset.

Rentals payable or receivable under operating leases are charged or credited to income on a straight-line basis over the lease term, as are
incentives to enter into operating leases.

(r) Segment reporting

A segment is a significant component of the group which is subject to risks and rewards distinguishable from those of other segments either by

the nature of the services provided (business segment) or by the economic environment in which it transacts business (geographical segment).

(s) Non-current assets held for sale and discontinued operations

Non-current assets (and disposal groups) classified as held for sale are measured at the lower of carrying amount and fair value less costs 
to sell.

Non-current assets and disposal groups are classified as held for sale if their carrying amount will be recovered through a sale transaction
rather than through continuing use. This condition is regarded as met only when the sale is highly probable and the asset (or disposal group) 
is available for immediate sale in its present condition. The group must be committed to the sale which should be expected to qualify for
recognition as a completed sale within one year from the date of classification.

A discontinued operation is a component of the group’s business that represents a separate major line of business or geographical area of

operations or is a subsidiary acquired exclusively with a view to resale, that has been disposed of, has been abandoned or that meets the

criteria to be classified as held for sale.

59

3 Significant accounting policies (continued)

(t) Dividends

Dividends are recognised as distributions to equity holders in the period in which they are declared. Dividends proposed but not declared are

not recognised but are disclosed in the notes to the consolidated financial statements.

(u) Adoption of new and revised accounting standards and interpretations

In the year ended 31 December 2007, the group has adopted IFRS 7 Financial Instruments: Disclosures and the related amendment to IAS 1
Presentation of Financial Statements, both of which were effective from 1 January 2007. The effect of the adoption of IFRS 7 and the
amendment to IAS 1 has been to expand the disclosures provided in these financial statements regarding the group’s financial instruments and

management of capital.

Four interpretations issued by the International Financial Reporting Interpretations Committee (IFRIC) were effective for the current year.

These were:

> 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.

The adoption of these interpretations has not resulted in changes to the group’s accounting policies and has not had a material impact on

amounts reported for the current or prior years.

At the year end, the following were in issue, endorsed but not yet effective:

> IFRS 8 Operating Segments which was issued in November 2006 and will apply to the group from 1 January 2009. This standard supersedes
IAS 14 Segment Reporting and will require the group to adopt the “management approach” to reporting on the financial performance of its
operating segments; and 

> IFRIC 11 IFRS 2 – Group and Treasury Share Transactions which was issued in November 2006 and is effective for annual periods beginning on
or after 1 March 2007. This interpretation requires a share-based payment arrangement in which the group receives goods or services as

consideration for its own equity-instruments to be accounted for as an equity-settled share-based payment transaction.

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, if endorsed, may impact on the group’s valuation of defined retirement benefit obligations. The directors anticipate that the adoption

of the other standards and interpretations in future periods will have no material financial impact on the financial statements of the group.

4 Accounting estimates

The preparation of financial statements in conformity with IFRS requires management to make judgements, estimates and assumptions that affect

the application of the group’s accounting policies, which are described in note 3, with respect to the carrying amounts of assets and liabilities at the
date of the financial statements, the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts
of income and expenses during the reporting period. These judgements, estimates and associated assumptions are based on historical experience

and various other factors that are believed to be reasonable under the circumstances, including current and expected economic conditions, and in

some cases, actuarial techniques. Although these judgements, estimates and associated assumptions are based on management’s best knowledge of

current events and circumstances, the actual results may differ.

Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which
the estimate is revised and in any future periods affected.

60

Notes to the consolidated financial statements (continued)

4 Accounting estimates (continued)

The judgements, estimates and assumptions which are of most significance to the group are detailed below:

Valuation of acquired businesses

The initial accounting for an acquisition involves identifying and determining the fair values to be assigned to identifiable assets, liabilities and

contingent liabilities as well as the acquisition cost. In some instances, this initial accounting can only be determined provisionally by the end of the

period in which the acquisition is effected because the fair values and/or the cost is not known with full certainty. In such an event, the initial

accounting can be completed using provisional values with any adjustments to those provisional values being completed within 12 months of the

acquisition date. Additionally, in determining the fair value of acquisition-related intangible assets, in the absence of market prices for similar assets,

valuation techniques are applied. These techniques use a variety of estimates including projected future results and expected future cash flows

discounted using the weighted average cost of capital. Full details of the fair values of assets and liabilities of acquired businesses are presented in

note 17.

Assessment of the recoverable amounts in respect of assets tested for impairment

The group tests tangible and intangible assets, including goodwill, for impairment on an annual basis or more frequently if there are indications that

amounts may be impaired. The impairment analysis for such assets is principally based upon discounted estimated future cash flows from the use

and eventual disposal of the assets. Such an analysis includes an estimation of the future anticipated results and cash flows, annual growth rates and

the appropriate discount rates. The full methodology and results of the group’s impairment testing is presented in note 19.

Valuation of retirement benefit obligations

The valuation of defined retirement benefit schemes is arrived at using the advice of qualified independent actuaries who use the projected unit

credit method for determining the group’s obligations. This methodology requires the use of a variety of assumptions and estimates, including the

appropriate discount rate, the expected return on scheme assets, mortality assumptions, future service and earnings increases of employees and

inflation. Full details of the group’s retirement benefit obligations, including an analysis of the sensitivity of the calculations to the key assumptions 

are presented in note 34.

5 Revenue

An analysis of the group’s revenue is as follows:

Continuing operations

Sale of goods
Rendering of services
Revenue from construction contracts

Revenue from continuing operations as presented in the consolidated income statement

Discontinued operations

Sale of goods
Rendering of services
Revenue from construction contracts

Revenue from discontinued operations

Other operating income

Interest income
Net gain in fair value of loan note derivative financial instruments and hedged items
Expected return on defined retirement benefit scheme assets

Total other operating income

Notes

6

6, 7

2007
£m

105.3
4,288.7
96.4

4,490.4

9.3
259.2
16.4

284.9

15.1
0.2
77.3

92.6

2006
£m

93.7
3,886.9
56.2

4,036.8

7.1
373.6
12.5

393.2

12.3
–
67.2

79.5

61

6 Business and geographical segments

The group operates in two core product areas: security services and cash services. The group operates on a worldwide basis and derives a

substantial proportion of its revenue and PBIT from each of the following geographical regions: Europe (comprising the United Kingdom and

Ireland, and Continental Europe), North America, and New Markets (comprising the Middle East and Gulf States, Latin America and the Caribbean,

Africa, and Asia Pacific).

The current management structure of the group is a combination of product area and geography, within which the larger businesses generally

report by product area. The group’s primary segmentation is therefore by business segment and its secondary segmentation is by geography.

Segment information is presented below:

Segment revenue

Revenue by business segment

Security Services

UK and Ireland
Continental Europe

Europe
North America

Middle East and Gulf States
Latin America and the Caribbean
Africa
Asia Pacific
New Markets

Total Security Services

Cash Services
Europe
North America
New Markets

Total Cash Services

Total revenue

Revenue by geographical market

UK and Ireland
Continental Europe

Europe
North America

Middle East and Gulf States
Latin America and the Caribbean
Africa
Asia Pacific
New Markets

Total revenue

Continuing
operations
2007
£m

Discontinued
operations
2007
£m

593.0
1,078.3
1,671.3
1,043.8
177.9
158.0
183.9
268.9
788.7

3,503.8

706.3
78.0
202.3

986.6

–
258.6
258.6
–
–
1.7
–
3.3
5.0

263.6

17.2
–
4.1

21.3

4,490.4

284.9

Total
2007
£m

593.0
1,336.9
1,929.9
1,043.8
177.9
159.7
183.9
272.2
793.7

3,767.4

723.5
78.0
206.4

1,007.9

4,775.3

Continuing
operations
2006
£m

Discontinued
operations
2006
£m

539.7
985.4
1,525.1
1,049.9
125.5
117.7
152.6
230.0
625.8

3,200.8

628.8
85.3
121.9

836.0

–
270.5
270.5
13.2
–
6.8
–
6.0
12.8

296.5

92.6
–
4.1

96.7

Total
2006
£m

539.7
1,255.9
1,795.6
1,063.1
125.5
124.5
152.6
236.0
638.6

3,497.3

721.4
85.3
126.0

932.7

4,036.8

393.2

4,430.0

Total
2007
£m

1,007.5
1,645.9
2,653.4
1,121.8
202.5
203.3
257.2
337.1
1,000.1

4,775.3

Inter-
segment
revenue
2006
£m

(3.8)
(0.8)

(4.6)

Total
2006
£m

928.9
1,588.1
2,517.0
1,148.4
147.1
162.9
168.1
286.5
764.6

4,430.0

External
revenue
2006
£m

3,497.3
932.7

4,430.0

Revenue from internal and external customers

by business segment

Security Services
Cash Services

Total revenue

Total gross
segment
revenue
2007
£m

3,773.7
1,008.5

4,782.2

Inter-
segment
revenue
2007
£m

(6.3)
(0.6)

(6.9)

External
revenue
2007
£m

3,767.4
1,007.9

4,775.3

Total gross
segment
revenue
2006
£m

3,501.1
933.5

4,434.6

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

Security Services

UK and Ireland
Continental Europe

Europe
North America

Middle East and Gulf States
Latin America and the Caribbean
Africa
Asia Pacific
New Markets

Total Security Services

Cash Services
Europe
North America
New Markets

Total Cash Services

Total PBITA before head office costs
Head office costs

Total PBITA

PBITA by geographical market

Europe
North America
New Markets

Total PBITA before head office costs

Head office costs

Total PBITA

Result by business segment

Total PBITA
Amortisation of acquisition-related intangible assets

Total PBIT

Security Services
Cash Services
Head office costs

Total PBIT

Continuing
operations
2007
£m

Discontinued
operations
2007
£m

48.4
61.5
109.9
61.5
14.2
10.3
16.0
22.9
63.4

234.8

77.4
0.6
29.7

107.7

342.5
(30.4)

312.1

187.3
62.1
93.1

342.5

(30.4)

312.1

–
(4.3)
(4.3)
–
–
(0.5)
–
(1.4)
(1.9)

(6.2)

(2.2)
–
(0.6)

(2.8)

(9.0)
–

(9.0)

(6.5)
–
(2.5)

(9.0)

–

(9.0)

Continuing
operations
2007
£m

Discontinued
operations
2007
£m

312.1
(41.6)

270.5

215.4
85.5
(30.4)

270.5

(9.0)
–

(9.0)

(6.2)
(2.8)
–

(9.0)

Total
2007
£m

48.4
57.2
105.6
61.5
14.2
9.8
16.0
21.5
61.5

228.6

75.2
0.6
29.1

104.9

333.5
(30.4)

303.1

180.8
62.1
90.6

333.5

(30.4)

303.1

Total
2007
£m

303.1
(41.6)

261.5

209.2
82.7
(30.4)

261.5

Continuing
operations
2006
£m

Discontinued
operations
2006
£m

44.1
56.5
100.6
62.7
10.9
6.3
12.5
18.5
48.2

211.5

67.8
1.8
17.4

87.0

298.5
(24.1)

274.4

168.4
64.5
65.6

298.5

(24.1)

274.4

–
(0.8)
(0.8)
0.7
–
0.2
–
–
0.2

0.1

(14.7)
–
–

(14.7)

(14.6)
–

(14.6)

(15.5)
0.7
0.2

(14.6)

–

(14.6)

Continuing
operations
2006
£m

Discontinued
operations
2006
£m

274.4
(36.0)

238.4

195.4
67.1
(24.1)

238.4

(14.6)
–

(14.6)

0.1
(14.7)
–

(14.6)

Total
2006
£m

44.1
55.7
99.8
63.4
10.9
6.5
12.5
18.5
48.4

211.6

53.1
1.8
17.4

72.3

283.9
(24.1)

259.8

152.9
65.2
65.8

283.9

(24.1)

259.8

Total
2006
£m

259.8
(36.0)

223.8

195.5
52.4
(24.1)

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.

6 Business and geographical segments (continued)

Segment assets and liabilities

The following information is analysed by business segment and by the geographical area in which the assets are located:

Total assets

By business segment

Security Services
Cash Services
Head office
Inter-segment trading balances

Total segment operating assets

By geographical segment

UK and Ireland
Continental Europe

Europe
North America

Middle East and Gulf States
Latin America and the Caribbean
Africa
Asia Pacific
New Markets
Head office
Inter-segment trading balances

Total segment operating assets
Non-operating assets

Total assets

Total liabilities

By business segment

Security Services
Cash Services
Head office
Inter-segment trading balances

Total segment operating liabilities
Non-operating liabilities

Total liabilities

63

2007
£m

2006
£m

2,135.3
954.8
103.5
(64.1)

3,129.5

938.1
923.9
1,862.0
615.5
102.5
104.7
190.3
206.8
604.3
103.4
(55.7)

3,129.5
546.3

3,675.8

1,805.7
843.0
81.4
(51.8)

2,678.3

869.5
773.6
1,643.1
586.7
62.5
82.4
76.6
178.3
399.8
81.4
(32.7)

2,678.3
496.9

3,175.2

2007
£m

2006
£m

(719.5)
(233.6)
(119.2)
64.1

(1,008.2)
(1,544.6)

(2,552.8)

(602.5)
(195.1)
(45.4)
51.8

(791.2)
(1,412.5)

(2,203.7)

Non-operating assets and liabilities comprise financial assets and liabilities, taxation assets and liabilities and retirement benefit obligations.

Included within operating and non-operating assets are £123.3m (2006: £nil) and £7.6m (2006: £nil) respectively relating to assets classified as held

for sale. Included within operating and non-operating liabilities are £66.3m (2006: £nil) and £12.0m (2006: £nil) respectively relating to liabilities

associated with assets classified as held for sale. Disposal groups are analysed in note 27.

Other information by geographical location

By business segment

Security Services
Cash Services
Head office

Total

Impairment
losses
recognised
in income
2007
£m

Depreciation
and
amortisation
2007
£m

–
–
–

–

72.5
68.1
0.6

141.2

Capital
additions
2007
£m

201.3
192.1
2.9

396.3

Impairment
losses
recognised
in income
2006
£m

Depreciation
and
amortisation
2006
£m

2.5
–
–

2.5

58.2
67.7
0.3

126.2

Capital
additions
2006
£m

139.7
73.9
0.6

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

UK and Ireland
Continental Europe

Europe
North America

Middle East and Gulf States
Latin America and the Caribbean
Africa
Asia Pacific
New Markets
Head office

Total

7 Discontinued operations

Capital
additions
2007
£m

83.3
124.7
208.0
13.2
27.4
13.6
106.1
25.1
172.2
2.9

396.3

Capital
additions
2006
£m

46.2
64.5
110.7
15.2
31.0
20.3
17.0
19.4
87.7
0.6

214.2

Operations qualifying as discontinued in the current year primarily comprise: G4S Cash Services (France) SAS, disposed of on 2 July 2007; the

security services businesses in France, which principally include Group 4 Securicor SAS; and the security services businesses in Germany, which

principally include G4S Sicherheitsdienste GmbH and G4S Sicherheitssysteme GmbH, Berlin. The disposal of the security services businesses in both

France and Germany is still in progress.

Additionally, operations qualifying as discontinued in the prior year primarily comprise the German cash services business of G4S Geld-und

Wertdienste GmbH, where terms were agreed for divestment on 22 December 2006, and the business and assets of Cognisa Transportation, Inc,

disposed of on 28 December 2006.

The results of the discontinued operations which have been included in the consolidated income statement are presented below.

Revenue
Expenses

Operating loss before interest and taxation (PBIT)
Net finance costs
Attributable tax credit/(expense)

Total operating loss for the year

Profit/(loss) on disposal of discontinued operations (note 18)
Adjustment in respect of disposals in the prior year

Net loss attributable to discontinued operations

2007
£m

284.9
(293.9)

(9.0)
(3.3)
0.3

(12.0)

9.1
2.9

–

2006
£m

393.2
(407.8)

(14.6)
(3.0)
(1.4)

(19.0)

(19.2)
5.2

(33.0)

The 2007 adjustment in respect of disposals in the prior year comprises £0.4m relating to the disposal of the German cash services business of
G4S Geld-und Wertdienste GmbH, and £2.5m relating to the finalisation of the disposal of Cognisa Transportation, Inc.

The 2006 adjustment in respect of disposals in the prior year comprises £3.2m relating to the finalisation of the disposal of Cognisa Security and
£2.0m relating to the finalisation of the disposal of Falck Security Nederland.

The effect of discontinued operations on segment results is disclosed in note 6.

7 Discontinued operations (continued)

Cash flows from discontinued operations included in the consolidated cash flow statement are as follows:

Net cash flows from operating activities
Net cash flows from investing activities
Net cash flows from financing activities

8 Profit from operations before interest and taxation (PBIT)

The income statement can be analysed as follows:

Continuing operations

Revenue
Cost of sales

Gross profit
Administration expenses
Share of profit from associates

PBIT

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 Profit from operations

Profit from continuing and discontinued operations has been arrived at after charging/(crediting):

Cost of sales

Cost of inventories recognised as an expense
Write-down of inventories to net realisable value
Reversal of inventories previously written down to net realisable value because subsequently sold

Administration expenses

Amortisation of acquisition-related intangible assets
Amortisation of other intangible assets
Depreciation of property, plant and equipment
Impairment of property, plant and equipment and intangible assets other than acquisition-related
Profit on disposal of property, plant and equipment and intangible assets other than acquisition-related
Impairment of trade receivables
Litigation settlements
Research and development expenditure
Operating lease rentals payable
Operating sub-lease rentals receivable
Cost of equity-settled transactions
Government grants received as a contribution towards wage costs
Net foreign translation adjustments

65

2007
£m

12.5
(1.4)
2.7

13.8

2006
£m

(10.8)
6.4
(3.7)

(8.1)

2007
£m

4,490.4
(3,485.4)

1,005.0
(737.5)
3.0

270.5

2006
£m

4,036.8
(3,158.0)

878.8
(643.2)
2.8

238.4

2007
£m

92.4
0.6
–

41.6
8.5
91.1
–
(14.4)
5.4
0.7
2.1
96.7
(3.0)
4.1
(2.2)
(0.2)

2006
£m

68.0
0.5
(0.2)

36.0
7.4
82.8
2.5
(1.6)
4.6
0.1
1.4
85.0
(1.9)
5.0
(2.3)
1.0

66

Notes to the consolidated financial statements (continued)

10 Auditors’ remuneration

Fees payable to the company’s auditor for the audit of the company’s annual report and accounts

Fees payable to the company’s auditor and its associates for other services:
The audit of the company’s subsidiaries pursuant to legislation
Other services pursuant to legislation
Taxation services
Corporate finance services

Fees payable to other auditors for the audit of the company’s subsidiaries pursuant to legislation

2007
£m

1.0

2.6
0.2
0.3
0.4

0.5

2006
£m

1.0

2.2
0.1
0.3
0.2

0.6

The Corporate Governance Statement on pages 34 to 36 outlines the company’s established policy for ensuring that audit independence is not

compromised through the provision by the company’s auditor of other services.

11 Staff costs and employees

The average monthly number of employees, in continuing and discontinued operations, including executive directors was:

By business segment

Security Services
Cash Services
Not allocated, including shared administration and head office

Total average number of employees

By geographical segment

Europe
North America
New Markets
Not allocated, including shared administration and head office

Total average number of employees

Their aggregate remuneration, in continuing and discontinued operations, comprised:

Wages and salaries
Social security costs
Employee benefits

Total staff costs

2007
Number

466,035
41,255
190

507,480

115,951
53,414
337,925
190

507,480

2007
£m

2,772.2
410.2
75.3

3,257.7

2006
Number

403,079
36,866
183

440,128

114,216
51,919
273,810
183

440,128

2006
£m

2,654.3
387.8
66.2

3,108.3

Information on directors’ remuneration, share options, long-term incentive plans, and pension contributions and entitlements is set out in the
Directors’ Remuneration Report on pages 37 to 44.

12 Finance income

Interest income on cash, cash equivalents and investments
Other interest income
Expected return on defined retirement benefit scheme assets
Gain arising from change in fair value of derivative financial instruments hedging loan notes
Loss arising from fair value adjustment to the hedged loan note items

Total finance income

13 Finance costs

Interest on bank overdrafts and loans
Interest on loan notes
Interest on obligations under finance leases
Other interest charges

Total group borrowing costs
Finance costs on defined retirement benefit obligations

Total finance costs

67

2007
£m

12.4
2.7
77.3
14.3
(14.1)

92.6

2007
£m

53.0
13.5
3.3
4.2

74.0
72.3

2006
£m

9.9
2.4
67.2
–
–

79.5

2006
£m

49.6
–
2.4
0.2

52.2
66.2

146.3

118.4

Included within interest on bank overdrafts and loans is a credit of £2.1m (2006: £2.5m) relating to cash flow hedges that were transferred from

equity during the year.

14 Taxation

Current taxation

UK corporation tax
Overseas tax
Adjustments in respect of prior years:
UK corporation tax
Overseas tax

Total current taxation expense/(credit)

Deferred taxation (see note 36)

Current year
Adjustments in respect of prior years

Total deferred taxation credit

Total income tax expense/(credit) for the year

Continuing
operations
2007
£m

Discontinued
operations
2007
£m

2.6
64.5

(7.1)
–

60.0

(7.4)
3.6

(3.8)

56.2

–
(0.3)

–
–

(0.3)

–
–

–

(0.3)

Total
2007
£m

2.6
64.2

(7.1)
–

59.7

(7.4)
3.6

(3.8)

55.9

Continuing
operations
2006
£m

Discontinued
operations
2006
£m

10.1
49.7

0.7
(3.5)

57.0

–
(0.4)

(0.4)

56.6

–
1.4

–
–

1.4

–
–

–

1.4

Total
2006
£m

10.1
51.1

0.7
(3.5)

58.4

–
(0.4)

(0.4)

58.0

UK corporation tax is calculated at 30.0% (2006: 30.0%) of the estimated assessable profits for the period. The total income tax expense for the

year includes a £1.7m credit resulting from the deferred tax movement arising from the reduction in the UK corporation tax rate from 30.0% to

28.0%. Taxation for other jurisdictions is calculated at the corporation tax rates prevailing in the relevant jurisdictions.

68

Notes to the consolidated financial statements (continued)

14 Taxation (continued)

The tax charge for the year can be reconciled to the profit per the income statement as follows:

Profit/(loss) before taxation

Continuing operations
Discontinued operations

Total profit before taxation

Tax at UK corporation tax rate of 30.0% (2006: 30.0%)
Expenses that are not deductible in determining taxable profit
Tax losses not recognised in the current year
Different tax rates of subsidiaries operating in non-UK jurisdictions
Adjustments for previous years

Total income tax charge

Effective tax rate

2007
£m

216.8
(0.3)

216.5

65.0
2.2
1.5
(9.3)
(3.5)

55.9

2006
£m

199.5
(31.6)

167.9

50.4
5.1
13.7
(8.0)
(3.2)

58.0

25.8%

34.5%

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

Amounts recognised as distributions to equity holders of the parent in the year

Final dividend for the year ended 31 December 2005
Interim dividend for the six months ended 30 June 2006
Final dividend for the year ended 31 December 2006
Interim dividend for the six months ended 30 June 2007

Pence
per share

DKK
per share

2.24
1.69
2.52
2.11

0.2435
0.1863
0.2766
0.2319

Proposed final dividend for the year ended 31 December 2007

2.85p

0.2786

2006
£m

28.3
21.5
–
–

49.8

2007
£m

–
–
32.0
27.3

59.3

36.3

The proposed final dividend is subject to approval by shareholders at the Annual General Meeting. If so approved, it will be paid on 6 June 2008 
to shareholders who are on the register on 2 May 2008. The exchange rate used to translate it into Danish kroner is that at 10 March 2008.

16 Earnings/(loss) per share attributable to equity shareholders of the parent

From continuing and discontinued operations

Earnings

Profit for the year attributable to equity holders of the parent
Effect of dilutive potential ordinary shares (net of tax) 

Profit for the purposes of diluted earnings per share

Number of shares (m)

Weighted average number of ordinary shares
Effect of dilutive potential ordinary shares

Weighted average number of ordinary shares for the purposes of diluted earnings/(loss) per share

Earnings per share from continuing and discontinued operations (pence)

Basic
Diluted

2007
£m

147.2
0.2

147.4

1,275.2
1.5

1,276.7

11.5p
11.5p

2006
£m

96.5
0.3

96.8

1,268.3
5.4

1,273.7

7.6p
7.6p

16 Earnings/(loss) per share attributable to equity shareholders of the parent (continued)

From continuing operations

Earnings

Profit for the year attributable to equity holders of the parent
Adjustment to exclude loss for the year from discontinued operations (net of tax) (note 7)

Profit from continuing operations
Effect of dilutive potential ordinary shares (net of tax) 

Profit from continuing operations for the purpose of diluted earnings per share

Earnings per share from continuing operations (pence)

Basic
Diluted

From discontinued operations

Loss per share from discontinued operations (pence)

Basic
Diluted

From adjusted earnings

Earnings

Profit from continuing operations
Adjustment to exclude net retirement benefit finance income (net of tax)
Adjustment to exclude amortisation of acquisition-related intangible assets (net of tax)

Adjusted profit for the year attributable to equity holders of the parent

Weighted average number of ordinary shares (m)
Adjusted earnings per share (pence)

69

2007
£m

2006
£m

147.2
–

147.2
0.2

147.4

11.5p
11.5p

96.5
33.0

129.5
0.3

129.8

10.2p
10.2p

–
–

(2.6)p
(2.6)p

147.2
(3.6)
26.7

170.3

129.5
(0.7)
25.2

154.0

1,275.2
13.4p

1,268.3
12.1p

In the opinion of the directors the earnings per share figure of most use to shareholders is that which is adjusted. This figure better allows the
assessment of operational performance, the analysis of trends over time, the comparison of different businesses and the projection of future earnings.

The denominators used in all earnings/(loss) per share calculations are those disclosed in respect of continuing and discontinued operations.

17 Acquisitions

Current year acquisitions

The group undertook a number of acquisitions in the year, none of which were individually material. Principal acquisitions in subsidiary undertakings
include the purchase of controlling interests in: Fidelity Cash Management Services (Pty) Ltd, in South Africa; al Majal Service Master LLC, a facilities
management business in Saudi Arabia; and in RIG – PR Ltd, a specialist police recruitment agency in the United Kingdom. In addition, the group
increased its interests in Israel and Mozambique, and recognised put options that increased the group’s interest in the Baltic states. A summary of

the provisional fair value of net assets acquired by geographical location is presented below:

Provisional fair value of net assets acquired of subsidiary undertakings
Acquisition of minority interests

Total provisional fair value of net assets acquired
Goodwill

Total purchase consideration

Europe
£m

7.8
19.2

27.0
92.5

119.5

North
America
£m

0.3
0.3

0.6
1.6

2.2

New
Markets
£m

9.4
1.4

10.8
85.1

95.9

Total
group
£m

17.5
20.9

38.4
179.2

217.6

70

Notes to the consolidated financial statements (continued)

17 Acquisitions (continued)

Current year acquisitions (continued)

The following table sets out the book values of the identifiable assets and liabilities acquired and their provisional fair value to the group in respect

of all acquisitions made in the year:

Acquisition-related intangible assets
Other intangible assets
Property, plant and equipment
Inventories
Trade and other receivables
Deferred tax assets
Cash and cash equivalents
Trade and other payables
Current tax liabilities
Provisions
Borrowings
Deferred tax liabilities
Minority interests

Net assets acquired of subsidiary undertakings
Acquisition of minority interests

Goodwill

Total purchase consideration

Satisfied by:
Cash
Transaction costs
Contingent consideration

Total purchase consideration

Book value
£m

Fair value
adjustments
£m

Fair value
£m

–
1.0
24.5
4.0
50.2
0.1
11.6
(46.7)
(1.6)
(7.7)
(22.9)
–
(10.7)

1.8
17.8

34.1
(0.7)
(1.9)
(0.4)
(3.6)
–
–
(2.4)
(1.1)
(3.1)
–
(9.7)
4.5

15.7
3.1

34.1
0.3
22.6
3.6
46.6
0.1
11.6
(49.1)
(2.7)
(10.8)
(22.9)
(9.7)
(6.2)

17.5
20.9

179.2

217.6

147.7
3.9
66.0

217.6

Adjustments made to identifiable assets and liabilities on acquisition are to reflect their fair value. These include the recognition of customer-related
intangible assets amounting to £34.1m attributable to the acquisition of subsidiary undertakings and £3.1m attributable to the acquisition of

minority interests. The fair values of net assets acquired are provisional and represent estimates following a preliminary valuation exercise. These

estimates may be adjusted to reflect any development in the issues to which they relate. Final fair value adjustments will, if required, be reflected in
the comparative to the 2008 consolidated financial statements.

The goodwill arising on acquisitions can be ascribed to the existence of a skilled, active workforce and the opportunities to obtain new contracts
and develop the business. Neither of these meet the criteria for recognition as intangible assets separable from goodwill. Goodwill arising on

acquisition includes £47.5m arising on the acquisition of minority interests.

From the date of acquisition, in aggregate, the acquired businesses contributed £171.2m to revenues, £10.0m to PBITA and £(0.3)m to profit for
the part year they were under the group’s ownership. If all acquisitions had occurred on 1 January 2007, group revenue would have been

£4,572.2m, PBITA would have been £321.0m and profit for the year would have been £162.4m.

Prior year acquisitions

The group undertook a number of acquisitions in 2006, none of which were individually material. Principal acquisitions in subsidiary undertakings
included the purchase of controlling interests in the Chilean company, Servicios Generales, Limitada, a manned security services provider, and in 
al Majal Security Services, a security services and cash services business in Saudi Arabia. In addition, the group increased its interests in United 
Arab Emirates.

71

17 Acquisitions (continued)

Prior year acquisitions (continued)

At 31 December 2006, the fair value adjustments made against net assets acquired were provisional. The initial accounting in respect of acquisitions

made during 2006 has since been finalised. The net assets acquired and goodwill arising in respect of all acquisitions made in the year are as follows:

Book value
£m

Fair value
adjustments
£m

Fair value
£m

Acquisition-related intangible assets
Property, plant and equipment and intangible assets other than acquisition-related
Deferred tax assets
Current assets
Current liabilities
Non-current liabilities
Minority interests

Net assets acquired of subsidiary undertakings
Acquisition of minority interests

–
7.0
0.2
22.0
(10.6)
(6.6)
(1.8)

10.2
6.4

17.6
(0.5)
–
(2.1)
(4.7)
(6.4)
0.6

4.5
4.6

Goodwill

Total purchase consideration

Satisfied by:
Cash
Transaction costs
Contingent consideration

Total purchase consideration

17.6
6.5
0.2
19.9
(15.3)
(13.0)
(1.2)

14.7
11.0

72.7

98.4

96.0
0.7
1.7

98.4

Included within current assets acquired is £3.5m of cash and cash equivalents.

Adjustments made to identifiable assets and liabilities on acquisition are to reflect their fair value. These include the recognition of customer-related

intangible assets amounting to £17.6m attributable to the acquisition of subsidiary undertakings and £4.6m attributable to the acquisition of

minority interests. On completion of the fair value exercise during 2007, adjustments made to the provisional calculation amounted to £4.7m, with

an equivalent increase in the reported value of goodwill. The comparative balance sheet at 31 December 2006 has been restated accordingly.

The goodwill arising on acquisitions can be ascribed to the existence of a skilled, active workforce and the opportunities to obtain new contracts

and develop the business. Neither of these meet the criteria for recognition as intangible assets separable from goodwill. Goodwill arising on
acquisition includes £10.1m arising on the acquisition of minority interests.

In the year of acquisition, in aggregate, the acquired businesses contributed £57.1m to revenues, £7.8m to PBITA and £1.8m to profit for the part

year they were under the group’s ownership. If all acquisitions had occurred on 1 January 2006, group revenue would have been £4,092.2m, PBITA

would have been £279.5m and profit for the year would have been £110.0m.

Post balance sheet acquisitions

A number of acquisitions were effected after the balance sheet date, but before the financial statements were authorised for issue, none of which
were individually material. In aggregate, the acquisitions, primarily within Europe, North America and Africa, were satisfied by total consideration of
£66m. In addition, there was a cash outflow of £41m in respect of contingent consideration accrued at 31 December 2007.

It is considered impractical to disclose any further information in relation to acquisitions effected after the balance sheet date because the
preliminary assessment of the fair value of assets and liabilities acquired is in progress.

Acquisition of the Global Solutions group (GSL)

In December 2007, the group announced the acquisition of the entire share capital of De Facto 1119 Limited, the holding company of GSL, for a

total consideration of £355m payable in cash on completion. GSL is an international leader in the provision of support services for governments,

companies and public authorities. The acquisition is subject to approval from the European Commission. The acquisition is expected to complete

following the receipt of such approval in 2008.

Offer for ArmorGroup International plc

In March 2008, the group announced that it was making a recommended cash offer for the shares of ArmorGroup International plc. ArmorGroup

is a leading provider of defensive, protective security services to national governments, multinational corporations and international peace and
security agencies operating in hazardous environments.

72

Notes to the consolidated financial statements (continued)

18 Disposal of a subsidiary

On 2 July 2007, the group disposed of G4S Cash Services (France) SAS.

In 2006, the group disposed of the German cash services business of G4S Geld-und Wertdienste GmbH, where terms were agreed for divestment

on 22 December 2006, and the business and assets of Cognisa Transportation, Inc, disposed of on 28 December 2006.

The net assets of operations disposed of were as follows:

Goodwill
Property, plant and equipment and intangible assets other than acquisition-related
Current assets
Liabilities

Net assets of operations disposed

Financial liabilities arising on disposal
Profit/(loss) on disposal

Total consideration

Satisfied by:
Cash

2007
£m

–
12.9
6.6
(8.3)

11.2

–
9.1

20.3

20.3

2006
£m

7.7
6.9
11.1
(14.5)

11.2

14.7
(19.2)

6.7

6.7

In the current year, £12.4m was paid relating to the disposal of the German cash services business G4S Geld-und Wertdienste GmbH. These

amounts were fully provided for within the loss on disposal recognised in 2006.

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, combined with other operations qualifying as discontinued, on the group’s results and cash flows in the current and

prior year is disclosed in note 7.

19 Intangible assets

2007

Cost

At 1 January 2007
Acquisition of businesses
Additions
Disposals
Disposal of businesses
Reclassified as held for sale
Translation adjustments

At 31 December 2007

Amortisation and accumulated

impairment losses

At 1 January 2007
Amortisation charge
Disposals
Disposal of businesses
Reclassified as held for sale
Translation adjustments

At 31 December 2007

Carrying amount

At 1 January 2007

At 31 December 2007

Goodwill

Acquisition-related intangible assets

Other intangible assets

Total

£m

Trademarks
£m

Customer
related
£m

Technology
£m

Development
expenditure
£m

Software
£m

1,218.0
179.2
–
–
–
(85.1)
46.0

1,358.1

(42.4)
–
–
–
27.8
(11.1)

(25.7)

16.4
–
–
–
–
(0.7)
0.5

16.2

(7.9)
(3.3)
–
–
0.4
(0.2)

274.8
37.2
–
–
–
–
5.9

317.9

(68.4)
(36.2)
–
–
–
(2.1)

(11.0)

(106.7)

1,175.6
1,332.4

8.5
5.2

206.4
211.2

10.9
–
–
–
–
–
(0.2)

10.7

(5.2)
(2.1)
–
–
–
0.1

(7.2)

5.7
3.5

4.8
0.2
2.3
(0.1)
–
(0.3)
0.1

7.0

(0.3)
(0.7)
0.1
–
0.2
(0.1)

(0.8)

4.5
6.2

£m

1,572.0
216.7
17.4
(0.4)
(1.3)
(89.3)
55.3

1,770.4

(153.6)
(50.1)
0.3
1.0
31.0
(15.4)

(186.8)

47.1
0.1
15.1
(0.3)
(1.3)
(3.2)
3.0

60.5

(29.4)
(7.8)
0.2
1.0
2.6
(2.0)

(35.4)

17.7
25.1

1,418.4
1,583.6

73

19 Intangible assets (continued)

2006

Cost

At 1 January 2006
Acquisition of businesses
Additions
Disposals
Disposal of businesses
Translation adjustments

At 31 December 2006

Amortisation and accumulated

impairment losses

At 1 January 2006
Amortisation charge
Impairment losses for the year
Disposals
Disposal of businesses
Translation adjustments

At 31 December 2006

Carrying amount

At 1 January 2006

At 31 December 2006

Goodwill

Acquisition-related intangible assets

Other intangible assets

Total

£m

Trademarks
£m

Customer
related
£m

Technology
£m

Development
expenditure
£m

Software
£m

1,229.0
72.7
–
–
(7.7)
(76.0)

1,218.0

(52.7)
–
–
–
–
10.3

(42.4)

1,176.3

1,175.6

16.9
–
–
–
–
(0.5)

16.4

(4.7)
(3.3)
–
–
–
0.1

(7.9)

12.2

8.5

259.7
22.2
–
–
–
(7.1)

274.8

(39.3)
(30.5)
–
–
–
1.4

(68.4)

220.4

206.4

12.3
–
–
–
–
(1.4)

10.9

(3.5)
(2.2)
–
–
–
0.5

(5.2)

8.8

5.7

2.8
–
2.2
–
–
(0.2)

4.8

(0.1)
(0.3)
–
–
–
0.1

(0.3)

2.7

4.5

47.2
0.1
4.9
(0.7)
(2.3)
(2.1)

47.1

(22.6)
(7.1)
(2.5)
0.2
1.8
0.8

(29.4)

24.6

17.7

£m

1,567.9
95.0
7.1
(0.7)
(10.0)
(87.3)

1,572.0

(122.9)
(43.4)
(2.5)
0.2
1.8
13.2

(153.6)

1,445.0

1,418.4

Included within software is internally generated software with a gross carrying value of £4.7m (2006: £3.5m), and accumulated amortisation of

£2.2m (2006: £1.4m), giving a net book value of £2.5m (2006: £2.1m). During the year, additions amounted to £1.2m (2006: £2.4m) and the

amortisation charge associated to these assets was £0.8m (2006: £1.3m).

Customer-related intangibles comprise the contractual relationship with customers and the customer relationships which meet the criteria for

identification as intangible assets in accordance with IFRS.

Customer contracts and relationships recognised upon the acquisition of Securicor plc on 19 July 2004 are considered significant to the group. The

carrying amount at 31 December 2007 was £152.3m (2006: £172.6m), and the amortisation period remaining in respect of these assets is six and

a half years.

Goodwill acquired in a business combination is allocated to the cash generating units (CGUs) which are expected to benefit from that business

combination. The following CGUs have significant carrying amounts of goodwill:

US security services (manned security)
UK cash services
UK security services (justice services)
Netherlands security services 
UK security services (manned security)
Other (all allocated)

Total goodwill

2007
£m

246.6
226.1
105.8
103.8
65.7
584.4

2006
£m

250.4
226.1
94.0
95.4
63.4
446.3

1,332.4

1,175.6

The group tests tangible and intangible assets, including goodwill, for impairment on an annual basis or more frequently if there are indications that

amounts may be impaired. The annual impairment test is performed just prior to the year end when the budgeting process is finalised. The group’s
impairment test compares the carrying value of each CGU to its recoverable amount. Under IAS 36 Impairment of Assets, an impairment is deemed
to have occurred where the recoverable amount of a CGU is less than its carrying value.

74

Notes to the consolidated financial statements (continued)

19 Intangible assets (continued)

The recoverable amount of a CGU is determined by its value in use which is derived from discounted cash flow calculations. These calculations

include forecast cash flows for a period of five years. The five year cash flow forecasts are based on the budget for the following year (year one)

and the business plans for years two and three, the results of which are reviewed by the board, and projections for years four and five, all of which

reflect past experience as well as future expected market trends. Cash flows beyond the five year forecast period are projected into perpetuity 

at the lower of the planned growth rate in year three and the forecast underlying economic growth rate for the economies in which the CGU

operates. Where the planned growth rate in year three exceeds the forecast underlying economic growth rate, the excess is progressively reduced

in the projections for years four and five. Growth rates across the group’s CGUs range from 0% to 18%. Future cash flows are discounted at a 

pre-tax, weighted average cost of capital which for the group is 11.3% (2006: 10.8%).This rate is adjusted where appropriate to reflect the different

financial risks in each country in which the CGUs operate.

In applying the group’s model, no impairment has been identified and recognised in any of the group’s CGUs for the year ended 31 December

2007 or for the year ended 31 December 2006.

The key assumptions used in the discounted cash flow calculations relate to the discount rate and underlying economic growth rate. With all other

variables being equal, an impairment of approximately £5m would arise if either the group discount rate were to be increased by 1.5% to 12.8%,

with an equivalent increase in the discount rate for all countries, or the underlying growth rate in all countries were to be reduced by 1.6%. These

approximations indicate the sensitivity of the impairment test to changes in the underlying assumptions. However, it is highly unlikely that any

variations in the assumptions would impact on all CGUs at the same time.

20 Property, plant and equipment

2007

Cost

At 1 January 2007
Acquisition of businesses
Additions
Disposals
Disposal of businesses
Reclassified as held for sale
Translation adjustments

At 31 December 2007

Depreciation and accumulated impairment losses

At 1 January 2007
Depreciation charge
Disposals
Disposal of businesses
Reclassified as held for sale
Translation adjustments

At 31 December 2007

Carrying amount

At 1 January 2007

At 31 December 2007

Land and
buildings
£m

Equipment
and vehicles
£m

137.8
3.1
34.5
(12.4)
(12.4)
(0.6)
7.6

157.6

(30.5)
(12.1)
6.9
3.5
0.3
(3.7)

(35.6)

540.4
19.5
105.1
(35.9)
(11.9)
(21.6)
33.5

629.1

(292.8)
(79.0)
19.1
8.2
16.8
(22.5)

(350.2)

Total
£m

678.2
22.6
139.6
(48.3)
(24.3)
(22.2)
41.1

786.7

(323.3)
(91.1)
26.0
11.7
17.1
(26.2)

(385.8)

107.3
122.0

247.6
278.9

354.9
400.9

20 Property, plant and equipment (continued)

2006

Cost

At 1 January 2006
Acquisition of businesses
Additions
Disposals
Disposal of businesses
Translation adjustments

At 31 December 2006

Depreciation and accumulated impairment losses

At 1 January 2006
Depreciation charge
Disposals
Disposal of businesses
Translation adjustments

At 31 December 2006

Carrying amount

At 1 January 2006

At 31 December 2006

The carrying amount of equipment and vehicles includes the following in respect of assets held under finance leases:

Net book value
Accumulated depreciation
Depreciation charge for the year

The rights over leased assets are effectively security for lease liabilities. These rights revert to the lessor in the event of default.

The carrying amount of equipment and vehicles includes the following in respect of assets leased by the group to third parties under operating
leases:

Net book value
Accumulated depreciation
Depreciation charge for the year

The net book value of land and buildings comprises:

Freeholds
Long leaseholds (50 years and over)
Short leaseholds (under 50 years)

2007
£m

32.5
49.0
7.5

2007
£m

51.3
17.0
53.7

At 31 December 2007 the group had entered into contractual commitments for the acquisition of property, plant and equipment amounting 
to £2.1m (2006: £4.3m).

Land and
buildings
£m

Equipment
and vehicles
£m

142.4
0.7
12.3
(8.2)
(4.9)
(4.5)

137.8

(28.2)
(8.5)
3.6
1.4
1.2

(30.5)

114.2

107.3

489.9
5.7
93.4
(12.4)
(12.8)
(23.4)

540.4

(249.5)
(74.3)
8.4
9.9
12.7

(292.8)

240.4

247.6

2007
£m

50.8
47.9
14.0

75

Total
£m

632.3
6.4
105.7
(20.6)
(17.7)
(27.9)

678.2

(277.7)
(82.8)
12.0
11.3
13.9

(323.3)

354.6

354.9

2006
£m

52.3
34.2
11.2

2006
£m

29.3
40.2
5.6

2006
£m

42.9
14.1
50.3

76

Notes to the consolidated financial statements (continued)

21 Investment in joint ventures

The group has the following significant interests in joint ventures:

(a) The group owns 100% of the equity of Wackenhut Services, Inc. (“WSI”) under US Foreign Ownership Controlling Interest provisions,

governed through a proxy agreement. WSI provides security services to US Government agencies including security services on sites deemed

to be strategically sensitive. In accordance with the proxy agreement the group is excluded from access to operational information and is

represented by directors on the WSI board who are independent of the group but under fiduciary and contractual obligation to act in the 

best interest of the shareholder. The group, through the proxy agreement, retains the power to veto certain material operational and strategic

decisions. As day to day management of the business remains with an independent board, WSI is accounted for as a joint venture. This means

that the group proportionately consolidates the results of WSI at 100%, giving rise to an accounting result identical to that which would be the

case if WSI were accounted for as a subsidiary.

(b) At the year end the group owned 59% of the equity of Bridgend Custodial Services Ltd and 50% of the equity in STC (Milton Keynes) Ltd. In

both cases, the group jointly shares operational and financial control over the operations and is therefore entitled to a proportionate share of

the results of each, which are consolidated on the basis of the equity shares held. In addition, at 31 December 2006, the group’s 49% equity

shareholding in Safeguards Securicor Sdn Bhd, in Malaysia, was accounted for as a joint venture. During 2007, the group obtained control of this

operation which is now accounted for as a subsidiary.

The results of each of the jointly controlled operations are prepared in accordance with group accounting policies. Amounts proportionately

consolidated into the group’s financial statements are as follows:

Results

Income
Expenses

Profit after tax

Balance sheet

Assets

Non-current assets
Current assets

Liabilities

Current liabilities
Non-current liabilities

Net assets

22 Investment in associates

The group’s share of associates’ profit and net assets and the reconciliation to the net investment are as follows:

Total assets
Total liabilities

Net investment in associates

Revenue

Profit for the year

2007
£m

320.6
(307.1)

13.5

2007
£m

54.5
92.6

147.1

(56.3)
(52.5)

(108.8)

38.3

2007
£m

14.2
(4.0)

10.2

75.8

3.0

2006
£m

344.4
(326.4)

18.0

2006
£m

49.7
75.8

125.5

(41.6)
(43.2)

(84.8)

40.7

2006
£m

13.1
(5.8)

7.3

83.6

2.8

The net investment and results presented above largely relate to Space Gateway Support LLC, in the USA, in which the group holds an investment
of 46%.

23 Inventories

Raw materials
Work in progress
Finished goods including consumables

Total inventories

24 Investments

77

2007
£m

12.5
7.4
37.2

57.1

2006
£m

9.0
9.5
31.0

49.5

Investments comprise primarily listed securities of £61.6m (2006: £64.2m) held by the group’s wholly-owned captive insurance subsidiaries stated 

at their fair values based on quoted market prices. Use of these investments is restricted to the settlement of claims against the group’s captive

insurance subsidiaries.

25 Trade and other receivables

Within current assets

Trade debtors
Allowance for doubtful debts
Amounts owed by associated undertakings
Other debtors
Prepayments and accrued income
Amounts due from construction contract customers (see note 26)
Derivative financial instruments at fair value (see note 32)

Total trade and other receivables included within current assets

Within non-current assets

Derivative financial instruments at fair value (see note 32)
Other debtors
Amounts receivable under PFI contracts

Total trade and other receivables included within non-current assets

Credit risk on trade receivables

2007
£m

788.5
(36.4)
3.3
64.4
51.6
11.3
2.3

885.0

15.1
13.9
40.4

69.4

2006
£m

709.7
(25.7)
1.2
58.2
40.7
7.0
7.2

798.3

1.4
7.3
41.2

49.9

There is limited concentration of credit risk with respect to trade receivables, as the group’s customers are both large in number and dispersed

geographically in over 100 countries.

Credit terms vary across the group and can range from 0 to 90 days to reflect the different risks within each country in which the group operates.

There is no group-wide rate of provision, and provision is made for debts that are past due according to local conditions and past default experience.

The movement in the allowance for doubtful debts is as follows:

At 1 January
Amounts written off during the year
Increase in allowance

At 31 December

2007
£m

(25.7)
5.4
(16.1)

(36.4)

2006
£m

(24.9)
4.6
(5.4)

(25.7)

Included within trade receivables are trade debtors with a carrying amount of £290m (2006: £351m) which are past due at the reporting date for
which no provision has been made as there has not been a significant change in credit quality and the group believes that the amounts are still
recoverable. The group does not hold any collateral over these balances. The proportion of trade debtors at 31 December 2007 that were
overdue for payment was 39% (2006: 32%). The group-wide average age of all trade debtors at year end was 58 days (2006: 56 days).

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 receivable under PFI contracts

Amounts receivable under PFI contracts comprise the group’s proportion of amounts receivable in respect of the Private Finance Initiative (PFI)

projects undertaken by the group’s joint ventures. During the year the group increased its ownership interest in Bridgend Custodial Services Ltd to

59%. There were no further changes in these arrangements during the year. The projects are the design, construction, financing and management of

HM Prison and Young Offenders Institution Parc in Bridgend, South Wales, for the Home Office; and the Oakhill Secure Training Centre for young

people in Milton Keynes for the Youth Justices Board. The Bridgend contract commenced in January 1996 and expires in December 2022.The

Milton Keynes contract commenced in June 2003 and expires in June 2028. Both contracts can be terminated by the customer either in the event

of a severe failure to comply with the contract or voluntarily with six months notice and the payment of appropriate compensation. The specified

assets remain the property of the customers. The group’s joint ventures have the right to provide services using the specified assets during the life

of the contracts. There is currently no obligation to acquire or build further assets and any such obligation would be agreed with the customers as

variations to the contracts. The pricing basis is inflation-indexed.

Amounts receivable under PFI contracts are pledged as security against borrowings of the group.

26 Construction contracts

Contracts in place at the balance sheet date are as follows:

Amounts due from contract customers included in trade and other receivables
Amounts due to contract customers included in trade and other payables

Net balances relating to construction contracts

Contract costs incurred plus recognised profits less recognised losses to date
Less: Progress billings

Net balances relating to construction contracts

2007
£m

11.3
(1.7)

9.6

32.2
(22.6)

9.6

2006
£m

7.0
(1.5)

5.5

22.6
(17.1)

5.5

At 31 December 2007, advances received from customers for contract work amounted to £2.8m (2006: £3.6m).There were no retentions held by

customers for contract work at either balance sheet date. All trade and other receivables arising from construction contracts are due for

settlement within one year.

The directors believe the fair value of amounts due from and to contract customers, being the present value of future cash flows, approximates to

their book value.

27 Disposal groups classified as held for sale

Disposal groups classified as held for sale as at 31 December 2007 primarily comprise the assets and liabilities associated with the security services
businesses in France, which principally include Group 4 Securicor SAS, and the security services businesses in Germany, which principally include

G4S Sicherheitsdienste GmbH and G4S Sicherheitssysteme GmbH, Berlin.

The major classes of assets and liabilities comprising the operations classified as held for sale are as follows:

ASSETS
Goodwill and acquisition-related intangible assets
Property, plant and equipment and intangible assets other than acquisition-related
Inventories
Trade and other receivables
Cash and cash equivalents
Total assets classified as held for sale

LIABILITIES
Bank overdrafts
Bank loans
Trade and other payables
Current tax liabilities
Retirement benefit obligations
Provisions
Total liabilities associated with assets classified as held for sale

Net assets of disposal group

2007
£m

57.6
5.8
3.3
56.6
7.6

130.9

(8.3)
(0.6)
(62.3)
(2.0)
(1.1)
(4.0)

(78.3)

52.6

79

28 Cash, cash equivalents and bank overdrafts

A reconciliation of cash and cash equivalents reported within the consolidated cash flow statement to amounts reported within the balance sheet

is presented below:

Cash and cash equivalents
Bank overdrafts
Cash, cash equivalents and bank overdrafts included within disposal groups classified as held for sale

Total cash, cash equivalents and bank overdrafts

2007
£m

381.3
(109.9)
(0.7)

270.7

2006
£m

307.5
(97.5)
–

210.0

Cash and cash equivalents principally comprise short-term money market deposits, current account balances and cash held in ATM machines and in
2007 bore interest at a weighted average rate of 3.3% (2006: 3.2%). The credit risk on cash and cash equivalents is limited because the counterparties
are banks with high credit ratings assigned by international credit-rating agencies.

The group operates a multi-currency notional pooling cash management system which included in excess of 80 group companies at 31 December 2007.
It is anticipated that the number of participants in the group will continue to grow. At 31 December 2007 £82.9m (2006: £75.2m) of the cash
balances and the equivalent amount of the overdraft balances were effectively offset for interest purposes within the cash pool.

Cash and cash equivalents of £28.1m (2006: £17.7m) are held by the group’s wholly-owned captive insurance subsidiaries. Their use is restricted to
the settlement of claims against the group’s captive insurance subsidiaries.

29 Bank overdrafts, bank loans and loan notes

Bank overdrafts
Bank loans
Loan notes

Total bank overdrafts, bank loans and loan notes

The borrowings are repayable as follows:
On demand or within one year
In the second year
In the third to fifth years inclusive
After five years

Total bank overdrafts, bank loans and loan notes
Less: Amount due for settlement within 12 months (shown under current liabilities):
– Bank overdrafts
– Bank loans

Amount due for settlement after 12 months

Analysis of bank overdrafts, bank loans and loans notes by currency:

2007
£m

109.9
809.7
290.4

1,210.0

190.5
10.7
702.1
306.7

1,210.0

(109.9)
(80.6)
(190.5)

1,019.5

Bank overdrafts
Bank loans
Loan notes

At 31 December 2007

Bank overdrafts
Bank loans

At 31 December 2006

Sterling
£m

64.4
184.9
–
249.3

61.4
126.1

187.5

Euros
£m

12.4
329.2
–
341.6

12.1
293.6

305.7

US Dollars
£m

Others
£m

2.6
242.2
290.4
535.2

1.1
447.8

448.9

30.5
53.4
–
83.9

22.9
32.9

55.8

Of the borrowings in currency other than sterling, £821m (2006: £763m) are designated as net investment hedging instruments.

2006
£m

97.5
900.4
–

997.9

167.6
6.5
805.5
18.3

997.9

(97.5)
(70.1)
(167.6)

830.3

Total
£m

109.9
809.7
290.4
1,210.0

97.5
900.4

997.9

80

Notes to the consolidated financial statements (continued)

29 Bank overdrafts, bank loans and loan notes (continued)

The weighted average interest rates on bank overdrafts, bank loans and loan notes were as follows:

Bank overdrafts
Bank loans
Loan notes

2007
%

6.0
5.7
5.9

2006
%

4.3
5.1
–

The group’s committed bank borrowings comprise two multicurrency revolving credit facilities totalling £1,087m with a maturity date of June 2012 and

a revolving credit facility of £30m maturing June 2008 with a one year term out option, and uncommitted facilities of £410.9m (2006: £353.3m). At 

31 December 2007, undrawn committed available facilities amounted to £427.9m (2006: £227.7m). Interest on all committed bank borrowing facilities

is at prevailing Libor or Euribor rates, dependent upon the period of drawdown, plus an agreed margin, and repriced within one year or less.

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 fixed rate loan notes in the US Private Placement market totalling US$550m (£276.3m) on 1st March 2007. The notes mature in

March 2014 ($100m), March 2017 ($200m), March 2019 ($145m) and March 2022 ($105m).

The committed bank facilities and the loan notes are subject to one financial covenant and any non-compliance with the covenant may lead to an
acceleration of maturity. The group was fully in compliance with the financial covenant throughout the year to 31 December 2007 and, where

applicable, the year to 31 December 2006. The group has not defaulted on, or breached the terms of, any material loans during the year.

Bank overdrafts and bank loans are stated at amortised cost. Loan notes are stated at amortised cost recalculated at an effective interest rate

current at the balance sheet date. The directors believe the fair value of the group’s bank overdrafts, bank loans and loan notes, calculated from

market prices, approximates to their book value.

30 Obligations under finance leases

Amounts payable under finance leases:
Within one year
In the second to fifth years inclusive
After five years

Less: Future finance charges on finance leases

Present value of lease obligations

Less: Amount due for settlement within 12 months (shown under current liabilities)

Amount due for settlement after 12 months

Minimum
lease
payments
2007
£m

Minimum
lease
payments
2006
£m

18.7
40.3
11.2

70.2
(8.0)

62.2

15.6
40.8
8.4

64.8
(8.7)

56.1

Present
value of
minimum
lease
payments
2007
£m

16.2
35.6
10.4

62.2

Present
value of
minimum
lease
payments
2006
£m

13.6
35.0
7.5

56.1

(16.2)

46.0

(13.6)

42.5

It is the group’s policy to lease certain of its fixtures and equipment under finance leases. The weighted average lease term is eight years. For the 
year ended 31 December 2007, the weighted average effective borrowing rate was 5.4% (2006: 5.5%). Interest rates are fixed at the contract date.
All leases are on a fixed repayment basis and no arrangements have been entered into for contingent rental payments.

The directors believe the fair value of the group’s finance lease obligations, being the present value of future cash flows, approximates to their 

book value.

The group’s obligations under finance leases are secured by the lessors’ charges over the leased assets.

31 Trade and other payables

Within current liabilities:

Trade creditors
Amounts due to construction contract customers (see note 26)
Amounts owed to associated undertakings
Other taxation and social security costs
Other creditors
Accruals and deferred income
Derivative financial instruments at fair value (see note 32)

Total trade and other payables included within current liabilities

Within non-current liabilities:

Derivative financial instruments at fair value (see note 32)
Other creditors

Total trade and other payables included within non-current liabilities

81

2007
£m

137.1
1.7
0.3
129.1
409.4
153.0
15.1

845.7

6.7
32.0

38.7

2006
£m

116.6
1.5
0.7
140.3
311.2
138.5
1.4

710.2

0.3
0.7

1.0

Trade and other payables principally comprise amounts outstanding for trade purchases and ongoing costs. The average credit period taken for

trade purchases is 46 days (2006: 42 days). The directors believe the fair value of trade and other payables, being the present value of future cash

flows, approximates to their book value.

32 Derivative financial instruments

The carrying values of derivative financial instruments at the balance sheet date are presented below:

Forward foreign exchange contracts
Interest rate swaps designated as cash flow hedges
Interest rate swaps designated as fair value hedges
Commodity swaps

Less: Non-current portion

Current portion

Assets
2007
£m

–
3.1
14.3
–

17.4
(15.1)

2.3

Assets
2006
£m

6.3
2.3
–
–

8.6
(1.4)

7.2

Liabilities
2007
£m

Liabilities
2006
£m

13.6
8.2
–
–

21.8
(6.7)

15.1

0.9
0.4
–
0.4

1.7
(0.3)

1.4

Derivative financial instruments are stated at fair value, based upon market prices where available or otherwise on discounted cash flow valuations.
The source of the market prices is Bloomberg and in addition the third party relationship counterparty banks. The relevant currency yield curve is

used to forecast the floating rate cash flows anticipated under the instrument which are discounted back to the balance sheet date. This value is

compared 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:

Within one year
In the second year
In the third year
In the fourth year
In the fifth year or greater

Total carrying value of cash flow hedges

Assets
2007
£m

0.1
1.0
0.6
0.7
0.7

3.1

Assets
2006
£m

0.5
0.3
1.1
0.2
0.2

2.3

Liabilities
2007
£m

Liabilities
2006
£m

0.1
0.9
1.1
2.2
3.9

8.2

0.4
–
–
–
0.4

0.8

82

Notes to the consolidated financial statements (continued)

32 Derivative financial instruments (continued)

Projected settlement of cash flows (including accrued interest) associated with derivatives that are cash flow hedges:

Within one year
In the second year
In the third year
In the fourth year
In the fifth year or greater

Total cash flows 

33 Financial risk

Capital management

Assets
2007
£m

1.7
0.6
0.4
0.2
0.2

3.1

Assets
2006
£m

1.4
0.5
0.4
0.1
–

2.4

Liabilities
2007
£m

Liabilities
2006
£m

1.6
3.1
1.7
0.9
0.9

8.2

0.4
0.1
0.2
0.1
0.1

0.9

The group’s objective in managing its capital is to ensure that the businesses within it can continue and develop as going concerns whilst returns 
to stakeholders are maximised. The group believes that these returns are maximised when the group’s Weighted Average Cost of Capital (WACC)
is minimised and that this is the case when the group broadly has the characteristics of a BBB rated entity. The group therefore aims generally to

maintain its net debt expressed as a multiple of cash generated from operations within a range corresponding to those of BBB rated entities.

The group has a range of return on capital targets in respect of potential acquisitions, depending upon their size. Most proposals for “bolt-on”

acquisitions must demonstrate a post-tax return of at least 12% on the capital investment within 3 years. Medium-sized acquisitions are required to

return a minimum of 10% within this timeframe and relatively rare, large, strategic acquisitions a minimum equal to the group’s WACC. The group’s

calculation of its post-tax WACC at 31 December 2007 was 8.2%.

The group monitors the financial performance of acquired businesses during the years following acquisition against the return targets. In addition,

the group monitors the Return on Net Assets (RONA) of all its businesses on a monthly basis. The group regards RONA as a measure of operational

performance and therefore calculates it as EBITA divided by net assets excluding goodwill, tax, dividends payable and retirement benefit obligations.

The group has no current intention to commence a share buy-back plan. The group operates a programme to purchase its own shares on the

market on a regular basis so as to provide a pool of shares from which to satisfy share awards to employees as the awards vest.

The group is not subject to externally-imposed capital requirements and there were no changes in the group’s approach to capital management

during the year.

Liquidity risk

The group mitigates liquidity risk by ensuring there are sufficient undrawn committed facilities available to it. Policy demands a minimum of 20% 
of such facilities to remain unutilised and in practice the group runs comfortably above this level.

The percentage of available, but undrawn committed facilities during the course of the year was as follows:

31 December 2006

31 March 2007

30 June 2007

30 September 2007

31 December 2007

22%
47%

41%

39%
38%

To reduce re-financing risk, Group Treasury obtains finance with a range of maturities and hence minimises the impact of a single material source 

of finance terminating on a single date.

The group’s committed facilities have the following maturity dates:

June 2008

June 2012

March 2014

March 2017
March 2019
March 2022

£30m

£1,087m

£50m
£100m
£73m
£53m

83

33 Financial risk (continued)

Liquidity risk (continued)

Re-financing risk is further reduced by Group Treasury opening negotiations to either replace or extend any major facility at least 18 months before

its termination date.

Following the example of the inaugural US Private Placement of loan notes issued in March 2007, the group will continue to seek to diversify 

its sources of finance and reduce further the proportion of bank supplied finance.

Market risk

Currency risk and forward foreign exchange contracts

The group conducts business in many currencies. Transaction risk is limited since, wherever possible, each business operates and conducts its

financing activities in local currency. However, the group presents its consolidated financial statements in sterling and it is in consequence subject 

to foreign exchange risk due to the translation of the results and net assets of its foreign subsidiaries. The group hedges a substantial proportion 

of its exposure to fluctuations in the translation into sterling of its overseas net assets by holding loans in foreign currencies.

Translation adjustments arising on the translation of foreign currency loans are recognised in equity to match translation adjustments on foreign

currency equity investments as they qualify as net investment hedges.

The group enters into forward foreign exchange contracts so as to hedge a high proportion of the translation risk not hedged by way of loans.

The group hedges those foreign currencies in which more than 1% of the group’s consolidated net operating assets are denominated, provided there

is a sufficiently liquid and large enough foreign exchange market in which to hedge the currency. Other currencies below the 1% threshold will also

be considered where the cost of hedging is acceptable. Gains and losses on such forward foreign exchange contracts are recognised in equity. The

notional value of outstanding forward foreign exchange contracts at 31 December 2007 was £373.2m (2006: £342.4m). All these contracts had

matured by 29 February 2008, at which point they were replaced with new forward foreign exchange contracts. All the foreign exchange hedging

instruments are designated and fully effective as net investment hedges and movements in their fair value have been deferred in equity.

At 31 December 2007, the group’s US dollar, euro, Canadian dollar and Danish krone net assets were approximately 98%, 90%, 93% and 83%

respectively hedged by foreign currency loans and foreign exchange forward contracts (2006: US dollar 90.6% and euro 94.7%).

The financial instruments used to hedge the foreign currency translation exposure had a fair value loss of £13.6m at 31 December 2007. Assuming a 1%

depreciation of GBP against each of the hedged currencies, the fair value loss on these instruments would increase by a further £3.9m. This additional fair

value loss would be posted to equity. A simultaneous depreciation of GBP against all currencies is unlikely based on past market movements.

Interest rate risk and interest rate swaps

Borrowing at floating rates as described in note 29 exposes the group to cash flow interest rate risk, which the group manages within policy limits
approved by the directors. Interest rate swaps and, to a limited extent, forward rate agreements are utilised to fix the interest rate on a proportion
of borrowings on a reducing scale over forward periods up to a maximum period of five years. At 31 December 2007 the nominal value of such

contracts was £213.5m (in respect of US dollar) (2006: £196.7m) and £183.6m (in respect of euro) (2006: £141.5m), their weighted average interest

rate was 4.9% (US dollar) (2006: 4.9%) and 3.8% (euro) (2006: 3.4%), and their weighted average period to maturity was three years. All the interest

rate hedging instruments are designated and fully effective as cash flow hedges and movements in their fair value have been deferred in equity.

The US Private Placement market is predominantly a fixed rate market, with investors looking for a fixed rate return over the life of the loan notes.
At the time of issue in March 2007, the group was comfortable with the proportion of floating rate exposure not hedged by interest rate swaps
and therefore rather than take on a higher proportion of fixed rate debt arranged fixed to floating swaps effectively converting the fixed coupon

on the Private Placement to a floating rate. Following the swaps the resulting average coupon on the US Private Placement is Libor + 60bps. These
swaps have been documented as fair value hedges of the US Private Placement fixed interest loan notes, with the movements in their fair value
posted to profit and loss at the same time as the movement in the fair value of the hedged item.

The core group borrowings are held in USD, euro and GBP. Although the impact of rising interest rates is partly shielded by interest rate swaps
which fix a portion of the exposure, some interest rate risk remains. Assuming a 1% increase in interest rates across the yield curve in each of
these currencies and keeping the 31 December 2007 debt position constant throughout 2008, an additional interest charge of £5.6m would be
expected in the 2008 financial year.

Commodity risk and commodity swaps

The group’s principal commodity risk relates to the fluctuating level of diesel prices, particularly affecting its cash services businesses. Commodity

swaps are sometimes used to fix synthetically part of the exposure and reduce the associated cost volatility. There were no commodity swaps 

in place at 31 December 2007.

84

Notes to the consolidated financial statements (continued)

33 Financial risk (continued)

Counterparty credit risk

The group’s strategy for credit risk management is to set minimum credit ratings for counterparties and monitor these on a regular basis.

For treasury-related transactions, the policy limits the aggregate credit risk assigned to a counterparty. The utilisation of a credit limit is calculated by

applying a weighting to the notional value of each transaction outstanding with each counterparty based on the type and duration of the transaction.

For short-term transactions (under one year), the financial counterparty must be investment grade rated by either the Standard & Poor’s or Moody’s

rating agency. For long-term transactions, the financial counterparty must have a minimum rating of A+/A1 from Standard & Poor’s or Moody’s.

Treasury transactions are dealt with the group’s relationship banks all of which have a strong investment grade rating. At 31 December 2007 the largest

two counterparty exposures related to Treasury transactions were £5.3m and £4.4m and held with institutions with long term Standard & Poor’s credit

ratings of AA and AA- respectively. These exposures represent 30% and 25% of the carrying values of derivative financial instruments with a fair value

gain at the balance sheet date.

The group operates a multi-currency notional pooling cash management system with a wholly owned subsidiary of an AA rated bank. At year end

credit balances of £84.5m were 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

pooling agreement.

At an operating level the minimum investment grade rating criteria applies. Exceptionally, where required by local country circumstances,

counterparties with no, or a non-investment grade, rating can be approved as counterparties for a period of up to 12 months. Due to the group’s

global geographical footprint and exposure to multiple industries, there is minimal concentration risk.

34 Retirement benefit obligations

The group operates a wide range of retirement benefit arrangements which are established in accordance with local conditions and practices

within the countries concerned. These include funded defined contribution and funded and unfunded defined benefit schemes.

Defined contribution arrangements

The majority of the retirement benefit arrangements operated by the group are of a defined contribution structure, where the employer

contribution and resulting income statement charge is fixed at a set level or is a set percentage of employees’ pay. Contributions made to defined

contribution schemes and charged to the income statement totalled £57.9m (2006: £49.8m).

In the UK, following the closure of the defined benefit schemes to new entrants, the main scheme for new employees is a contracted-in defined

contribution scheme.

Wackenhut Services, Inc (“WSI”) is the administrator of several defined benefit schemes. WSI is responsible for making periodic cost-reimbursable

deposits to the various defined benefit schemes as determined by independent actuaries. In each instance, the US Department of Energy (“DOE”)

acknowledged within the contract entered between the DOE and WSI its responsibility for all unfunded pension and benefit liabilities. Therefore,

these schemes are accounted for as defined contribution schemes.

In the Netherlands, most employees are members of industry-wide defined benefit schemes which are not valued on an IAS 19 basis as it is not
possible to identify separately the group’s share of the schemes’ assets and liabilities. As a result the schemes are accounted for as defined
contribution schemes. Contributions made to the schemes and charged to the income statement in 2007 totalled £4.7m (2006: £4.2m). The estimated

amounts of contributions expected to be paid to the schemes during the financial year commencing 1 January 2008 in respect of the ongoing
accrual of benefits is approximately £4.9m.

Defined benefit arrangements

The group operates a number of defined benefit retirement arrangements where the benefits are based on employees’ length of service and final
pensionable pay. Liabilities under these arrangements are stated at the discounted value of benefits accrued to date, based upon actuarial advice.

Under unfunded arrangements, the group does not hold the related assets separate from the group. The amount charged to the income statement

in respect of these arrangements in 2007 totalled £1.8m (2006: £1.6m). Under funded arrangements, the assets of defined benefit schemes are

held in separate trustee-administered funds. The pension costs are assessed on the advice of qualified independent actuaries using the projected

unit credit method. The group operates several funded defined retirement benefit schemes. Whilst the group’s primary schemes are in the UK,

it also operates other material schemes in the Netherlands, Ireland, Canada and Israel. During 2007, two defined benefit schemes (one in the

Netherlands and one in Israel) have been reclassified, for disclosure purposes, into the material funded defined retirement benefit schemes category.

34 Retirement benefit obligations (continued)

The carrying values of retirement benefit obligations at the balance sheet date are presented below:

UK
Rest of World

Net liability on material funded defined retirement benefit schemes
Unfunded and other funded defined retirement benefit obligations

Less: Amounts included within current liabilities

Included within non-current liabilities

85

2007
£m

121.6
13.9

135.5
31.9

167.4
(47.3)

120.1

2006
£m

210.7
15.7

226.4
24.1

250.5
(42.2)

208.3

The defined benefit schemes in the UK account for 90% of the net balance sheet liability on material funded defined retirement benefit schemes.

They comprise two arrangements: the pension scheme demerged from the former Group 4 Falck A/S with total membership of approximately 8,000

and the Securicor scheme, responsibility for which the group assumed on 20 July 2004 with the acquisition of Securicor plc, with total membership

of approximately 20,000. Regular actuarial assessments of the schemes are carried out, the latest being at 31 March 2007 in respect of the Group 4

scheme and at 5 April 2006 in respect of the Securicor scheme. Pension obligations stated in the balance sheet take account of future service and
earnings increases, have been updated to 31 December 2007 and use the valuation methodologies specified in IAS 19 Employee Benefits.

The weighted average principal assumptions used for the purposes of the actuarial valuations were as follows:

Key assumptions used 2007

Discount rate
Expected return on scheme assets
Expected rate of salary increases
Future pension increases
Inflation

Key assumptions used 2006

Discount rate
Expected return on scheme assets
Expected rate of salary increases
Future pension increases
Inflation

UK

Rest of World

5.8%
6.7%
5.2%
3.4%
3.4%

5.2%
6.5%
4.9%
3.1%
3.1%

5.5%
5.8%
3.3%
2.1%
2.2%

4.8%
5.8%
3.7%
2.3%
2.3%

In addition to the above, the group uses appropriate mortality assumptions when calculating the schemes obligations. The mortality tables used for
the schemes in the UK are as follows:

> Current and future pensioners
> Current and future pensioners

125% of PMA92 (YOB) Short Cohort Male
115% of PFA92 (YOB) Short Cohort

Female

The amounts recognised in the income statement in respect of these defined benefit schemes are as follows:

Amounts recognised in income 2007

Current service cost
Finance cost on defined retirement benefit obligations
Expected return on defined retirement benefit scheme assets

Total amounts recognised in income

Amounts recognised in income 2006

Current service cost
Past service cost
Finance cost on defined retirement benefit obligations
Expected return on defined retirement benefit scheme assets

Total amounts recognised in income

UK
£m

Rest of World
£m

(11.5)
(68.4)
73.9

(6.0)

(10.2)
(0.4)
(63.3)
64.8

(9.1)

(4.1)
(3.9)
3.4

(4.6)

(3.5)
(0.7)
(2.9)
2.4

(4.7)

Total
£m

(15.6)
(72.3)
77.3

(10.6)

(13.7)
(1.1)
(66.2)
67.2

(13.8)

86

Notes to the consolidated financial statements (continued)

34 Retirement benefit obligations (continued)

The amounts recognised in income are included within the following categories in the income statement:

Cost of sales
Administration expenses
Finance income
Finance costs

Total

Actuarial gains and losses recognised cumulatively in the statement of recognised income and expense are as follows:

At 1 January
Recognised in the year

At 31 December

2007
£m

(11.3)
(4.3)
77.3
(72.3)

(10.6)

2007
£m

(72.5)
64.7

(7.8)

2006
£m

(11.1)
(3.7)
67.2
(66.2)

(13.8)

2006
£m

(39.1)
(33.4)

(72.5)

The amounts included in the balance sheet arising from the group’s obligations in respect of its defined benefit schemes are as follows:

2007

Present value of defined benefit obligations
Fair value of scheme assets

Deficit in scheme recognised in the balance sheet

2006

Present value of defined benefit obligations
Fair value of scheme assets

Deficit in scheme recognised in the balance sheet

2005

Present value of defined benefit obligations
Fair value of scheme assets

Deficit in scheme recognised in the balance sheet

2004

Present value of defined benefit obligations
Fair value of scheme assets

Deficit in scheme recognised in the balance sheet

UK
£m

Rest of World
£m

Total
£m

1,291.3
(1,169.7)

121.6

1,328.8
(1,118.1)

210.7

1,199.3
(1,004.5)

194.8

1,038.6
(845.8)

192.8

84.6
(70.7)

13.9

61.1
(45.4)

15.7

61.1
(39.3)

21.8

87.0
(59.6)

27.4

1,375.9
(1,240.4)

135.5

1,389.9
(1,163.5)

226.4

1,260.4
(1,043.8)

216.6

1,125.6
(905.4)

220.2

34 Retirement benefit obligations (continued)

Movements in the present value of defined benefit obligations in the current year and the fair value of scheme assets during the year were as

87

follows:

2007

Obligations

At 1 January 2007
Service cost
Interest cost
Contributions from scheme members
Actuarial gains
Benefits paid
Other
Translation adjustments

At 31 December 2007

Assets

At 1 January 2007
Expected return on scheme assets
Actuarial losses
Actual return on scheme assets
Contributions from the sponsoring companies
Contributions from scheme members
Benefits paid
Other
Translation adjustments

At 31 December 2007

2006

Obligations

At 1 January 2006
Service cost
Past service cost
Interest cost
Contributions from scheme members
Actuarial losses/(gains)
Benefits paid
Acquisitions/divestments
Other
Translation adjustments

At 31 December 2006

Assets

At 1 January 2006
Expected return on scheme assets
Actuarial gains 
Actual return on scheme assets
Contributions from the sponsoring companies
Contributions from scheme members
Benefits paid
Acquisitions/divestments
Other
Translation adjustments

At 31 December 2006

UK
£m

Rest of World
£m

Total
£m

1,328.8
11.5
68.4
3.3
(77.5)
(44.5)
1.3
–
1,291.3

1,118.1
73.9
(16.6)
57.3
34.2
3.3
(44.5)
1.3
–
1,169.7

61.1
4.1
3.9
1.9
(8.4)
(1.3)
15.9
7.4
84.6

45.4
3.4
(4.6)
(1.2)
3.8
1.9
(1.3)
15.7
6.4
70.7

1,389.9
15.6
72.3
5.2
(85.9)
(45.8)
17.2
7.4
1,375.9

1,163.5
77.3
(21.2)
56.1
38.0
5.2
(45.8)
17.0
6.4
1,240.4

UK
£m

Rest of World
£m

Total
£m

1,199.3
10.2
0.4
63.3
3.5
85.4
(36.7)
0.4
3.0
–

1,328.8

1,004.5
64.8
45.4
110.2
33.2
3.5
(36.7)
0.4
3.0
–

1,118.1

61.1
3.5
0.7
2.9
1.0
(4.0)
(1.2)
0.5
–
(3.4)

61.1

39.3
2.4
2.6
5.0
3.2
1.0
(1.2)
0.5
–
(2.4)

45.4

1,260.4
13.7
1.1
66.2
4.5
81.4
(37.9)
0.9
3.0
(3.4)

1,389.9

1,043.8
67.2
48.0
115.2
36.4
4.5
(37.9)
0.9
3.0
(2.4)

1,163.5

The contribution from sponsoring companies in 2007 included £26.1m (2006: £24.2m) of additional contributions in respect of the deficit in the
schemes. The other movements in the rest of the world in 2007 represent the reclassification as material of two funded plans.

88

Notes to the consolidated financial statements (continued)

34 Retirement benefit obligations (continued)

The composition of the scheme assets at the balance sheet date is as follows:

Analysis of scheme assets

UK

Rest of World

Total

2007

Equity instruments
Debt instruments
Property
Other assets

2006

Equity instruments
Debt instruments
Property
Other assets

68%
30%
–
2%

100%

70%
27%
–
3%

100%

50%
21%
4%
25%

100%

64%
27%
6%
3%

100%

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:

2007 (return expected in 2008)
2006 (return expected in 2007)
2005 (return expected in 2006)

UK

Rest of World

6.9%
6.7%
6.5%

6.2%
6.2%
5.8%

67%
30%
–
3%

100%

70%
27%
–
3%

100%

Total

6.9%
6.7%
6.4%

The expected rates of return on individual categories of scheme assets are determined with respect to bonds by reference to relevant indices, and

with respect to other assets by reference to relevant indices of the historical return and economic forecasts of future returns relative to inflation in

respect of assets of a similar nature. The overall expected rate of return is the weighted average of the rates on the individual asset categories.

The history of experience adjustments is as follows:

2007

Experience adjustments on scheme liabilities

Amount (£m)
Percentage of scheme liabilities (%)

Experience adjustments on scheme assets

Amount (£m)
Percentage of scheme assets (%)

2006

Experience adjustments on scheme liabilities

Amount (£m)
Percentage of scheme liabilities (%)

Experience adjustments on scheme assets

Amount (£m)
Percentage of scheme assets (%)

2005

Experience adjustments on scheme liabilities

Amount (£m)
Percentage of scheme liabilities (%)

Experience adjustments on scheme assets

Amount (£m)
Percentage of scheme assets (%)

UK

Rest of World

Total

5.5
–

(16.6)
(1)

29.0
2

45.4
4

(17.5)
(1)

99.0
10

(3.1)
(4)

(4.6)
(7)

0.1
–

2.6
6

1.1
2

2.4
6

2.4
–

(21.2)
(2)

29.1
2

48.0
4

(16.4)
(1)

101.4
10

34 Retirement benefit obligations (continued)

2004

Experience adjustments on scheme liabilities

Amount (£m)
Percentage of scheme liabilities (%)

Experience adjustments on scheme assets

Amount (£m)
Percentage of scheme assets (%)

89

UK

Rest of World

Total

(2.7)
(1)

30.2
4

–
–

3.7
6

(2.7)
(1)

33.9
4

The estimated amounts of contributions expected to be paid to the schemes during the financial year commencing 1 January 2008 in respect of

the ongoing accrual of benefits is approximately £18m and it is anticipated that these will remain at a similar level in the medium term subject to

changes in financial conditions. Additional contributions of around £26m will also be made in 2008 in respect of the deficit in the schemes.

IAS 19 specifies that pension liabilities should be discounted at appropriate high quality corporate bond rates. The directors consider that it is appropriate

to apply the average of the yields on those AA corporate bonds which most closely approximate to the timescale of the liability profile of the schemes

and have therefore used such a rate, being 5.8%, in respect of the UK schemes at 31 December 2007 (5.2% at 31 December 2006). The effect of a 0.1%

movement in the discount rate applicable in the UK is to alter reported liabilities (before associated deferred tax) by approximately £26m.

Liability calculations are also heavily impacted by the mortality projections included in the actuarial assumptions. The weighted average life

expectancy of a male member of the UK schemes currently aged 65 has been assumed as 19.6 years. The weighted average life expectancy 

at 65 of a male currently aged 52 has been assumed as 20.4 years. The directors consider, on actuarial advice, these assumptions to be appropriate 

to the profile of the membership of the schemes. The effect of a one year change in this UK life expectancy assumption is to alter reported

liabilities (before associated deferred tax) by approximately £49m.

Pension obligations in respect of deferred members increase in line with inflation. Increases in salaries and increases in pensions-in-payment

generally move in line with inflation. Inflation is therefore an important assumption in the calculation of defined retirement benefit liabilities. The

effect of a 0.1% movement in the rate of inflation assumption applicable in the UK is to alter reported liabilities (before associated deferred tax) 

by approximately £14m.

35 Provisions

At 1 January 2007
Additional provision in the year
On acquisition of subsidiary
Utilisation of provision
Unused amounts reversed
Reversals on disposal of a subsidiary
Reclassified as held for sale
Translation adjustments

At 31 December 2007

Included in current liabilities
Included in non-current liabilities

Employee benefits

Employee
benefits
£m

Restructuring
£m

Claims
reserves
£m

Onerous
contracts
£m

11.5
3.6
–
(2.3)
(0.6)
–
(2.0)
0.2
10.4

1.9
5.2
0.2
(1.2)
(2.4)
–
–
0.2
3.9

37.9
12.2
–
(10.9)
(9.0)
–
–
–
30.2

10.1
–
8.2
(3.6)
–
–
(2.0)
0.3
13.0

Other
£m

18.6
–
2.4
(18.6)
(2.5)
(0.6)
–
0.7
–

Total
£m

80.0
21.0
10.8
(36.6)
(14.5)
(0.6)
(4.0)
1.4
57.5

23.6
33.9
57.5

The provision for employee benefits is in respect of any employee benefits which accrue over the working lives of the employees, typically including

items such as long service awards and termination indemnity schemes.

Restructuring

Restructuring provisions include amounts for redundancy payments, and the costs of closure of activities in acquired businesses and discontinued

operations. Settlement of restructuring provisions is highly probable. The timing is uncertain but is generally likely to be short term.

90

Notes to the consolidated financial statements (continued)

35 Provisions (continued)

Claims reserves

The claims reserves are held by the wholly-owned captive insurance subsidiaries in Guernsey, Luxembourg and the US which underwrite part 

of the group’s cash services, general liability, workers’ compensation and auto liability policies. The provisions are subject to regular actuarial review

and are adjusted as appropriate. Settlement of these provisions is highly probable but both the value of the final settlements and their timing is

uncertain, dependent upon the outcome of ongoing processes to determine both liability and quantum in respect of a wide range of claims or

possible claims.

Onerous contracts

The onerous contract provision mainly comprises the provision against future liabilities for all properties sub-let at a shortfall and for long-term idle,

leased properties. The provision is based on the value of future net cash outflows relating to rent, rates, service charges and costs of marketing the

properties. Whilst the likelihood of settlement of these obligations is considered probable, there is uncertainty over their value and duration.

Other provisions

Other provisions include amounts arising in respect of disposals where their final calculation is dependent on future events. The company and

various of its subsidiaries are, from time to time, parties to legal proceedings and claims which arise in the ordinary course of business. Provision 

is made for the estimated value of settlements likely to be made, but both this value and the timing of any payments are uncertain. The directors

do not anticipate, taking account of legal and other professional advice as appropriate, that the outcome of these proceedings and claims will have 

a material adverse effect on the group’s financial position or on the results of its operations.

36 Deferred tax

The following are the major deferred tax liabilities and assets recognised by the group and movements thereon during the current and prior

reporting periods:

At 1 January 2006
(Charge)/credit to the income statement
Acquisition of subsidiaries
Credit/(charge) to equity
Translation adjustments

At 31 December 2006

At 1 January 2007
(Charge)/credit to the income statement
Acquisition of subsidiaries
(Charge)/credit to equity
Translation adjustments

At 31 December 2007

Retirement
benefit
obligations
£m

Intangible
assets
£m

Tax losses
£m

Other
temporary
differences
£m

74.1
(10.6)
–
9.7
–

73.2

73.2
(14.6)
–
(22.2)
0.7
37.1

(70.9)
10.8
(3.9)
–
2.8

(61.2)

(61.2)
14.9
(9.7)
–
(3.7)
(59.7)

8.2
(1.4)
–
–
–

6.8

6.8
(1.7)
–
–
–
5.1

16.7
1.6
–
(2.1)
(1.0)

15.2

15.2
5.2
0.1
6.9
(0.7)
26.7

Total
£m

28.1
0.4
(3.9)
7.6
1.8

34.0

34.0
3.8
(9.6)
(15.3)
(3.7)
9.2

Certain deferred tax assets and liabilities have been offset where permitted. The following is the analysis of the deferred tax balances (after offset)
for financial reporting purposes:

Deferred tax liabilities
Deferred tax assets

Total deferred tax position

2007
£m

(75.0)
84.2

9.2

2006
£m

(81.7)
115.7

34.0

At the balance sheet date, the group has unutilised tax losses of approximately £126.5m (2006: £118.4m) potentially available for offset against

future profits. A deferred tax asset of £5.1m (2006: £6.8m) has been recognised in respect of approximately £19.3m (2006: £32.1m) of gross

losses. No deferred tax asset has been recognised in respect of the remaining £107.2m (2006: £86.3m) of gross losses due to the unpredictability

of future profit streams in the relevant jurisdictions and the fact that a significant proportion of such losses remains unaudited by the relevant tax

authorities. Included in unrecognised tax losses are gross losses of £0.8m, £3.0m, £1.7m, £1.4m and £0.4m which will expire in 2008, 2009, 2010,

2011 and 2012 respectively. Other losses may be carried forward indefinitely.

91

36 Deferred tax (continued)

At the balance sheet date, the aggregate amount of temporary differences associated with undistributed earnings of non-UK subsidiaries for which

deferred tax liabilities have not been recognised is £2,504m (2006: £1,056m). No liability has been recognised in respect of these gross differences

on the basis that the group is in a position to control the timing of the reversal of the temporary differences and it is probable that such

differences will not reverse in the foreseeable future.

Temporary differences arising in connection with interests in associates and joint ventures are insignificant.

At the balance sheet date, the group has total unprovided contingent tax liabilities of approximately £39.0m (2006: £31.8m) relating to unresolved

tax issues in various jurisdictions. No provision has been made for these amounts on the basis that the group considers that the likelihood of the

liabilities crystallising is improbable. It is not possible to estimate the timing or outcome of these issues.

37 Share capital

G4S plc

Ordinary shares of 25p each (2006: 25p each)

Ordinary shares in issue

At 1 January 2006
Shares issued on exercise of options:

Executive Scheme
Sharesave Scheme

At 1 January 2007
Shares issued on exercise of options:

Executive Scheme
Sharesave Scheme

At 31 December 2007

At 31 December 2007

Authorised
£

Issued and
fully paid
£

At 31 December 2006

Authorised
£

Issued and
fully paid
£

500,000,000 320,177,685

500,000,000

319,954,230

Number

Nominal
value £m

1,268,715,480

317.2

3,556,271
7,545,167

1,279,816,918

667,500
226,320
1,280,710,738

0.9
1.9

320.0

0.2
–
320.2

The holders of ordinary shares are entitled to receive dividends as declared from time to time and are entitled to one vote per share at meetings
of the company.

Options over G4S plc shares outstanding at 31 December 2007, rolled over at 19 July 2004 from options previously held over Securicor plc shares,
were as follows:

(a) Executive share option scheme

Number of options outstanding

Number of ordinary shares under option

Exercise price per share (pence)

Exercise date

1
9
9
10
5
2
1
1
1

72,901
450,000
300,000
230,000
1,655,000
150,000
25,000
25,000
50,000

107.98p
164p
133.75p
153p
108p
130p
85p
79.75p
91p

2008
2008 – 2009
2008 – 2010
2008 – 2010
2008 – 2011
2008 – 2012
2008 – 2013
2008 – 2013
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) Sharesave scheme

All remaining shares under this scheme have been exercised or have lapsed during the year. The proceeds from shares allotted under this

scheme during the year amounted to £144,845 (2006: £4,860,469).

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
premium
£m

4.0

–
6.3
–
–
–

10.3

10.3

–
0.7
–
–
–
–
11.0

At 1 January 2006
Net recognised income/(expense)

attributable to equity shareholders
of the parent

Shares issued
Dividends declared
Own shares purchased
Equity-settled transactions

At 31 December 2006

At 1 January 2007
Net recognised income/(expense)

attributable to equity shareholders
of the parent

Shares issued
Dividends declared
Own shares purchased
Own shares awarded
Equity-settled transactions

At 31 December 2007

Hedging reserve

Retained
earnings
£m

157.0

Hedging
reserve
£m

Translation
reserve
£m

(5.8)

49.8

Merger
reserve
£m

426.3

–
–
–
–
–

426.3

(52.6)
–
–
–
–

(2.8)

(2.8)

426.3

38.8
–
–
–
–
–
36.0

–
–
–
–
–
–
426.3

Reserve for
own shares
£m

Total
reserves
£m

(6.3)

625.0

–
–
–
(3.1)
–

(9.4)

(9.4)

–
–
–
(3.1)
3.5
–
(9.0)

31.8
6.3
(49.8)
(3.1)
5.0

615.2

615.2

209.3
0.7
(59.3)
(3.1)
–
4.1
766.9

73.8
–
(49.8)
–
5.0

186.0

186.0

189.7
–
(59.3)
–
(3.5)
4.1
317.0

10.6
–
–
–
–

4.8

4.8

(19.2)
–
–
–
–
–
(14.4)

The hedging reserve comprises the effective portion of the cumulative net change in the fair value of cash flow instruments related to the hedged
transactions that have not yet occurred (net of tax).

Translation reserve

The translation reserve comprises all foreign exchange differences arising from the translation of the financial statements of foreign operations,

as well as from the translation of liabilities that hedge the company’s net investment in foreign operations (net of tax).

Merger reserve

The merger reserve comprises reserves arising upon the merger between the former Group 4 Falck A/S and the former Group 4 Securitas BV 
in 2000 and the acquisition of Securicor plc by the group in 2004.

Reserve for own shares

An employee benefit trust established by the group holds 5,209,320 shares (2006: 6,022,967 shares), to satisfy the vesting of awards under the

performance share plan and performance-related and synergy bonus schemes. During the year 1,451,326 shares were purchased by the trust, whilst
2,264,973 shares were used to satisfy the vesting of awards under the schemes. At 31 December 2007, the cost of shares held by the trust was
£8,953,071 (2006: £9,435,828), whilst the market value of these shares was £12,749,808 (2006: £11,323,178). Shares held by the trust are treated
as treasury shares, are deducted from equity, do not bear dividends and are excluded from the calculations of earnings per share.

39 Analysis of net debt

A reconciliation of net debt to amounts in the consolidated balance sheet is presented below:

Cash and cash equivalents
Investments
Net debt included within disposal groups classified as held for sale
Bank overdrafts
Bank loans
Loan notes
Fair value of loan note derivative financial instruments
Obligations under finance leases

Total net debt

An analysis of movements in net debt in the year is presented below:

Increase in cash, cash equivalents and bank overdrafts per consolidated cash flow statement
Purchase of investments
Increase in debt and lease financing

Change in net debt resulting from cash flows
Borrowings acquired with subsidiaries
Net additions to finance leases

Movement in net debt in the year
Translation adjustments
Net debt at the beginning of the year

Net debt at the end of the year

40 Contingent liabilities

93

2007
£m

381.3
73.2
(1.5)
(109.9)
(809.7)
(290.4)
14.3
(62.2)

(804.9)

2007
£m

48.8
0.3
(135.8)

(86.7)
(22.9)
(10.3)

(119.9)
(12.2)
(672.8)

(804.9)

2006
£m

307.5
73.7
–
(97.5)
(900.4)
–
–
(56.1)

(672.8)

2006
£m

16.1
21.8
(86.7)

(48.8)
(2.5)
(19.6)

(70.9)
55.4
(657.3)

(672.8)

Contingent liabilities exist in respect of agreements entered into in the normal course of business, none of which are individually or collectively significant.

Details of unprovided contingent tax liabilities are presented in note 36.

41 Operating lease arrangements

The group as lessee

At the balance sheet date, the group had outstanding commitments under non-cancellable operating leases, which fall due as follows:

Within one year
In the second to fifth years inclusive
After five years

Total operating lease commitments

2007
£m

95.6
185.8
148.2

429.6

2006
£m

72.4
140.2
130.4

343.0

The group leases a number of its office properties, vehicles and other operating equipment under operating leases. Leased properties are
negotiated over an average term of eight and a half years, at rates reflective of market rentals. Periodic rent reviews take place to bring lease rentals
in line with prevailing market conditions. Some but not all lease agreements have an option to renew the lease at the end of the lease term. Leased
vehicles and other operating equipment are negotiated over an average lease term of three and a half years.

Certain leased properties have been sub-let by the group. Sub-leases are negotiated on terms consistent with those of the associated property.

The total future minimum sub-lease payments expected to be received by the group from sub-let properties amount to £16.4m (2006: £18.3m).

94

Notes to the consolidated financial statements (continued)

42 Share-based payments

The group has two types of equity-settled, share-based payment scheme in place: (1) share options previously held by employees over 

Securicor plc shares and rolled over to G4S plc shares with the acquisition of that business on 19 July 2004, and (2) conditional allocations 

of G4S plc shares.

Share options

Share options rolled over from Securicor plc fall under either the Executive Share Option Scheme (ESOS) or the Sharesave Scheme. Options

under the ESOS were granted at market value, vest three or four years following the date of grant (provided that certain non-market performance

conditions are met and that the recipients continue to be employed by the group during the vesting period) and are exercisable up to ten years

following the date of grant. Options under the Inland Revenue-approved Sharesave scheme were granted at a discount of 20% to market value,

vest after three years following the date of grant and remain exercisable for a period of six months following vesting.

Details of the share options outstanding during the year are as follows:

Outstanding at 1 January
Forfeited during the year
Exercised during the year
Expired during the year

Outstanding at 31 December

Exercisable at 31 December

Number of
shares under
option
2007

3,912,990
–
(893,820)
(61,269)

2,957,901

Weighted
average
exercise
price (pence)
2007

117.73
–
103.89
64.00

123.02

Number of
shares under
option
2006

15,377,443
(249,061)
(11,101,438)
(113,954)

3,912,990

Weighted
average
exercise
price (pence)
2006

91.23
70.50
82.22
104.00

117.73

2,957,901

123.02

3,912,990

117.73

The weighted average share price at the date of exercise for share options exercised during the year was 197.85p (2006: 174.56p). All options

outstanding at 31 December 2007 were vested.

No share option expense has been recognised in the income statement during the year (2006: £1.4m) as all share options had previously vested.

Shares allocated conditionally

Shares allocated conditionally fall under either the group’s performance-related bonus scheme or the group’s Performance Share Plan (PSP). Shares

allocated conditionally under the performance-related bonus scheme vest three years following the date of grant provided certain non-market

performance conditions are met. Those allocated under the PSP vest after three years, to the extent that (a) certain non-market performance

conditions are met as to two thirds of the allocation (one half for awards made prior to 2007) and (b) certain market performance conditions are
met as to the remaining third of the allocation (half for awards made prior to 2007).

The number of shares allocated conditionally is as follows:

Outstanding at 1 January
Allocated during the year
Transferred during the year
Forfeited during the year
Expired during the year

Outstanding at 31 December

Performance-
related
bonus
scheme
2007
Number

PSP
2007
Number

Total
2007
Number

1,915,270
377,725
(311,218)
–
–

11,154,403
4,359,350
(1,953,755)
(952,469)
(1,147,460)

13,069,673
4,737,075
(2,264,973)
(952,469)
(1,147,460)

1,981,777

11,460,069

13,441,846

Performance-
related
bonus
scheme
2006
Number

–
1,915,270
–
–
–

PSP
2006
Number

7,763,419
3,716,815
–
(325,831)
–

Total
2006
Number

7,763,419
5,632,085
–
(325,831)
–

1,915,270

11,154,403

13,069,673

The weighted average remaining contractual life of conditional share allocations outstanding at 31 December 2007 was 16 months (2006: 17 months).

The weighted average share price at the date of allocation of shares allocated conditionally during the year was 216.83p (2006: 185.14p) and the

contractual life of all conditional allocations was three years.

Under the PSP, the vesting of two thirds of the shares allocated conditionally (one half for awards made prior to 2007) depends upon Total
Shareholder Return (a market performance condition) over the vesting year measured against a comparator group. 25% of the allocation vests
upon the group’s Total Shareholder Return equalling median performance amongst the comparator group. The fair value of the shares allocated

subject to this market performance condition has therefore been reduced by 75%.

95

42 Share-based payments (continued)

Shares allocated conditionally (continued)

Total expenses of £4.1m were recognised in the income statement in the year (2006: £3.6m) in respect of conditional share allocations, the

calculation of which included an estimate of the number of those shares allocated subject to non-market performance conditions that would vest

based upon the probable achievement against the performance conditions.

43 Related party transactions

Transactions and balances with joint ventures and associated undertakings

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

Revenue

Balances

Amounts due to related parties

Creditors

Amounts due from related parties

Debtors
Loans

Joint ventures
2007
£m

Joint ventures
2006
£m

Associates
2007
£m

Associates
2006
£m

13.8

14.5

–

0.7
2.3

–

1.4
3.5

–

1.5

–
–

–

5.4

–
–

Revenue relates to fees of £10.4m (2006: £9.6m) charged to Bridgend Custodial Services Ltd and fees of £3.4m (2006: £4.9m) charged to 

STC (Milton Keynes) Ltd. Amounts owed by the group are to its associated undertaking Space Gateway Support LLC. The amounts outstanding

are unsecured and will be settled in cash. No expense has been recognised in the year for bad and doubtful debts in respect of amounts owed by

related parties. Details of principal joint ventures and associated undertakings are shown in notes 21 and 22 respectively.

Transactions with Mr Jørgen Philip-Sørensen, whilst a director (retired 30 June 2006)

In 2006, the group purchased air transport services of £19,300 and leased office facilities for £34,707 from Mr Jørgen Philip-Sørensen at cost price.

Transactions with post-employment benefit schemes

Details of transactions with the group’s post-employment benefit schemes are provided in note 34. Unpaid contributions owed to schemes
amounted to £1.4m at 31 December 2007 (2006: £1.5m).

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 41 to 44.

Short-term employee benefits
Post-employment benefits
Other long-term benefits
Share-based payment

Total

2007
£

4,869,365
343,443
28,896
2,344,412

7,586,116

2006
£

4,337,944
826,777
22,138
2,022,518

7,209,377

44 Events after the balance sheet date

A number of acquisitions were effected after the balance sheet date, but before the financial statements were authorised for issue, details of which

are provided within note 17.

On 7 March 2008 the group signed committed bank facilities amounting to £350m. These facilities expire on 31 December 2008, although the

group can exercise an option to extend the facilities to 30 June 2009.

96

Notes to the consolidated financial statements (continued)

45 Significant investments

The companies listed below are those which were part of the group at 31 December 2007 and which, in the opinion of the directors, significantly

affected the group’s results and net assets during the year. The directors consider that those companies not listed are not significant in relation to the

group as a whole.

The principal activities of the companies listed below are indicated according to the following key:

Security services

Cash services

S

C

These businesses operate principally in the country in which they are incorporated.

Product
segment

Country of
incorporation

Ultimate
ownership

Subsidiary undertakings
Group 4 Security Services AG
G4S Security Services SA/NV
G4S Cash Services (Belgium) SA/NV
G4S Cash Services (Canada) Limited
G4S Security Services (Canada) Limited
Wackenhut de Colombia SA
G4S Security Services A/S
G4S Aviation Security (UK) Limited
G4S Cash Centres (UK) Limited
G4S Cash Services (UK) Limited
G4S International UK Limited
G4S Justice Services Limited
G4S Security Services (UK) Limited
Group 4 Technology Limited
Group 4 Total Security Limited
Falck Eesti AS
G4S Security Services Oy
Group 4 Securicor SAS
G4S Sicherheitsdienste GmbH
G4S Keszpenzlogisztikai Kft
G4S Security Services (India) Pvt. Limited 1,4
G4S Cash Services (Ireland) Limited
G4S Security Services (Ireland) Limited
Hashmira Company Limited
G4S Security Services (Kenya) Limited
G4S Security Services SA
Safeguards Securicor Sdn Bhd 2,4
Group 4 Securicor Cash Services BV
Group 4 Securicor Beheer BV
G4S Security Services AS
G4S Security Systems AS
al Majal Service Master 4
Fidelity Cash Management Services (Pty) Limited
G4S Security Services (SA) (Pty) Limited
G4S Cash Services (Sverige) AB
G4S Security Services (Sverige) AB
G4S Youth Services LLC
The Wackenhut Corporation

Joint ventures (see note 21)
Bridgend Custodial Services Limited 3
STC (Milton Keynes) Limited
Wackenhut Services, Inc.

Associated undertakings (see note 22)
Space Gateway Support LLC

S
S
C
C
S
S+C
S
S
C
C
C
S
S
S
S
S+C
S
S
S
S+C
S
C
S
S
S+C
S+C
S+C

Austria
Belgium
Belgium
Canada
Canada
Colombia
Denmark
England
England
England
England
England
England
England
England
Estonia
Finland
France
Germany
Hungary
India
Ireland
Ireland
Israel
Kenya
Luxembourg
Malaysia
C Netherlands
S Netherlands
Norway
Norway
Saudi Arabia
South Africa
South Africa
Sweden
Sweden
USA
USA

S+C
S
S
C
S
C
S
S
S

England
England
USA

S
S
S

S

100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
65%
100%
100%
100%
100%
40%
100%
100%
91%
100%
100%
49%
100%
100%
100%
100%
49%
50%
80%
100%
100%
90%
100%

59%
50%
100%

USA

46%

1 G4S Security Services (India) Pvt. Limited has a year end of 31 March.

2

3

4

Safeguards Securicor Sdn Bhd has a year end of 30 June.

Bridgend Custodial Services Limited has a year end of 30 September.

By virtue of shareholder agreements, the group has the power to govern the financial and operating policies 

of G4S Security Services (India) Pvt. Limited, Safeguards Securicor Sdn Bhd and al Majal Service Master, so as to obtain

the benefits from their activities. These are therefore consolidated as full subsidiaries.

Parent company balance sheet

At 31 December 2007

97

Fixed assets

Tangible assets
Investments

Current assets

Debtors
Cash at bank and in hand

Creditors – amounts falling due within one year

Bank overdraft (unsecured)
Borrowings (unsecured)
Other

Net current (liabilities)/assets

Total assets less current liabilities

Creditors – amounts falling due after more than one year

Borrowings (unsecured)
Other

Provisions for liabilities and charges

Net assets

Capital and reserves

Called up share capital
Share premium and reserves

Equity shareholders’ funds

Notes

(b)
(c)

(d)

(e)
(f)

(e)
(f)

(i)

37
(j)

(k)

2007
£m

4.3
2,214.9

2,219.2

1,418.1
9.7

1,427.8

(63.6)
(15.0)
(2,141.2)

(2,219.8)

(792.0)

2006
£m

3.9
587.5

591.4

1,176.3
7.7

1,184.0

(61.1)
(25.0)
(504.5)

(590.6)

593.4

1,427.2

1,184.8

(962.4)
(4.8)

(967.2)

(2.7)

457.3

320.2
137.1

457.3

(786.2)
(0.3)

(786.5)

(3.8)

394.5

320.0
74.5

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 Buckles

Director

Trevor Dighton

Director

98

Notes to the parent company financial statements

(a) Significant accounting policies

Basis of preparation

The separate financial statements of the company are presented as required by the Companies Act 1985. They have been prepared under the

historical cost convention except for the revaluation of certain financial instruments and in accordance with applicable United Kingdom Accounting

Standards (UK GAAP).

Exemptions

As permitted by section 230(3) of the Companies Act 1985, the company has not presented its own profit and loss account.

The company has taken advantage of the exemption from preparing a cash flow statement under the terms of FRS 1 Cash Flow Statements.
The cash flows of the company are included within its consolidated financial statements.

The company is also exempt under the terms of FRS 8 Related Party Disclosures from disclosing related party transactions with other members 
of the group.

The consolidated financial statements of the group contain financial instrument disclosures and comply with FRS 29 Financial Instruments: Disclosures.
Consequently the company has taken advantage of certain exemptions in FRS 29 from the requirement to present separate financial instrument

disclosures for the company.

Tangible fixed assets

Tangible fixed assets are stated at cost net of accumulated depreciation and any provision for impairment. Tangible fixed assets are depreciated on a

straight-line basis over their expected economic life. Short leasehold property (under 50 years) is depreciated over the life of the lease. Equipment

and vehicles are depreciated over periods up to a maximum of ten years.

Fixed asset investments

Fixed asset investments, which comprise investments in subsidiary undertakings, are stated at cost and reviewed for impairment if there are

indicators that the carrying value may not be recoverable.

Financial instruments

Financial assets and financial liabilities are recognised when the group becomes a party to the contractual provisions of the instruments.

> External debtors

Debtors do not carry interest and are stated initially at their fair value.

> Cash and cash equivalents

Cash and cash equivalents comprise cash balances and call deposits.

> Interest-bearing borrowings

Interest-bearing bank overdrafts, loans and loan notes are recognised at the value of proceeds received, net of direct issue costs. Finance
charges, including premiums payable on settlement or redemption and direct issue costs, are recognised in the profit and loss account on an
accrual basis using the effective interest method.

> External creditors

Creditors are not interest-bearing and are stated initially at their fair value.

> Amounts owed to/from subsidiary undertakings

Amounts owed to/from subsidiary undertakings bear interest at prevailing market rates.

> Equity instruments

Equity instruments issued by the group are recorded at the value of proceeds received, net of direct issue costs.

Provisions

Provisions are recognised when the company has a present legal or constructive obligation as a result of past events and a reliable estimate of the

amount can be made.

99

(a) Significant accounting policies (continued)

Derivative financial instruments and hedge accounting

In accordance with its treasury policy, the company only holds or issues derivative financial instruments to manage the group’s exposure to financial

risk, 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’s

fixed-rate borrowings, and foreign exchange risk on transactions, on the translation of the group’s results and on the translation of the group’s net

assets measured in foreign currencies, to the extent that these are not matched by foreign currency borrowings. The company manages these risks

through a range of derivative financial instruments, including interest rate swaps, fixed rate agreements, forward foreign exchange contracts and

currency swaps.

Derivative financial instruments are recognised in the balance sheet as financial assets or liabilities at fair value. The gain or loss on remeasurement

to fair value is recognised immediately in the profit and loss account, unless they qualify for hedge accounting. Where derivatives do qualify for

hedge accounting, the treatment of any resultant gain or loss depends on the nature of the item being hedged as described below:

> Fair value hedge

The change in the fair value of both the hedging instrument and the related portion of the hedged item is recognised immediately in the profit

and loss account.

> Cash flow hedge

The change in the fair value of the portion of the hedging instrument that is determined to be an effective hedge is recognised in equity and

subsequently recycled to the profit and loss account when the hedged cash flow impacts the profit and loss account. The ineffective portion 

of the fair value of the hedging instrument is recognised immediately in the profit and loss account.

Leases

Assets held under finance leases are included as tangible fixed assets at their capital value and depreciated over the shorter of the lease term and

their useful economic life. The capital element of future rentals is included within creditors and finance charges are allocated to accounting periods

over the period of the lease.

Annual rentals payable or receivable under operating leases are charged or credited to the profit and loss account as incurred.

Foreign currencies

The financial statements of the company are presented in sterling, its functional currency. Transactions in currencies other than sterling are 

translated at the rates of exchange prevailing on the dates of the transactions. At each balance sheet date, monetary assets and liabilities which are

denominated in other currencies are retranslated at the rates prevailing on that date. Non-monetary assets and liabilities carried at fair value which

are denominated in other currencies are translated at the rates prevailing at the date when the fair value was determined. Non-monetary items
measured at historical cost denominated in other currencies are not retranslated. Gains and losses arising on retranslation are included in the profit
and loss account.

Taxation

Current tax is provided at amounts expected to be paid (or recovered) using tax rates and laws that have been enacted or substantively enacted

by the balance sheet date.

Deferred tax is recognised in respect of all material timing differences that have originated, but not reversed, by the balance sheet date. Deferred

tax is measured on a non-discounted basis at tax rates that are expected to apply in the periods in which the timing differences reverse based 
on tax rates and laws enacted or substantively enacted at the balance sheet date. Deferred tax assets are recognised where their recovery is
considered more likely than not in that there will be suitable taxable profits from which the future reversal of underlying timing differences can 

be deducted.

Pensions

The company participates in multi-employer pension schemes in the UK, which provide benefits based on final pensionable pay. The company is
unable to identify its share of the schemes’ assets and liabilities on a consistent and reasonable basis. In accordance with FRS 17 Retirement Benefits,
the company treats the schemes as if they were defined contribution schemes and recognises charges as and when contributions are due to the
scheme. Details of the schemes are included in note 34 to the consolidated financial statements.

100

Notes to the parent company financial statements (continued)

(a) Significant accounting policies (continued)

Share-based payments

The company issues equity-settled share-based payments to certain employees. The fair value of share-based payments is determined at the date

of grant and expensed, with a corresponding increase in equity on a straight-line basis over the vesting period, based on the company’s estimate of

the shares that will eventually vest. The amount expensed is adjusted over the vesting period for changes in the estimate of the number of shares

that will eventually vest, save for changes resulting from any market-related performance conditions.

The fair value of share-based payments granted in the form of options is measured by the use of the Black-Scholes valuation technique, adjusted

for future dividend receipts and for any market-related performance conditions.

The company grants share options over its own shares to the employees of subsidiary companies. The company does not receive goods or 

services in exchange for these options. These are accounted for as a written call option on the entity’s own shares and do not result in an

accounting entry upon grant. When the share options are subsequently exercised the resulting entries are either to increase share capital and share

premium for new shares issued or to record a reduction in the treasury shares owned by the employee benefit trust.

Dividends

Dividends are recognised as distributions to equity holders in the period in which they are declared. Dividends proposed but not declared are not

recognised but are disclosed in the notes to the consolidated financial statements.

Financial guarantees

The company enters into financial guarantee contracts to guarantee the indebtedness of other companies within the group. The company treats

such contracts as a contingent liability unless and until such time as it becomes probable that the company will be required to make a payment

under the guarantee.

Own shares held by employee benefit trust

Transactions of the company-sponsored employee benefit trust are included in the parent company financial statements. In particular, the trust’s

purchases of shares in the company are debited directly to equity.

(b) Tangible fixed assets

Cost

At 1 January 2007
Additions at cost
Disposals

At 31 December 2007

Depreciation

At 1 January 2007
Charge for the year

At 31 December 2007

Net book value
At 31 December 2007

At 31 December 2006

The net book value of land and buildings comprises short leasehold buildings (under 50 years).

Land and
buildings
£m

Equipment
and vehicles
£m

3.0
–
–

3.0

(0.8)
(0.2)

(1.0)

2.0

2.2

2.4
1.5
(0.6)

3.3

(0.7)
(0.3)

(1.0)

2.3

1.7

Total
£m

5.4
1.5
(0.6)

6.3

(1.5)
(0.5)

(2.0)

4.3

3.9

(c) Fixed asset investments

The following are included in the net book value of fixed asset investments:

Subsidiary undertakings

Shares at cost:

At 1 January 2007
Additions
Disposals

At 31 December 2007

101

Total
£m

587.5
3,193.4
(1,566.0)
2,214.9

The increase in the carrying value of subsidiary undertakings in the year is mainly due to a reorganisation of the legal structure in respect of some

of the company’s subsidiaries in which transfers were reflected at market values. Full details of significant investments held by the parent company

and the group are detailed in note 45 to the consolidated financial statements.

(d) Debtors

Amounts owed by group undertakings
Other debtors
Prepayments and accrued income
Derivative financial instruments at fair value

Total debtors

2007
£m

1,369.2
29.0
2.8
17.1

1,418.1

2006
£m

1,150.7
16.1
0.9
8.6

1,176.3

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:

Accelerated capital allowances
Employee benefits, including equity-settled transactions and special pension contributions
Changes in fair value of hedging derivatives

Total deferred tax

The reconciliation of deferred tax balances is as follows:

At 1 January 2007
Credited to profit and loss
Charged to equity in relation to changes in fair value of hedging derivatives

At 31 December 2007

(e) Borrowings (unsecured)

The unsecured borrowings are in the following currencies:

Sterling
Euro
US dollar

Total unsecured borrowings

2007
£m

(0.4)
4.0
4.7

8.3

2006
£m

(0.3)
9.0
(2.2)

6.5

Total
£m

6.5
(5.1)
6.9
8.3

2007
£m

150.0
325.4
502.0

977.4

2006
£m

89.9
291.3
430.0

811.2

102

Notes to the parent company financial statements (continued)

(e) Borrowings (unsecured) (continued)

The payment profile of the unsecured borrowings is as follows:

Repayable within one year
Repayable within two to five years
Repayable after five years

Total unsecured borrowings

Undrawn committed facilities mature as follows:

Within one year
Within two to five years

Total undrawn committed facilities

2007
£m

15.0
672.0
290.4

977.4

2007
£m

15.0
412.9

427.9

2006
£m

25.0
786.2
–

811.2

2006
£m

5.0
212.5

217.5

Borrowings 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

at amortised cost. Loan notes are stated at amortised cost recalculated at an effective interest rate current at the balance sheet date. The directors

believe the fair value of the group’s bank loans and loan notes, calculated from market prices, approximates to their book value.

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

Amounts falling due within one year:

Trade creditors
Amounts owed to group undertakings
Other taxation and social security costs
Other creditors
Accruals and deferred income
Derivative financial instruments at fair value

Total creditors – amounts falling due within one year

Amounts falling due after more than one year:

Derivative financial instruments at fair value

2007
£m

1.8
2,101.8
1.1
9.6
12.1
14.8

2,141.2

2006
£m

0.5
493.6
1.2
4.2
4.0
1.0

504.5

4.8

0.3

(g) Derivative financial instruments

The carrying values of derivative financial instruments at the balance sheet date are presented below:

Forward foreign exchange contracts
Interest rate swaps designated as cash flow hedges
Interest rate swaps designated as fair value hedges

Amounts falling due after more than one year

Amounts falling due within one year

Assets
2007
£m

–
2.8
14.3

17.1
(14.8)

2.3

Assets
2006
£m

6.3
2.3
–

8.6
(1.4)

7.2

Liabilities
2007
£m

Liabilities
2006
£m

13.6
6.0
–

19.6
(4.8)

14.8

0.9
0.4
–

1.3
(0.3)

1.0

Derivative financial instruments are stated at fair value, based upon market prices where available or otherwise on discounted cash flow valuations.

The mark to market valuation of the derivatives has fallen by £9.8m during the year.

103

(g) Derivative financial instruments (continued)

The interest rate swaps which qualify as cash flow hedges have the following maturities:

Within one year
In the second year
In the third year
In the fourth year
In the fifth year

Total carrying value of cash flow hedges

Assets
2007
£m

0.1
1.0
0.6
0.7
0.4

2.8

Assets
2006
£m

0.5
0.3
1.1
0.2
0.2

2.3

Liabilities
2007
£m

Liabilities
2006
£m

0.1
0.9
1.1
2.2
1.7

6.0

–
–
–
–
0.4

0.4

Projected settlement of cash flows (including accrued interest) associated with derivatives that are cash flow hedges:

Within one year
In the second year
In the third year
In the fourth year
In the fifth year

Total cash flows 

(h) Financial risk

Assets
2007
£m

1.7
0.6
0.3
0.2
–

2.8

Assets
2006
£m

1.3
0.5
0.4
0.1
–

2.3

Liabilities
2007
£m

Liabilities
2006
£m

1.3
2.8
1.4
0.5
–

6.0

–
0.1
0.2
0.1
0.1

0.5

Currency risk and forward foreign exchange contracts

The group conducts business in many currencies. The group presents its consolidated financial statements in sterling and it is in consequence

subject to foreign exchange risk due to the translation of the results and net assets of its foreign subsidiaries. The company therefore hedges a

substantial portion of the group’s exposure to fluctuations in the translation into sterling of its overseas net assets by holding loans in foreign

currencies. Translation adjustments arising on the translation of foreign currency loans are recognised in the profit and loss account.

The company enters into forward foreign exchange contracts so as to hedge group translation risk not hedged by way of loans. Gains and losses

on such forward foreign exchange contracts are recognised in the profit and loss account. The notional value of outstanding forward foreign
exchange contracts at 31 December 2007 was £373.2m (2006: £342.4m). All these contracts had matured by 29 February 2008, at which point
they were replaced with new forward foreign exchange contracts.

Interest rate risk and interest rate swaps

Borrowing at floating rates as described in note (e) exposes the company to cash flow interest rate risk, which the company manages within policy

limits approved by the directors. Interest rate swaps and, to a limited extent, forward rate agreements are utilised to fix the interest rate on a

proportion of borrowings on a reducing scale over forward periods up to a maximum period of five years. At 31 December 2007 the nominal

value of such contracts was £213.5m (in respect of US dollar) (2006: £196.7m) and £183.6m (in respect of euro) (2006: £141.5m), their weighted

average interest rate was 4.9% (US dollar) (2006: 4.9%) and 3.8% (euro) (2006: 3.4%), and their weighted average period to maturity was three

years. All the interest rate hedging instruments are designated and fully effective as cash flow hedges and movements in their fair value have been

deferred in equity.

The US Private Placement market is predominantly a fixed rate market, with investors looking for a fixed rate return over the life of the loan notes.
At the time of issue in March 2007, the company was comfortable with the proportion of floating rate exposure not hedged by interest rate swaps

and therefore rather than take on a higher proportion of fixed rate debt arranged fixed to floating swaps effectively converting the fixed coupon
on the Private Placement to a floating rate. Following the swaps the resulting average coupon on the US Private Placement is Libor + 60bps. These
swaps have been documented as fair value hedges of the US Private Placement fixed interest loan notes, with the movements in their fair value

posted to profit and loss at the same time as the movement in the fair value of the hedged item.

104

Notes to the parent company financial statements (continued)

(h) Financial risk (continued)

Counterparty credit risk

The company’s strategy for credit risk management is to set minimum credit ratings for counterparties and monitor these on a regular basis.

For treasury-related transactions, the policy limits the aggregate credit risk assigned to a counterparty. The utilisation of a credit limit is 

calculated by applying a weighting to the notional value of each transaction outstanding with each counterparty based on the type and duration 

of the transaction. For short-term transactions (under one year), the financial counterparty must be investment grade rated by either the 

Standard & Poor’s or Moody’s rating agency. For long-term transactions, the financial counterparty must have a minimum rating of A+/A1 from

Standard & Poor’s or Moody’s.

Treasury transactions are dealt with the company’s relationship banks all of which have a strong investment grade rating. At 31 December 2007 the

largest two counterparty exposures related to Treasury transactions were £5.3m and £4.4m and held with institutions with long term Standard & Poor’s

credit ratings of AA and AA- respectively. These exposures represent 30% and 25% of the carrying values of derivative financial instruments at the

balance sheet date.

The company participates in the group’s multi-currency notional pooling cash management system with a wholly owned subsidiary of an AA rated

bank. There is legal right of set off under the pooling agreement.

(i) Provisions for liabilities and charges

At 1 January 2007
Utilisation of provisions

At 31 December 2007

Onerous
contracts
£m

3.8
(1.1)
2.7

The onerous contracts provision comprises a provision against future liabilities for all properties sub-let at a shortfall and for long-term idle properties.

The provision is based on the value of future net cash outflows relating to rent, rates, service charges and costs of marketing the properties.

(j) Share premium and reserves

At 1 January 2007
Retained profit
Changes in fair value of hedging derivatives
Shares issued
Dividends declared
Own shares purchased
Own shares awarded
Equity-settled transactions
Tax on equity movements

At 31 December 2007

Share
premium
£m

Profit and
loss account
£m

10.3
–
–
0.7
–
–
–
–
–
11.0

73.6
137.4
(24.1)
–
(59.3)
–
(3.5)
4.1
6.9
135.1

Own
shares
£m

(9.4)
–
–
–
–
(3.1)
3.5
–
–
(9.0)

(k) Reconciliation of movements in equity shareholders’ funds for the year ended 31 December 2007

Retained profit/(loss) for the year
Changes in fair value of hedging derivatives
Shares issued
Dividends declared
Own shares purchased
Equity-settled transactions
Tax on equity movements

Net increase/(decrease) in shareholders’ funds
Opening equity shareholders’ funds

Closing equity shareholders’ funds

2007
£m

137.4
(24.1)
0.9
(59.3)
(3.1)
4.1
6.9

62.8
394.5

457.3

Total
£m

74.5
137.4
(24.1)
0.7
(59.3)
(3.1)
–
4.1
6.9
137.1

2006
£m

(6.4)
13.1
9.1
(49.8)
(3.1)
5.0
(2.2)

(34.3)
428.8

394.5

105

(l) Operating lease commitments

At the balance sheet date, the company had annual commitments under non-cancellable operating leases, which expire as follows:

Within one year
In the second to fifth years inclusive
After more than five years

Total operating lease commitments

(m) Auditor’s remuneration

2007
£m

0.2
0.5
0.8

1.5

2006
£m

0.1
0.7
0.8

1.6

Fees paid to KPMG Audit Plc and its associates for non-audit services to the company itself are not disclosed in its individual accounts because the

company’s consolidated financial statements are required to disclose such fees on a consolidated basis.

(n) Staff costs and employees

The average monthly number of employees of the company during the year was:

Total staff costs, including directors’ emoluments, were as follows:

Wages and salaries
Social security costs
Pension costs

Total staff costs

(o) Share-based payments

2007
Number

178

2006
Number
(Restated)

171

2007
£m

23.1
2.0
1.1

26.2

2006
£m

22.0
1.9
1.3

25.2

The group has two types of equity-settled, share-based payment scheme in place: (1) share options previously held by employees over 

Securicor plc shares and rolled over to G4S plc shares with the acquisition of that business on 19 July 2004, and (2) conditional allocations 
of G4S plc shares. The majority of the shares under option are attributable to employees of the company, however the company bears the full cost
of share-based payment charges applicable to subsidiary undertakings. Therefore all disclosures relevant to the company are presented within note
42 to the consolidated financial statements.

(p) Contingent liabilities

To help secure cost effective finance facilities for its subsidiaries, the company issues guarantees to some of its finance providers.

At 31 December 2007 guarantees totalling £377.4m (2006: £315.4m) were in place in support of such facilities.

The company is included in a group registration for UK VAT purposes and is therefore jointly and severally liable for all other UK group companies’

unpaid debts in this connection. The liability of the UK group registration at 31 December 2007 totalled £18.2m (2006: £18.8m).

106

Group financial record

£m

Revenue

Profit before interest, taxation, amortisation of acquisition-related

intangible assets and exceptional items

Profit/(loss) after taxation

Profit/(loss) attributable to shareholders

Non-current assets

Net assets

Net debt

Net debt/equity (%)

Return on net assets (%) (profit/(loss) after taxation/net assets)

Adjusted earnings per ordinary share (pence)

Dividends for the year per ordinary share (pence)

Average headcount (number)

Presented under IFRS

Presented
under
the then
UK GAAP

2006

2005

2004

2003

4,036.8

4,045.7

3,093.6

2,569.5

274.4

109.9

96.5

255.0

90.7

80.8

165.5

(65.4)

(72.3)

1,946.2

1,966.7

1,876.0

971.5

672.8

69

11

12.1p

4.21p

969.9

657.3

68

9

11.2p

3.54p

909.9

586.4

64

(7)

9.5p

1.85p

118.4

(3.2)

(9.7)

693.6

323.6

382.4

118

(1)

8.0p

0.46p

440,128

395,771

306,313

230,472

2007

4,490.4

312.1

160.6

147.2

2,148.3

1,123.0

804.9

72

14

13.4p

4.96p

507,480

The five year record comprises only the results of the security businesses of the former Group 4 Falck A/S up to the acquisition of Securicor plc 

on 19 July 2004. After that date, the record reflects the results of the combined businesses.

The figures presented for 2003 are in accordance with the then UK GAAP. The main adjustments that would be required to make them consistent with

the 2007 financial statements which have been prepared under IFRS relate to:

(a)

the non-amortisation of goodwill

(b) the recognition of separable or contractual intangible assets on a business combination

(c)

the recognition of the funding balances for each retirement benefit scheme

(d) the recognition of a charge to income in respect of share options granted

(e) the accounting treatment of joint ventures under the proportionate consolidation method rather than the gross equity method of accounting

(f)

the recognition of all derivative financial instruments at fair value

the recognition of all taxable temporary timing differences between the accounting base and tax base of assets and liabilities

(g)
(h) dividends being provided for in the year in which they are declared
(i)
(j)

the reclassification of certain contracts as finance leases rather than operating leases
the reclassification of securities held by the group’s captive insurance companies as a component of net debt

Notice of Annual General Meeting

107

Notice is hereby given that the Annual General Meeting of G4S plc will be held at Ironmongers’ Hall, Barbican, London EC2Y 8AA on Thursday,

29 May 2008 at 2.00 pm.

Resolutions 1 to 7 will be proposed as ordinary resolutions. Resolutions 8 to 10 will be proposed as special resolutions.

1

2

3

4

5

6

To receive the financial statements of the Company for the year ended 31 December 2007 and the reports of the directors and auditor thereon.

To receive and approve the Directors’ Remuneration Report contained in the financial statements for the year ended 31 December 2007.

To confirm and declare dividends.

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.

To re-appoint KPMG Audit Plc as auditor of the Company from the conclusion of this meeting until the conclusion of the next general meeting 

at which accounts are laid before the shareholders, and to authorise the directors to fix their remuneration.

7

That the directors be and are hereby generally and unconditionally authorised in accordance with section 80 of the Companies Act 1985 

(“the 1985 Act”) to exercise all the powers of the Company to allot relevant securities (as defined in section 80(2) of the 1985 Act) up to an

aggregate nominal amount of £106,500,000 provided that the authority hereby given shall expire on the date of the Company’s Annual General
Meeting in 2009, save that the Company shall be entitled to make offers or agreements before the expiry of such authority which would or might

require relevant securities to be allotted after such expiry and the directors shall be entitled to allot relevant securities pursuant to any such offer

or agreement as if this authority had not expired; and all unexpired authorities granted previously to the directors to allot relevant securities be 

and are hereby revoked.

8

That the directors be and are hereby granted, pursuant to section 95 of the 1985 Act, power to allot equity securities (as defined in section 94(2)

of the 1985 Act) for cash as if section 89(1) of the 1985 Act did not apply to such allotment, provided that this power shall be limited to:

(i)

the allotment of equity securities in connection with a rights issue, open offer or other offer of securities in favour of the holders of ordinary

shares on the register of members at such record dates as the directors may determine where the equity securities respectively attributable 

to the interests of the ordinary shareholders are proportionate (as nearly as may be) to the respective numbers of ordinary shares held or

deemed to be held by them on any such record date, subject to such exclusions or other arrangements as the directors may deem necessary

or expedient to deal with treasury shares, fractional entitlements or legal or practical problems arising under the laws of any overseas territory

or the requirements of any regulatory body or stock exchange or by virtue of shares being represented by depositary receipts or any other

matter whatever; and

(ii)

the allotment (otherwise than pursuant to sub-paragraph (i) above) to any person or persons of equity securities up to an aggregate nominal

value of £16,000,000;

and shall expire on the date of the Company’s Annual General Meeting in 2009 save that the Company shall be entitled to make offers or
agreements before the expiry of such power which would or might require equity securities to be allotted after such expiry and the directors shall
be entitled to allot equity securities pursuant to any such offer or agreement as if the power conferred hereby had not expired; and all unexpired
authorities granted previously to the directors under section 95 of the 1985 Act be and are hereby revoked.

9

That the Company be and is hereby generally and unconditionally authorised to make market purchases (within the meaning of Section 163(3) 
of the 1985 Act) of ordinary shares of 25p each in the capital of the Company provided that:

(i)

the maximum number of shares which may be purchased is 128,000,000;

(ii)

the minimum price which may be paid for each share is 25p;

(iii) the maximum price which may be paid for each share is an amount equal to 105% of the average of the middle market quotations for an

ordinary share in the Company as derived from The London Stock Exchange Daily Official List for the five business days immediately preceding
the day on which such share is contracted to be purchased; and

(iv) this authority shall expire at the conclusion of the Annual General Meeting of the Company to be held in 2009 (except in relation to the

purchase of shares the contract for which was entered into before the expiry of this authority and which might be executed wholly or partly

after such expiry).

108

Notice of Annual General Meeting (continued)

10 That the Company’s articles of association be amended with effect from 1 October 2008 in accordance with the contents of the document

entitled “Amendments to Articles” (a copy of which has been produced to the meeting and initialled by the chairman for the purposes of

identification).

By order of the board
Peter David

Secretary

7 April 2008

Notes

The Manor

Manor Royal

Crawley

West Sussex RH10 9UN

(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) To have the right to attend and vote at the meeting (and also for the purposes of calculating how many votes a person may cast), a person must

have his name entered on the register of ordinary shares by no later than 5.30 pm on 27 May 2008. Changes to entries on the register after this

time shall be disregarded in determining the rights of any person to attend or vote at the meeting.

(d) A copy of this notice has been sent for information only to persons who have been nominated by a member to enjoy information rights under

section 146 of the Companies Act 2006 (“Nominated Persons”). The right to appoint a proxy cannot be exercised by a Nominated Person; it can

only be exercised by the member. However, a Nominated Person may have a right under an agreement between him and the member by whom

he was nominated to be appointed as a proxy for the meeting or to have someone else so appointed. If a Nominated Person does not have such

a right or does not wish to exercise it, he may have a right under such an agreement to give instructions to the member as to the exercise of

voting rights. Nominated Persons should contact the registered member by whom they were nominated in respect of these arrangements.

(e) In order to facilitate voting by corporate representatives at the meeting, arrangements will be put in place at the meeting so that (i) if a corporate
shareholder has appointed the chairman of the meeting as its corporate representative with instructions to vote on a poll in accordance with the
directions of all of the other corporate representatives for that shareholder at the meeting, then on a poll those corporate representatives will give
voting directions to the chairman and the chairman will vote (or withhold a vote) as corporate representative in accordance with those directions;
and (ii) if more than one corporate representative for the same corporate shareholder attends the meeting but the corporate shareholder has 
not appointed the chairman of the meeting as its corporate representative, a designated corporate representative will be nominated, from those
corporate representatives who attend, who will vote on a poll and the other corporate representatives will give voting directions to that designated
corporate representative. Corporate shareholders are referred to the guidance issued by the Institute of Chartered Secretaries and Administrators
on proxies and corporate representatives – www.icsa.org.uk – for further details of this procedure. The guidance includes a sample form of
representation letter if the chairman is being appointed as described in (i) above.

(f) By attending the meeting, a member expressly agrees that he is requesting and willing to receive any communications made at the meeting.

(g)

If the addressee of this notice has sold or transferred all of his shares in the Company, this notice should be passed to the person through whom
the sale or transfer was effected so that it can be passed on to the purchaser or transferee.

109

Notes (continued)

(h) If you are in any doubt about the contents of this document, or the action you should take, you should immediately consult your stockbroker, bank

manager, solicitor, accountant or other independent professional adviser authorised pursuant to the Financial Services and Markets Act 2000.

(i) CREST members who wish to appoint a proxy or proxies by utilising the CREST electronic proxy appointment service may do so by utilising 

the procedures described in the CREST Manual. CREST Personal Members or other CREST sponsored members, and those CREST members 

who have appointed a voting service provider(s), should refer to their CREST sponsor or voting service provider(s), who will be able to take the

appropriate action on their behalf. In order for a proxy appointment made by means of CREST to be valid, the appropriate CREST message 

(a “CREST Proxy Instruction”) must be properly authenticated in accordance with Euroclear UK & Ireland Limited’s specifications and must contain

the information required for such instructions, as described in the CREST Manual. The message regardless of whether it constitutes the

appointment of a proxy or an amendment to the instruction given to a previously appointed proxy must, in order to be valid, be transmitted so 

as to be received by the Company’s agent (ID number – RA10) by the latest time for receipt of proxy appointments specified in this notice of

meeting. For this purpose, the time of receipt will be taken to be the time (as determined by the timestamp applied to the message by the CREST

Applications Host) from which the Company’s agent is able to retrieve the message by enquiry to CREST in the manner prescribed by CREST. The

Company may treat as invalid a CREST Proxy Instruction in the circumstances set out in Regulation 35(5)(a) of the Uncertificated Securities

Regulations 2001.

(j) Copies of the articles of association of the Company marked up to show the proposed changes and the document entitled “Amendments to

Articles” referred to in Resolution 10 are available on the Company’s web site (www.g4s.com), at the Company’s registered office and will also 

be available for inspection at the place of the Annual General Meeting for at least 15 minutes before and during the meeting.

(k)

It should be noted that the Company’s web site address is given in this notice solely for the purpose of providing access to information for

shareholders. Neither the web site nor any e-mail address referred to on it may be used by shareholders or others to give notice to the Company

in relation to the meeting or otherwise.

110

Recommendation and explanatory notes relating to business to be
conducted at the Annual General Meeting on 29 May 2008

The board of G4S plc considers the resolutions set out in the Notice of Annual General Meeting are likely to promote the success of the Company

and are in the best interests of its shareholders as a whole. The directors unanimously recommend that members vote in favour of the resolutions as

they intend to do in respect of their own beneficial holdings.

Explanatory notes in relation to certain of the business to be conducted at the meeting are set out below:

1 Authority to Allot Shares (Resolution 7)

At the last AGM of the Company, held on 31 May 2007, the directors were given authority under section 80 of the Companies Act 1985 (“the

1985 Act”) to allot ordinary shares in the capital of the Company up to a maximum nominal amount of £105,500,000 representing approximately

33% of the Company’s then issued ordinary share capital. This authority was granted for a period ending on 1 May 2012.

The 1985 Act provides for such authority to be granted either by a company in general meeting or by the articles of association, and in both cases

such authority must be renewed at least every five years. Notwithstanding the statutory provisions, institutional best practice indicates that this

authority be renewed annually and that the authority be limited to the lesser of the authorised but unissued share capital and one third of the

issued share capital.

Accordingly, the board considers it appropriate that a further similar authority be granted to allot ordinary shares in the capital of the Company 

up to a maximum nominal amount of £106,500,000, representing a little less than one-third of the Company’s issued ordinary share capital as at 

7 April 2008, during the period up to the conclusion of the next AGM in 2009.

The intention of the directors is to allot shares upon the exercise of options granted over Securicor plc shares and rolled over into options over

the Company’s shares. The directors do not have any other present intention of exercising this authority.

The Company does not hold any treasury shares as such. However, the 5,209,320 shares held within the employee benefit trust and referred to on

page 92 (note 37 to the consolidated financial statements) are accounted for as treasury shares.

2 Disapplication of Pre-emption Rights (Resolution 8)

Resolution 8 will empower the directors to allot ordinary shares in the capital of the Company for cash on a non pre-emptive basis (a) in

connection with a rights or similar issue and (b) (otherwise than in connection with a rights issue) up to a maximum nominal value of £16,000,000,

representing approximately 5% of the issued ordinary share capital of the Company as at 7 April 2008. Again, institutional best practice suggests

that this authority should be renewed annually.

3 Purchase of Own Shares (Resolution 9)

Resolution 9 gives the Company authority to buy back its own ordinary shares in the market as permitted by the 1985 Act. The authority limits the

number of shares which could be purchased to a maximum of 128,000,000 (representing a little less than 10% of the Company’s issued ordinary

share capital as at 7 April 2008) and sets minimum and maximum prices. This authority will expire at the conclusion of the AGM in 2009.

The directors have no present intention of exercising this authority, but will keep the matter under review, taking into account the financial
resources of the Company, the Company’s share price and future funding opportunities. The authority will be exercised only if the directors believe
that to do so would result in an increase in earnings per share and would be in the interests of shareholders generally. No shares were purchased

pursuant to the equivalent authority granted to the directors at the Company’s last AGM.

111

4 Amendment of Articles (Resolution 10)

The Company proposes to amend its articles of association to reflect the provisions of the Companies Act 2006 (the “2006 Act”) which came,

or will come, into effect in 2007 and 2008. As the 2006 Act will not be fully in force until October 2009, and it is not yet possible fully to reflect

the 2006 Act changes, it is anticipated that shareholders will be asked to approve further changes to the articles of association at the 2009 AGM.

The principal changes to the articles of association proposed to be made following the 2008 AGM relate to shareholder meetings and resolutions,

transfers of shares and directors’ conflicts of interest.

The provisions of the 2006 Act regarding shareholder meetings and resolutions came into force in October 2007, replacing the corresponding

provisions of the 1985 Act. The new articles incorporate amendments in relation to meetings and resolutions to ensure consistency with 

the 2006 Act.

From 1 October 2008, under the 2006 Act a director has a statutory duty to avoid a situation where he has, or can have, a direct or indirect

interest which conflicts, or possibly may conflict, with the company’s interests. The 2006 Act allows directors of public companies to authorise

conflicts or potential conflicts where the articles of association contain a provision allowing this authorisation. It is proposed that the Company’s

new articles of association should include such a provision.

The principal changes to the articles of association can be summarised as follows:

(a) Transfer of shares (article 40)

Under the 2006 Act, a company must either register a transfer or give the transferee notice of, and reasons for, its refusal to register the

transfer. Any registration of a transfer or notice of refusal must be made or given as soon as practicable and in any event within two months

from the date that the transfer is lodged with the company. Reasons for refusal must also be provided if a reasonable request is made by the

transferee. The revised article will reflect these requirements.

(b) Disclosure of interests (article 48)

The provisions relating to the disclosure of interests in shares contained in the 1985 Act, including section 212 on company investigation

powers, were repealed in January 2007. Section 793 and related sections in Part 22 of the 2006 Act, which contain the corresponding

company investigation powers previously contained in section 212, were brought into force simultaneously. Article 38 reflects the replacement

of section 212 of the 1985 Act with section 793 of the 2006 Act.

(c) Notice of general meetings (article 57)

The provisions in the revised articles dealing with the convening of general meetings and the length of notice required to convene general

meetings are in line with the relevant provisions of the 2006 Act. In particular, a general meeting (other than the annual general meeting) 

to consider a special resolution can be convened on 14 days’ notice whereas previously 21 days’ notice was required.

(d) Quorum (article 70)

The article has been amended to make it clear that two persons who are proxies for the same member or representatives of the same body
corporate can constitute a quorum.

(e) Polls (article 78)

The article has been amended to avoid any potential conflict with the provisions of section 329 of the 2006 Act which details the rights
conferred on a proxy to demand a poll in various circumstances.

(f) Votes of members, proxies and corporate representatives (articles 90 and 99)

Under the 2006 Act, proxies are entitled to vote on a show of hands as well as on a poll, and members may appoint a proxy to exercise all or

any of their rights to attend, speak and vote at meetings. Multiple proxies may be appointed provided that each proxy is appointed to exercise

the rights attached to a different share or shares. The amendments reflect these new proxy rights (article 90). The 2006 Act also provides for

multiple corporate representatives to be appointed and the articles therefore refer to the right to appoint multiple corporate representatives

(article 99).

(g) Receipt of appointments of proxy and termination of proxy authority (article 93)

The article provides that proxies for a poll to be taken after the date of a meeting or adjourned meeting must be received not less than 
24 hours, or such shorter time as the directors may determine, before the time of the poll.

(h) Availability of appointments of proxy (article 97)

The article provides for the directors to make available to the members at the Company's expense, facilities for appointing proxies. The
article provides that proceedings at shareholder's meetings will not be invalidated as a result of any accidental omission or the failure due
to circumstances beyond the Company's control to send or make available to shareholders appointments of proxy or invitations to 
appoint proxies.

112

Recommendation and explanatory notes relating to business to be
conducted at the Annual General Meeting on 29 May 2008 (continued)

4 Amendment of Articles (Resolution 10) (continued)

(i) Directors’ appointments, interests and conflicts of interest (articles 127, 127A and 132)

The 2006 Act sets out directors’ general duties which largely codify the existing law but with some changes. Under the 2006 Act, from 

1 October 2008 a director has a statutory duty to avoid a situation where he has, or can have, a direct or indirect interest which conflicts,

or possibly may conflict, with the company’s interests. The requirement is very broad and could apply, for example, if a director becomes a

director of another company or a trustee of another organisation. The 2006 Act allows directors of public companies to authorise conflicts 

and potential conflicts where appropriate, if the articles of association contain a provision to this effect. The 2006 Act also allows the articles 

to contain other provisions for dealing with directors’ conflicts of interest to avoid a breach of duty.

Article 127, which is the provision for dealing with conflicts in the current articles, allowing directors to be interested in transactions and to be

an officer of or employed by or interested in a body corporate in which the Company is interested, has been amended so that it confirms that

such interests, offices or employment will not infringe the conflicts duty as codified in the 2006 Act.

New article 127A gives the directors authority to approve conflict situations including other directorships held by the Company’s directors and

includes other provisions to allow conflicts of interest to be dealt with in a similar way to the current position.

There are safeguards which will apply when directors decide whether or not to authorise a conflict or potential conflict. First, only directors

who have no interest in the matter being considered will be able to take the relevant decision and, secondly, in taking the decision the

directors must act in a way they consider, in good faith, will be most likely to promote the Company’s success. The directors will be able to

impose limits or conditions when giving authorisation if they think this is appropriate.

The proposed new article 127A also contains provisions relating to confidential information, attendance at board meetings and availability of

board papers to protect a director from being in breach of duty if a conflict of interest or potential conflict of interest arises. These provisions

will only apply where the position giving rise to the potential conflict has previously been authorised by the directors.

The proposed amendment to Article 132, which deals with the quorum requirement for board meetings, clarifies that the presence of a

quorum will be determined separately in relation to each matter or resolution considered or voted on at the meeting. This will mean that 

if a director cannot count in the quorum for a particular resolution (because for example he is interested in the outcome of the resolution) 

he may still count in the quorum for the other resolutions to be voted on at the meeting.

(j) Permitted interests and voting (article 137)

Article 137 identifies certain matters in relation to which directors are permitted to vote notwithstanding an interest in those matters. The

2006 Act contains a much wider definition of “connected person” of a director than had applied under the 1985 Act which would make

declaration by directors of relevant interests very difficult in practice. It is therefore proposed to retain the status quo by preserving the
definition of connected person which applied under the 1985 Act.

The previous exception relating to retirement schemes was confined only to schemes approved by the Inland Revenue. This has now been
combined with a broader exception which relates to all arrangements including retirement benefit schemes in respect of which directors have

no special privilege or advantage not generally awarded to the employees to whom the arrangements relate.

The other change in this article relates to the question of whether or not a director is interested in a resolution by virtue of holding shares in
a company to which the resolution relates. The proposed amendment excludes shares which are held as treasury shares when calculating such

directors’ interests.

(k) Miscellaneous

The articles have also been amended to:

(1) delete references to sections of the 1985 Act and replace them with references to corresponding sections of the 2006 Act, where

appropriate; and

(2) account for the fact that certain concepts under the 1985 Act have been done away with (for example, the concept of “extraordinary”

resolutions).

Financial calendar and corporate addresses

113

Auditor

KPMG Audit Plc

Chartered Accountants

Registered Auditor

8 Salisbury Square

London EC4Y 8BB

Stockbrokers

Deutsche Bank AG London

Winchester House

Great Winchester Street

London EC2N 2DB

Financial advisors

Greenhill & Co. International LLP

Lansdowne House

57 Berkeley Square

London W1J 6ER

Deutsche Bank AG London

Winchester House

Great Winchester Street

London EC2N 2DB

G4S website

www.g4s.com

Results announcements

Interim results – August

Final results – March

Dividend payment

Interim paid – 16 November 2007

Final payable – 6 June 2008

Annual General Meeting

29 May 2008

Registered office

The Manor

Manor Royal

Crawley

West Sussex RH10 9UN

Telephone +44 (0) 1293 554 400

Registered number

4992207

Registrars and transfer office

Capita Registrars

The Registry

34 Beckenham Road

Beckenham

Kent BR3 4TU

Telephone: within the UK 0871 664 0300 (calls cost 10p per minute

plus network extras); from outside the UK +44 208 639 3399

Fax: +44 (0) 20 8658 3430

Email: ssd@capitaregistrars.com

Please note that beneficial owners of shares who have been

nominated by the registered holder of those shares to receive

information rights under S.146 of the Companies Act 2006 are
required to direct all communications to the registered holder of their
shares rather than to the company or the company’s registrar.

This report is printed on papers that meet international environmental standards. Consort Brilliance uses a combination of TCF (Totally Chlorine Free) and

ECF (Elemental Chlorine Free) fibres.They are totally recyclable, biodegradeable and acid-free. Naturalis Absolute White Smooth is made from 100% ECF

(Elemental Chlorine Free) wood pulp sourced from sustainable and renewed forest.The mill generates a proportion of its renewable power from water turbines.

Naturalis is fully recyclable and is manufactured within an ISO 14001 certified mill in the UK.

Designed and produced by MAGEE
www.magee.co.uk

Printed by St Ives Westerham Press

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A World of Security Solutions

G4S plc
The Manor, Manor Royal,
Crawley, West Sussex
RH10 9UN, UK
Telephone: +44 (0)1293 554 400

Registered no. 4992207

www.g4s.com

G4S plc ANNUAL REPORT AND ACCOUNTS 2007

A World of
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