GLOBALFOUNDRIES
Annual Report 2017

Plain-text annual report

Integrated Report and Accounts 2017 Securing Your World FOCUSED GROWTH Introduction G4S provides electronic monitoring equipment to justice departments in around 20 countries across the world G N I R U C E S demonstrate the values and performance that make G4S the company of choice for customers, employees and shareholders. DOur enduring strategic aim is to L R O W R U O Y We aim to do this by delivering industry‑leading, innovative solutions and outstanding service to our customers, by providing engaging and rewarding work for employees and by generating sustainable growth and returns for our shareholders. Highlights and contents HIGHLIGHTS STATUTORY RESULTS Revenue CORE RESULTSa Revenue KPI £7.8bn+3.1% (2016: £7.6bn) £7.4bn+3.2% (2016: £7.2bn) Adjusted PBITA £491m+6.5% (2016: £461m) Adjusted PBITA KPI £496m+4.2% (2016: £476m) EPS 15.2p+18.8% (2016: 12.8p) Adjusted EPS KPI 17.9p+5.9% (2016: 16.9p) Operating cash fow £488m-20.7% (2016: £615m) Operating cash fow KPI £527m-16.7% (2016: £633m) Dividend per share 9.70p+3.1% (2016: 9.41p) Employee engagement survey KPI 84% Favourable response in 2017 Visit: g4s.com for more information. The Chief Financial Offcer’s review is on pages 37 to 50. a. See page 44 for basis of preparation and defnition of core businesses and for a reconciliation to statutory results. An explanation of Alternative Performance Measures is provided on page 35. STRATEGIC REPORT Overview Highlights G4S at a glance 1 2 Strategy & Business Review 4 Chief Executive’s review 8 Market-growth drivers 10 Business model 12 Stakeholder engagement 14 Our strategy 32 Key performance indicators CSR performance 34 Alternative Performance Measures 35 Chief Financial Offcer’s review 37 Regional and service line review 51 Risk management and our principal risks 60 GOVERNANCE REPORT 66 Chairman’s statement 68 Board of directors 70 Executive committee 72 Corporate governance report Audit committee report 85 Directors’ remuneration report 93 116 Directors’ report 119 Directors’ responsibilities FINANCIAL REPORT 133 133 Independent auditor’s report 120 Consolidated income statement 132 Consolidated statement of comprehensive income Consolidated statement of changes in equity Consolidated statement of fnancial position Consolidated statement of cash fows Notes to the consolidated fnancial statements Parent company statement of changes in equity Parent company statement of fnancial position Notes to the parent company fnancial statements 135 203 204 134 202 136 Front cover: G4S provides technology and physical security services for the three consortia building the Thames Tideway tunnel. G4S is securing the project as a fully-integrated partner for security across all 21 construction worksites. The Thames Tideway tunnel is a £4.2 billion construction project, designed to stop London’s iconic River Thames from being polluted. A cleaner Thames and a more attractive riverside will help underpin London’s economic prosperity, attracting more tourists, and boosting the use of river transport. It is also expected to help revitalise small local businesses and the commercial fshing industry, by encouraging healthy marine life. Shareholder information Group fnancial record General information 211 212 KPI Financial KPI KPI Other fnancial and non-fnancial KPIs Please see pages 32 to 33 for a description of the Group’s fnancial and non-fnancial KPIs and how they link to the Group’s strategic priorities. Integrated Report and Accounts 2017 G4S plc 1 Strategic report G4S at a glance D G4S is the world’s leading global, integrated security company specialising in the delivery of security and L R related services across six continents. O W We offer a broad range of security products and services on a single, multi‑service and integrated basis. We have been investing in technology, software and systems. The Group’s technology‑related security revenues were £2.45 billion* in 2017 (2016: £2.2 billion). R U O Y G N I R U C E S * Technology-related security revenues are from the sale of security technology (£0.7 billion) and security solutions which combine our people with technology (technology-enabled security: £1.75 billion). OUR BUSINESSES SECURE SOLUTIONS (84% OF CORE BUSINESS REVENUES) CASH SOLUTIONS (16% OF CORE BUSINESS REVENUES) SECURITY SERVICES AND TECHNOLOGY (77%) Our approach Against the backdrop of growing demand, we design, Market G4S operates an integrated security business in more than 90 countries across the globe. The global security market and deliver a wide range of security and related market has structural growth qualities (see page 8 for a description of the growth drivers) and is highly fragmented; there are few international suppliers and our competitors are typically smaller local and regional companies. The security industry is seeing growing demand for technology-enabled and integrated security solutions (which combine people and technology) to deliver cost-effective security, especially in developed markets. services and our global footprint provides valuable access to a highly-diversifed customer base in markets around the world. Some traditional security markets are commoditised and signifcant price competition exists – we aim to differentiate G4S by providing industry- leading security solutions that are innovative, reliable and effcient. Our scale and focus on productivity support, our cost competitiveness and our sustained investment in professional staff, technology, software and systems enable us to provide innovative and reliable solutions for our customers on a stand-alone or integrated basis. CARE & JUSTICE SERVICES (7%) Market G4S Care & Justice Services are concentrated in the UK and Australia. The market for the private provision of care and justice services is fairly consolidated with a small number of large providers. Larger companies are usually better equipped to deliver the highly specialised services in this sector, working with a diverse supply chain including the voluntary sector. In the UK the market environment is mature with limited growth opportunities. In the short to medium term we expect the environment to be more positive in Australia. CASH SOLUTIONS  Market G4S Cash Solutions is one of a small number of large, global cash businesses and is the market leader or number two in 40 of its 42 markets. Each market is highly regulated, often by central banks, and the business requires signifcant infrastructure and expertise. G4S competes with local, national and a small number of international competitors. Cash volumes in most developed markets are fat or gradually declining at an aggregate market level. Cash usage continues to increase in emerging markets (see page 8 for cash usage trends). The Group sees signifcant revenue-growth opportunities in providing technology solutions to reduce the cost and increase the ease of using cash for banks and retailers. Our approach We aim to achieve positive outcomes for those in the care and justice system. G4S will only offer custody, detention, rehabilitation and care services where we can access a qualifed talent pool and where the political, legal, human rights and regulatory framework is consistent with our Group values and results in acceptable operational, commercial and reputational risk. Our approach We transport, process, recycle, store securely and manage cash, and provide secure international logistics for cash and valuables. Our strategy is designed to enable us to aggregate cash-handling volumes through cost leadership and product and service differentiation. We invest in technology and sell proprietary cash-management systems which combine skilled professionals with software, hardware and operational support in an integrated, managed service. To support cost leadership we strive for a consistent operating model and use shared services to maximise effciency. We operate around the globe, focusing on markets where we are able to build and sustain a material market share in our key service offerings. Outside the traditional cash market, there remains signifcant opportunity for retail cash and bank branch automation – services that have mainly remained in-house until now. 2 G4S plc Integrated Report and Accounts 2017 G4S plays a valuable and an important role in society. We provide direct employment for over half a million people around the world and make a difference by helping people to live and work in safe and secure environments. G4S takes a fully‑integrated approach to its strategy and Corporate Social Responsibility. This is refected in this report and please see page 18 for more information on our CSR approach and impact on society. OUR STRATEGY Our strategy addresses the positive, long‑term demand for security and related services, and our enduring strategic aim is to demonstrate the values and performance that make G4S the company of choice for customers, employees and shareholders. We aim to do this by delivering industry‑ leading, innovative solutions and outstanding service to our customers, by providing engaging and rewarding work for employees and by generating sustainable growth and returns for our shareholders. These aims are underpinned by the key programmes in our strategic plan: Secure Solutions Integrated Managed Services Security Software & Hardware Systems Integration Consultancy Services Monitoring & Response i n g r a M Manned & Mobile Security, FM Integration Care & Justice Services PEOPLE AND VALUES CUSTOMERS AND SERVICE EXCELLENCE TECHNOLOGY AND INNOVATION Monitoring technology & Services Custody, Detention & Rehabilitation Secure FM Forensics & Secure Health Patient Transport i n g r a M Secure Transport Cash Solutions Integration Cash Technology and Services Cash Processing ATM Services International Secure Logistics i n g r a M CIT Integration OPERATIONAL EXCELLENCE AND PRODUCTIVITY FINANCIAL AND COMMERCIAL DISCIPLINE Please see pages 14 and 15 for more details. OUR VALUES Our people and values underpin everything we do. Our ‘One G4S’ model brings all areas of our business together and is designed to ensure that the way we go about our business is consistent across our global operations and is strongly aligned with our strategy and our values. We believe that this approach will generate signifcant benefts for our customers, employees and shareholders. Please see pages 22 to 58 for case studies of our values in action and sustainable development goals. Integrated Report and Accounts 2017 G4S plc 3 Strategic report Chief Executive’s review H Since 2013, revenues from core businesses T W O R G have grown by 17% and Adjusted EPS by 48% while generating operating cash fow of £2.5 billion. The Group’s strong cash generation has enabled us to invest in growth, pay dividends of more than £700 million and at the same time strengthen the Group’s fnancial position, reducing net debt/Adjusted EBITDA to 2.4x at the end of 2017. D E S U C O F Over the same period we have created innovative new products and services for our customers and we greatly improved safety performance for our employees. We are continuing to invest in growth, technology and productivity in order to capitalise on our strong positions and to support our aim of delivering sustainable, proftable growth. OUR STRATEGY OUR STRATEGY ADDRESSES THE POSITIVE LONG-TERM DEMAND FOR SECURITY AND RELATED SERVICES AND OUR ENDURING STRATEGIC AIM IS TO DEMONSTRATE THE VALUES AND PERFORMANCE THAT MAKE G4S THE COMPANY OF CHOICE FOR CUSTOMERS, EMPLOYEES AND SHAREHOLDERS. Our business The Group has two business segments, each with a number of key service lines: Secure Solutions, comprising: • Security: incorporating risk consulting software, manned security, software and systems and integrated security solutions • Facilities management: including integrated security and FM services • Care & Justice Services: comprising custody, health, transportation, care and rehabilitation in the UK and Australia Cash Solutions, comprising: • Cash transportation, cash processing and ATM services • Smart safes and cash recycling • Cash Technology: comprising software and service solutions 2017 Results highlights – core businesses Revenues rose by 3.2% to £7.4 billion. The combination of growing revenues and improved productivity saw the Group’s adjusted earnings per share rise by 5.9% to 17.9 pence per share. The Group generated operating cash fow of £527 million, equivalent to 106% of Adjusted PBITA in line with our guidance of a normalised rate of over 100%. 4 G4S plc Integrated Report and Accounts 2017 Ashley Almanza, Group Chief Executive Offcer £2.45bn Technology‑ related security revenues in 2017 Zero harm Is our health and safety goal 47% Reduction in employee fatalities from 2016 to 2017 extend and grow new products and services across our global markets. At the end of 2017 G4S cash management technology was deployed at over 19,500 locations in North America, Europe, Asia Pacifc and Africa, an increase of more than 30% over the prior year. We also made progress in improving productivity in a number of markets and we now have plans to apply these improvements across all of our cash solutions businesses. I am confdent that our new organisation will enable G4S to take full advantage of the exciting growth opportunities in our markets and to successfully execute our strategy. Our CSR approach and contribution to society As a global leader in security and related services, corporate social responsibility is very important to G4S and it forms a key part of our strategy. We are trusted to care for some of the world’s most valuable assets and to ensure the safety, protection and welfare of people around the world, often in complex and demanding operating environments. Conducting our business in a way which is ethically responsible, safe and consistent with the company’s values and standards, is an essential element of our business model. The Group is committed to sustainability and the core principles of the UN Global Compact are refected in our policies, values and business activities today. We recognise that business has an important role in the achievement of the UN Sustainable Development Goals. On page 18 of this report we highlight where G4S is helping to advance these goals and make a positive difference to society and communities around the world. We expect all colleagues to uphold G4S’ values in whatever role they play. In return, our commitment is to provide meaningful work, fair reward and the opportunity to develop. Our employees often work in inherently hazardous environments and we equip and train our employees to ensure they are as safe as possible. We regularly ask stakeholders from inside and outside the company to provide input into an analysis of our material CSR issues to help set priorities. See page 83 for more information on the CSR materiality review that was undertaken in 2017. Our CSR approach covers a broad range of areas, with three material priorities: health and safety, human rights and anti-bribery and corruption. In June 2017, G4S was selected as a constituent company of the FTSE4Good Index, recognising our strong commitment to social responsibility and sustainable business practices. PEOPLE AND VALUES Organisation Over the past four years we have invested in sales, business development, technology and our support and control systems, processes and resources. We now have suffcient strength and depth in these areas to enable us to implement the next, critical phase of our organisational development and with effect from1 January 2018 we have reorganised the Group-wide management of our core business. The principal features of this change are: • Creation of a Global Cash Solutions division • Consolidation of our Secure Solutions businesses into four regions: Americas, Europe & Middle East, Africa and Asia Our new organisation will enable us to strengthen further our strategic, commercial and operational focus in each of our core service lines. We will continue to build and utilise shared services for the provision of effcient and ft-for-purpose support functions to all businesses and this element of our organisational development has signifcant unrealised potential. The biographies of the leaders of our principal businesses are set out on pages 70 and 71. As outlined in the market growth section on pages 8 and 9, technology is a growing part of our Secure Solutions and Cash Solutions services. In Secure Solutions, we continue to build our capabilities to design and deliver integrated security solutions – combining people and technology to offer our customers more effcient and valuable security solutions (see pages 24 to 27). Today we have more than £2.45 billion technology-related security revenues. Our integrated approach to designing and delivering security solutions helps us to differentiate our value proposition in order to win, retain and grow contracts with key customers. Our new Secure Solutions organisation will enable us to increase collaboration and co-ordination across all of our markets which, in turn, will enable us to rationalise and target our product and business development, improve global account development, harmonise marketing and transfer operational best practices more rapidly. Our Care & Justice Services are concentrated in the UK & Australia where we have signifcant resource and capability to win and deliver complex public services. Our focus is on rigorous pre-bid evaluation of contracts and operational delivery. We expect the overall cash generation of these services to improve as certain legacy contracts expire over the next 18 to 24 months. In our Global Cash Solutions division we have proven expertise in providing technology-enabled cash solutions and services that improve the control, ease of use and effciency of our customers’ cash management. In the United States we have established a market-leading position in the provision of cash management technology for large format retail stores. We believe that our proven cash management technology and our people provide G4S with a substantial opportunity to Integrated Report and Accounts 2017 G4S plc 5 Strategic report Chief Executive’s review continued Culture – Embedding our values Underpinning our culture are the Group’s values which govern and guide the conduct of everyone at G4S. Employee‑communication programme Following the launch of our values in March 2016 we conducted an extensive employee engagement programme to raise awareness and deepen understanding of G4S’ corporate values. We have developed a training programme for managers and our values are an essential part of induction and training for new employees. We are embedding our values into existing processes, governing all aspects of our business including sales, operations and performance management. Where actions are required – for example, an improvement in the safety performance of a particular business – leaders and managers will have specifc objectives in order to make sure the actions are prioritised appropriately (see Key Performance Indicators page 32). Speak Out We continue to encourage colleagues to “Speak Out” if they are aware of behaviour which is not consistent with our values or policies. There are many ways in which colleagues can raise concerns, with supervisors or managers, with their local HR team or through the global, independent whistleblowing systems. Our case management system provides improved visibility of whistleblowing cases from across the Group, and provides vital information to our Group Ethics Steering Committee. I believe that the conduct of the vast majority of our employees is consistent with our values and that this has been – and remains – the cornerstone of our customer service and commercial success. We know, however, that even isolated instances of poor conduct are unacceptable and can be very damaging. It is therefore important that we continue to promote good conduct and the use of Speak Out. Health & Safety The wellbeing and safety of our employees and those in our care remains a key priority for the Group executive and global leadership teams. We work in an inherently hazardous industry: we travel extensively and many of our colleagues are trained and deployed to protect our customers and their property. As a result, road-traffc accidents and criminal attacks are inherent risks we face in delivering some of our services. We have therefore invested in a sustained programme to strengthen our health and safety policies, practices and training performance across the Group with the aim of improving safety. The number of road-traffc fatalities has decreased by 48% since 2013 when the frst G4S road-safety programme was launched. There has also been a reduction in attack-related fatalities in our Cash Solutions businesses. However, the number of armed attacks has not changed and so we continue to work with the relevant authorities to mitigate the elevated risk in some of our services. Sadly, during 2017, 25 of our colleagues lost their lives in work-related accidents and attacks, compared with 47 fatalities in 2016. 6 G4S plc Integrated Report and Accounts 2017 Although we are pleased that there are clear signs of an overall cultural shift within G4S in our approach to safety we also know that there is more to do and our plans refect this. We are frmly committed to improving our health and safety performance and our goal remains zero harm. CUSTOMERS AND SERVICE EXCELLENCE In both Secure Solutions and Cash Solutions we have been investing in innovative products and service excellence, to grow the business with new contracts for new and existing customers, and to improve customer retention, which averages around 90%, refecting our exit from some low-margin contracts and retaining some of the Group’s largest contracts in 2017 – as discussed in this report. >£1.4bn Annual contract value of new business won in 2017 48% Reduction in annual road fatalities since 2013 TECHNOLOGY AND INNOVATION Increasingly our customer offering includes technology in the form of systems and software. Technology-related security revenues were £2.45 billion (2016: £2.2 billion) in 2017. Overall we won new business with an annual contract value of £1.4 billion and total contract value of £2.5 billion in 2017. OPERATIONAL EXCELLENCE AND PRODUCTIVITY In 2017, our operational excellence and productivity programmes delivered further benefts, providing the Group with the fnancial fexibility to invest in service and product development as well as improving the Group’s adjusted proft before interest, tax and amortisation (Adjusted PBITA) from core businesses by 4.2% to £496 million. With our more focused business designed around service delivery, there is further opportunity to streamline general and administrative processes and share resources to generate greater effciency. The Secure Solutions, Global Cash Solutions and Care & Justice Services segments will share facilities, infrastructure and functional services. Our detailed plans will enable us to begin implementing changes and to realise the frst phase of these benefts during 2018 and 2019. One example of where we are introducing more streamlined processes is in our manned security business with a new lean-business process called “Javelin” (see page 29), which combines HR, operations, fnance and back-offce functions, and should ensure we schedule our people more effciently and are able to reduce the time between when we do the work and when we bill for it, and provide accurate and timely management information to customers. Javelin was launched in Ireland in November 2017 and we will be commencing implementation in the UK during 2018. FINANCIAL AND COMMERCIAL DISCIPLINE The new capital and contract processes we introduced in 2013 are helping us to apply capital with greater consistency and rigour. Strengthening our working Market Environment The global demand outlook for security services remains positive as we outline in more detail on pages 8 and 9. We expect this positive demand to continue around the world in 2018 with the possible exception of the Middle East where the effect of prevailing fscal and macro- economic conditions remains uncertain. capital management was also a priority for our fnance and line management in 2017 and we have maintained the increased weighting of operating cash fow in our annual incentive plans. I am pleased to report that at 31 December 2017, our net debt to Adjusted EBITDA had reduced to 2.4x, down from 2.8x at the end of 2016. Portfolio programme The portfolio programme we announced in 2013 has materially improved our strategic focus and the programme is substantially complete. Since 2013 we have divested 41 businesses (with annual revenues of c.£1.3 billion and Adjusted PBITA of £46 million), realising gross proceeds of approximately £520 million. In 2017 we closed four businesses and sold a further nine, realising gross proceeds of £166 million. Performance Statutory results Revenue growth was 3.1% and earnings per share rose by 18.8%. A more detailed review of the statutory results can be found on page 38, and a reconciliation to results from core businesses is provided on page 44. Core business performance Supported by the continuous investment in sales and business development resource and new technology- enabled services, revenues rose by 3.2% to £7.4 billion. Consistent with the commercial practice we adopted several years ago, we have continued to be very disciplined on contract bidding and, whilst this constrained revenue growth in some markets, it underpins sustained proftable growth. The combination of growing revenues and improved productivity saw the Group’s adjusted earnings per share rise by 5.9% to 17.9 pence per share. In 2017 the Group generated operating cashfow of 106% of Adjusted PBITA (2016: 133%). Net debt Growth in profts and robust cash fow generation, together with net disposal proceeds of £156 million, helped reduce the Group’s net debt to Adjusted EBITDA to 2.4x (2016: 2.8x) in line with our plans. In the UK & Ireland region, the Brexit negotiations have created some uncertainty around UK GDP growth, but, in this market, we believe G4S is a defensive business, with a number of long-term contracts. We continue to invest in innovative products and services for customers to drive growth in the region. Outlook The outlook for the Group is positive. G4S’ strong market positions, growing technology-enabled revenues, positive cash generation, commercial discipline and on-going productivity programmes provide substantial confdence that the Group is very well positioned to deliver a strong performance over the next three years. To realise this potential G4S is investing in: • Sales, technology and new products, services and solutions to support our aim of growing revenues from core businesses by an average of 4-6% per annum • Restructuring and effciency programmes to deliver recurring operating gains of £70 million to £80 million by 2020, through effcient organisation design and leaner processes. Additional refnancing gains of around £20 million are also anticipated by 2020. A portion of these gains will be re-invested in growth, with the majority expected to beneft the bottom line We intend to remain soundly fnanced with average operating cash fow conversion of more than 100% of Adjusted PBITA and a net debt to Adjusted EBITDA ratio of less than 2.5x. Priorities for excess cash will be investment, dividends and, in the near term, further leverage reduction. Following the achievement of the Group’s leverage- reduction target, the directors propose a 5% increase in the fnal dividend to 6.11p (DKK 0.5097) refecting the board’s confdence in the Group’s performance and prospects. Our policy is to increase the dividend in line with the long-term growth in earnings. Our customers and our colleagues are at the core of G4S and, in closing, I would like to thank our customers for placing their trust in G4S and to pay tribute to our 570,000 colleagues who serve our customers every day. Ashley Almanza Group Chief Executive Offcer Watch our 2017 results and 2018 outlook online at: www.g4s.com/ investors. See page 44 for the basis of results of core businesses and an explanation of Alternative Performance measures is on page 35. Integrated Report and Accounts 2017 G4S plc 7 Strategic report Market‑growth drivers D N A M E D E H T G N I T E E M The world continues to face a series of divergent and emerging threats. Governments and companies require holistic approaches to ensure the security of their people and assets both at home and abroad. Third-party commentators such as Freedonia expect the global security industry to grow 5-6% per annum from 2015 to 2025 (see chart on page 9). With our global footprint and attractive array of products and services we are well positioned to meet this increased demand. a. Source: Security Systems Integration Report, IHS Markit 2017. b. Source: company research and 3rd party data including RBR, Panteia, Euromonitor International, World Retail Data and Statistics. 8 G4S plc Integrated Report and Accounts 2017 MARKET-GROWTH DRIVERS SECURE SOLUTIONS Demand for security is increasing across the globe The evolving nature of terrorism, which continues to threaten societies, has elevated security risks and concerns in many parts of the world. Intense price‑based competition in basic manned security and basic equipment installations Barriers to entry in basic manned security and basic equipment installations are low, which can result in intense competition in some markets. Companies like G4S are therefore looking for ways to increase differentiation such as global breadth or technology and productivity improvement to offset price pressure. Customers buying processes increasingly complex The increasing use of technology, globalisation and the growing threat of cyber security breaches mean that the procurement of security services has moved away from operations to a more strategic role in an increasing number of customers’ organisations. The global market for security systems integration is estimated to be $80bn by 2021a. Technology reshaping security industry Whilst labour costs have increased or are increasing, particularly in developed markets, the cost of sophisticated security technology is reducing. Combined with the additional data and assurance that comes with technology, it is starting to reshape the security industry. CASH SOLUTIONS Global cash‑usage trends According to third party research frm RBR London, cash withdrawn from automated teller machines (ATMs) between 2016 and 2021 is expected to grow by more than 6% per annum in emerging markets and between 0 to 1% per annum in developed markets. Network consolidation With lower cash volumes in some markets together with new higher value added services partly cannibalising traditional cash-in- transit services, it is likely that some, if not all cash markets will experience network consolidation. A number of industry participants have publicly stated that they are looking to make acquisitions, and we have sold some cash businesses to focus on our key markets with stronger growth potential. We believe this market consolidation will help network effciency and lower the cost of cash handling. Retail opportunities In many markets, retailers operate in very competitive environments and are looking to reduce costs including cash handling and to free up idle cash sitting in tills, safes, vehicles and cash-processing centres. G4S software and service enhanced smart safes and cash recycling services can reduce shrinkage costs for retailers, and eliminate or reduce the space required for a cash back offce and cash reconciliation teams. Through recycling the majority of cash takings in store, the number of cash-in-transit journeys can be reduced by 40% to 60% – with both cost-saving and environmental benefts. As more cash is recycled in store, less cash is being processed by the banks so the retailers achieve a reduction in banking fees. Strategic report HOW G4S RESPONDS • We assist customers in evaluating and understanding security trends and their risks through experience in the market and the provision of software tools such as Risk360 and TravelAware. Key trends are featured in G4S Risk Consulting publications. • G4S has been investing in productivity programmes to be more effcient and cost competitive (see page 29). • G4S designs, builds, operates and maintains integrated security solutions. We invest in technology and innovation which is changing our sales mix, helping deliver service excellence to customers (see pages 24 to 28). Supplier consolidation In certain markets (both Manned Services and Systems) we have seen some market consolidation and trends whereby large competitors aim to provide multi-service bundled and integrated solutions. Some competitors have followed this trend to differentiate away from the commoditised manned security market. We believe this may be helping customers move to more technology-focused solutions. Technology-enabled solutions is a less commoditised market than traditional manned security markets with a lower number of capable suppliers. Global security market by region ($m) 120,000 100,000 80,000 60,000 40,000 20,000 0 2010 2015 2020 2025 Asia Paciÿc Western Europe Latin America North America Africa & Middle East Eastern Europe Source: Freedonia World Security Services report January 2017 excluding residential security. Our new products are being adopted by banks and some of the world’s leading retailers and we expect this market will continue to grow strongly. Industry research data indicates that our addressable market for smart safes and recycling solutions is around £20bn-25bn per annumb. Automated processes inside bank branches Banks and fnancial institutions are also under pressure to be more effcient, lower the cost of handling cash, reduce their branch network whilst maintaining customer access and service. We have been developing integrated technology to address these areas. They combine hardware, proprietary cash- management software, real-time banking integration, same day credit and customer service and support. Global presence (No. of countries) Secure Solutions Cash Solutions 100 80 60 40 20 0 82 57 42 41 22 14 23 15 1 2 3 4 1 2 3 4 1. G4S 2. Securitas 3. Garda 4. Prosegur 82 57 22 14 1. G4S 2. Brinks 3. Loomis 4. Prosegur 42 41 23 15 • We provide cash solutions and services that materially improve the control and effciency of our customers’ cash handling. We continue to invest in innovative products and services such as CASH360, Deposita and bank-branch automation. • With the signifcant progress made in some areas of the business, we have an enormous opportunity to extend and grow our new technology and services right across our global markets. • At the end of December 2017 we had over 19,500 (2016: 14,600) cash technology installations deployed in North America, Europe, Asia Pacifc and Africa. • We have also made great progress in improving productivity in a number of markets and we now have the opportunity to apply these improvements across all of our cash businesses. Integrated Report and Accounts 2017 G4S plc 9 D L R O W R U O Y E R U C E S O T L E D O M S S E N I S U B R U O Business model WHY G4S GLOBAL FOOTPRINT 90 countries We provide a broad range of products and services across more than 90 countries. This breadth provides us with a strong understanding and clear visibility of how security trends are evolving across the world. This insight is invaluable for positioning our solutions to address customer needs. DEEP UNDERSTANDING 100 years’ heritage We support our knowledge of global security trends with a deep understanding of our customers’ unique needs. We have a strong heritage of more than 100 years in the security industry, helping to distinguish positively the G4S brand in our key markets around the world. Our dedicated segment experts, involvement in industry bodies and academic institutions, strategic customer relationships and customer-service feedback mean that we can tailor our solutions to offer maximum value to our diverse customer base. SECURITY PROFESSIONALS AND EXPERTISE 570,000 colleagues We recruit, screen and deploy over 150,000 new colleagues each year. We have around 570,000 colleagues, whose unique skills and shared values are focused on delivering high-quality service to our many thousands of customers. TECHNOLOGY AND INNOVATION £2.45bn technology‑related security revenue We continue to invest in technology to meet the growing demand for integrated solutions – which combine consultation, technology (hardware and software), installation, staffng and maintenance – and to drive the development of innovative new solutions for customers. CUSTOMER SERVICE c150,000 customers Service excellence is one of our core values and an area in which we continue to invest signifcantly. In the past three years, we have focused in particular on our capability, processes and performance measures to drive growth, customer retention and customer satisfaction. 10 G4S plc Integrated Report and Accounts 2017 OUR APPROACH In order to grow our provision of security and related services, we use our unique industry and customer insight to deliver services that are innovative, effcient, effective and integrated. 1. ASSESS 2. DESIGN Solutions design We employ our growing resource and capability to design solutions to meet our customers’ requirements, protecting and adding value to their organisation. This may involve a single service, bundled services (two or more services including facilities services in selective markets), or an integrated security solution from the G4S portfolio.  Security and risk consulting We combine our understanding of our customers’ businesses and objectives with our security expertise to assess their security risks and requirements. Increasingly using data analytics, we are able to identify and mitigate security threats (contextual, criminal or business) and challenges on a local, regional and global basis. Risk consulting allows us to be seen as a trusted senior adviser to customers, providing insight and added value. ?SECURITY PERSONNELELECTRONIC SURVEILLANCEACTIVE SECURITYACCESS CONTROL / SOFTWAREEDUCATION / AWARENESSMECHANICAL SECURITY Watch our animated business model on-line at: www.g4s.com/investors. E L E C T R O NIC U S RVEI L L E R L / SOFTWA ACCESS CO T R N O N CE A R SONNEL SECU RITY P E AC TI V E S E C U R I T Y S S E O N / AWAREN ED UCA T I MECHA NICA E S L C URITY 3. BUILD AND INTEGRATE 4. MANAGE STAKEHOLDER VALUE CREATED SOCIETY G4S delivers a broad range of social and economic benefts to the communities in which we work, many of which are helping to realise the United Nations Sustainable Development Goals (see page 18). CUSTOMERS £2.5bn Total contract value of new business won in 2017 SHAREHOLDERS 5.9% Growth in Adjusted EPS from core businesses in 2017 to 17.9p EMPLOYEES 570,000 People employed by G4S around the world SUPPLIERS 55,000 Suppliers provide services and products to G4S around the world G4S Solutions portfolio In some markets, we are seeing a move towards integrated solutions where security or cash-management technology are delivered under one integrated solution. We use both third-party technology as well as our own world-class proprietary technology in areas such as visitor management, identity and credentials management, access control, integrated video systems and risk-management software. Global security operations centres (GSOC) G4S designs, builds and manages global security operations centres (GSOC) for customers, both on a standalone basis and as part of an integrated offering. The GSOC receives, analyses and responds to all the security intelligence and data for a customer. Customers may award these activities to a G4S GSOC in order to obtain network benefts and access our security expertise. Please see pages 12 to 34 for more details. Integrated Report and Accounts 2017 G4S plc 11 ?SECURITY PERSONNELELECTRONIC SURVEILLANCEACTIVE SECURITYACCESS CONTROL / SOFTWAREEDUCATION / AWARENESSMECHANICAL SECURITYStrategic report S R E D L O H E K A T S R U O H T I W I G N G A G N E Stakeholder engagement Our key stakeholders are those who most materially impact our strategy, or are directly impacted by it. Engagement with stakeholders is essential for us, as a security business, with our role in society, the global nature of our business and substantial workforce. SOCIETY Key stakeholders How we engage CUSTOMERS SHAREHOLDERS EMPLOYEES Our employees touch the lives of others every day, providing crucial services to help keep society safe and secure. • Operations which promote secure and stable communities • CSR Materiality Review with key stakeholders (see page 83) • Community-engagement programmes • Tax and economic contributions • Government relationships and parliamentary engagement • NGO and UN agency engagement • Industry forums Through understanding our customers’ needs we can offer value‑added, innovative, cost‑effective security solutions and build enduring relationships. • Relationship management • c150,000 customers • Bidding processes • Customer service • Net promoter score The company actively seeks to engage with shareholders on a regular basis. With around 570,000 colleagues, G4S is one of the world’s largest private sector employers. Our success is underpinned by the way we lead and engage with our people. • One-on-one meetings between management and shareholders • Group investor meetings hosted by management • Results announcements and trading updates • Participation in investor relations association and best practice events • Annual governance meetings with the Chairman • CSR updates with the Chair of the CSR committee • Annual General Meeting • HR core standards set the framework for employee engagement. • On-boarding, induction and refresher training • Biennial global all-employee and senior management engagement surveys • Works councils and employee representative forums, including through UNI, the global union, with whom G4S signed a global Ethical Employment Partnership in 2008 • Newsletters, videos, employee self-service portals, and intranets • Specifc campaigns on health & safety, values and Speak Out whistleblowing arrangements • Values recognition schemes SUPPLIERS We have a responsible purchasing policy consistent with our business ethics. • 55,000 suppliers • Contract and relationship management • Supplier Code of Conduct • Purchase to Pay process 12 G4S plc Integrated Report and Accounts 2017 Understanding stakeholders’ interests helps us defne our strategic priorities and guide our initiatives. We run a formal exercise every two years to identify and prioritise our material CSR issues (see page 83). Key areas of interest Our response and KPIs • People and Values • Ethical and sustainable business practice; including: • Health & safety • Human rights • Anti-bribery & Corruption • Employee standards and behaviour • Slavery and Human Traffcking Statement • UN Global Compact: Communication on Progress • Global employee-engagement survey (see page 19) • Engagement with Parliamentary committees • Industry forums including: International Security Ligue, British Security Industry Association, Confederation of British Industry • MP surveys and site visits, especially to detention facilities • Quality and price of service • Expertise • Innovation • Health & safety • Business ethics • 3.2% revenue growth from core businesses in 2017 • Customer retention is on average around 90% • 24,000 customers surveyed using net promoter score in 2017, with improvement in most regions • Feedback from unsuccessful contract bids • Financial performance • Strategic direction and coherence • Governance and risk management • Company performance and plans • Compensation and benefts • Training and career development • Health & safety • Values, CSR and recognition • CEO and CFO met with shareholders representing over 65% of the share register and 205 institutions (see page 79 for more information) • 3.2% revenue growth from core businesses in 2017 • 5.7% adjusted earnings growth from core businesses in 2017 • £527 million operating cash fow from core businesses in 2017 • Final dividend increased 5% in 2017 • Feedback from 428,000 employees in 2017 • Access to survey extended through mobile technology and number of languages available • Increase in overall favourable responses from 82% (2015) to 84% (2017) • Feedback from consultation committees and works councils • Nominations for employee recognition awards • Reduction in staff turnover from 27.6% in 2016 to 25.3% in 2017 • Fatalities, serious injuries and road traffc incidents down around 30-50% since focus was applied and investment was made in these areas • Supplier performance – service delivery and product quality • Payment terms • SME engagement • Rationalised suppliers • Commitment to the UK Prompt Payment Code • Member of the UK Government Contract Finder portal to promote use of SME businesses Links to policies and case studies: Business Ethics Policy: g4s.com/ethicspolicy Environmental Policy: g4s.com/environmentalpolicy Ethical Employment Partnership: g4s.com/EEP Human Rights Policy: g4s.com/humanrightspolicy HR core standards: g4s.com/hrstandards Slavery and Human Traffcking Statement: g4s.com/modernslavery Supplier Code of Conduct: g4s.com/suppliercode Tax Strategy: g4s.com/taxstrategy Whistleblowing Policy: g4s.com/whistleblowingpolicy Business for Peace Case Study: g4s.com/b4p Please see examples online on g4s.com Link to strategy People and values Customers and service excellence Technology and innovation Operational excellence and productivity Financial and commercial discipline Please see page 12 to 35 for more details. Integrated Report and Accounts 2017 G4S plc 13 Strategic report Our strategy Our strategy addresses the positive, long‑term demand for security and related services and our enduring strategic aim is to demonstrate the values and performance that make G4S the company of choice for customers, employees and shareholders. This section summarises our strategic priorities and how we focus our resources and expertise in areas where we can achieve the best results for customers and sustainable growth and return for investors. Our CSR approach covers a broad range of areas, but we have three material priorities: Health and safety, Human rights and Anti‑bribery and corruption which are covered in the People and Values section. Strategic priorities Watch our 2017 results and 2018 outlook online at: www.g4s.com/investors W E I V R E V O E C N A M R O F R E P D N A Y G E T A R T S Key risks See Principal risks: pages 62 to 65 KPI See page 32 onwards for more detail and the progress in our key performance indicators. The following pages highlight some of the Group’s fnancial and non-fnancial KPIs and how they link to the Group’s strategic priorities. For more detail see page 33. 14 G4S plc Integrated Report and Accounts 2017 PEOPLE AND VALUES We recruit, develop and deploy the best people in our industry CUSTOMERS AND SERVICE EXCELLENCE We build long‑term customer relationships based upon trust and understanding of our customers’ businesses and objectives • Attracting and retaining the best • Positive demand for security people services • Large diversifed customer base and sales pipeline • Investment in sales leadership and account management • Net promoter score and contract retention • Failure to understand customers’ changing needs or falling short of customer expectations • Creating the right culture • Defning our societal impact • Building capability • Engaging for success • Promoting the right organisational culture • Improving health and safety • Respecting human rights • Our trained and skilled people are hired by competitors or other companies or do not behave in line with the Group’s values, resulting in a negative impact on customer service or those in our care • Negative impacts on our employees’ health and safety 47% £1.4bn Reduction in fatalities from 2016 to 2017 Annual contract value of substantial new business won CORPORATE CULTURE BASED ON GROUP VALUES AND… TECHNOLOGY AND INNOVATION OPERATIONAL EXCELLENCE AND PRODUCTIVITY FINANCIAL AND COMMERCIAL DISCIPLINE We design, market and deliver innovative, industry‑leading technology and services that protect and add value for our customers wherever they operate We have secure, safe, reliable and effcient operations We manage risk effectively and ensure we provide proftable, cash‑generative services • Well-positioned for trends • More focused business – cultural towards more technology with disciplined capital allocation • Secure Solutions – integrated security • Investing in world-leading proprietary products and services • Cash Solutions – Bank and Retail cash technology change • Reinvesting for growth • Productivity programmes – good progress but more to do • Effcient organisation design and management de-layering • Procurement and property • Operational excellence • IT-enabled lean processes • Contract risk management • Portfolio management • Operating cash fow • Strengthening collections performance • Managing accounts payable • Capital allocation • Changing behaviours • Failure to market or deliver our • Failure to comply with our • Ineffcient capital management services and technology effectively or failure to deliver adequate value for money standards results in harm, loss of expertise or investment fails to deliver beneft and failure to comply with Group risk management standards 30% 4.2% 2.4x Growth in cash management technology locations in 2017 Increase in Adjusted PBITA from core businesses in 2017 Net debt/Adjusted EBITDA at December 2017 in line with our target set in 2016 COMMITMENT TO CORPORATE SOCIAL RESPONSIBILITY UNDERPIN THE STRATEGY Integrated Report and Accounts 2017 G4S plc 15 Strategic report Our strategy continued S E U L A V D N A E L P O E P With around 570,000 people, G4S is one of the world’s largest private sector employers. Our employees and services touch the lives of others every day, providing crucial services to keep them safe and secure. Our success is therefore underpinned by the way we attract, develop and engage with our people, as well as the culture and values that shape the way we work and how our colleagues carry out their roles. 2017 ACHIEVEMENTS KPI KPI 8.3% Reduction in voluntary employee turnover to 25.3% in 2017 (2016: 27.6%) 428,000 Employees responded to our global engagement survey KPI 37% Reduction in serious H&S incidents since 2015 in high priority businesses 16 G4S plc Integrated Report and Accounts 2017 Attracting and retaining the best people Attracting and retaining the best people continues to give G4S a competitive advantage as well as ensuring we deliver the best results for our customers. For our senior population, we know from our management survey that the most important factor infuencing their decision to join and then to stay at G4S is the nature of the roles and the responsibilities on offer. Our global footprint and operations across a range of product and service lines helps make the business attractive to the best candidates. Once appointed, the responsibility, complexity and opportunities for innovation help retain our senior people and keep them motivated. For other levels in the organisation, we have developed two toolkits which help us attract and retain colleagues by utilising our expertise and sharing resources across the Group. The frst relates to recruitment and is designed to ensure potential candidates for jobs with G4S have a positive recruitment experience while going through an effcient and effective hiring process. The second provides guidance on good retention practices. Both toolkits are online and contain templates that are easy to follow and adopt. They emphasise the importance of ensuring applicants know what will be expected before they apply, and if they do join G4S there are robust processes in place to welcome, induct, train and support them. Feedback from our most recent global employee survey suggests that our employees feel well equipped to perform their role, with over 90% of respondents stating they understand their job procedures. Often employee turnover is at its highest in the initial months after appointment, which suggests there is still more to do to retain our newest colleagues. In order to build our reputation as a good employer and attract candidates from the widest talent pools, CREATING THE RIGHT CULTURE The G4S values are embedded in the standards, policies and guidance which we set out to help employees and managers perform. To help our front-line operational employees understand the behaviours we expect, and the decisions they should take in line with our values, we have launched a range of learning and awareness materials. These materials include an animated video, scenario-based fashcards, presentations and an online exercise. The materials draw on over 90 scenarios from all product and service lines and are designed to promote discussion and to guide behaviour in line with our values. They address topics like harassment, bribery and corruption, the care and treatment of others, breaches of health and safety rules and inappropriate use of social media. To ensure these materials remain relevant we will continue to add different scenarios whenever new values-based operational situations are identifed which can help guide our employees. Work is now underway on values training materials for our managers, using our newly revised competency framework. In line with our values, this refreshed framework defnes leadership and management behaviours in terms of how managers should act today, plan for tomorrow, and build relationships. The framework is used in our selection processes as well as our 360 degree review process to assess performance and future potential. It enables us OUR VALUES Our values are the standards we set for ourselves and they are refected in the culture of our organisation through our behaviours and actions. Integrity and Respect Our business activities and relationships are built on trust, honesty and openness. We deliver on the promises we make and treat our colleagues, customers and those in our care with the utmost respect. Safety, Security and Service Excellence We work in a safe way and take great care to protect our colleagues and customers from harm. We are experts in security and use that knowledge to protect our customers’ most valuable assets. We are passionate about delivering high levels of customer service. Innovation and Teamwork We invest in technology and best practice to improve continually our service offering. We challenge ourselves to fnd new ways of helping our customers. We work together as a team to achieve the best results for our customers and our business. Everyone has a valid opinion and their contribution is valued. countries and regions adopt different approaches to diversity, reaching out to recruit from under-represented groups in their businesses. In North America, the recruitment of veterans who bring relevant skills and an inherent understanding of security risks continues, whilst in the UK our businesses are some of the few in the security sector to have been awarded Disability Confdent level 2 status as a result of their commitment to identify and remove barriers which impact on the employment of people with disabilities. Overall employee retention continues to improve with voluntary employee turnover reducing to 25.3% (2016: 27.6%) as closer scrutiny and the implementation of good retention practices help us improve performance even in tight labour markets. This is good for service to our customers, who appreciate working with staff who know them better and have more experience. While our employee headcount has reduced from 585,000 to 570,000 as a result of our portfolio management programme and our drive to improve organisational effciency, wherever possible we redeploy people and retain their skills and knowledge. For our front-line employees, the launch of a new values related global recognition programme will add a further opportunity to showcase the amazing work they do for our customers each and every day. Ensuring we celebrate success, and share information about the ways in which our employees behave in line with our values, not only helps to bring our values to life but also promotes the expertise and capabilities of our people. In March 2018, we published our UK Gender Pay Gap Report for the relevant UK businesses. As well as explaining the reasons for any gaps, the report also sets out the actions we are taking to achieve the progress required as part of our wider diversity and inclusion strategy. to gather insight into what colleagues have achieved as well as whether they have done so in a way which is consistent with our values. While having a common set of values helps set G4S apart from the competition, as a global employer we also appreciate that having a diverse workforce enables us to better understand our differing customer needs, and harnessing this diversity is critical to driving innovation. Feedback from our latest global employee survey indicates that 84% of employees who responded believe that the company values people from different backgrounds, and in 2018 we will continue our focus on diversity to ensure we maximise the benefts it brings. Integrated Report and Accounts 2017 G4S plc 17 Strategic report Our strategy continued S E U L A V D N A E L P O E P Employees by location as at 31 December 2017 (%) Employee gender diversity in 2017 (%) 100 80 60 40 20 0 70 83.9 85.3 30 16.1 14.7 d r a o B i r o n e S l a t o T s e e y o p m e l t n e m e g a n a m Female Male Middle East & India Africa Latin America Asia Paciÿc North America Europe UK & Ireland 31% 22% 12% 10% 10% 8% 7% Wage infation In a number of markets, especially developed regions such as North America and the UK, economic indicators have highlighted an increase in wage infation – as a result of tightening labour markets in some areas and as a result of increases in minimum or living wages. As a long-established global employer, G4S has many years of experience of managing periods of wage infation. We have to be prepared to negotiate price increases with customers and to look for ways to continue to be more productive and cost effective. For example, we believe this trend is helping to drive more revenue towards integrated solutions, where G4S has a competitive advantage and barriers to entry are higher. Building capability Building industry-leading capability is at the heart of our people strategy. We want employees at G4S to have the opportunity to fourish and grow so that they can contribute to the future success of the organisation. There are many examples of local development programmes which enhance the security and technology expertise in our organisation. For example, in 2017 the G4S Academy was launched in Denmark and has provided a structured approach to skills development and accreditation in line with industry standards. DEFINING OUR SOCIETAL IMPACT We play an important role in society. Through its services and organisation, G4S delivers a broad range of signifcant and far‑reaching social and economic benefts to the communities in which we work, many of which are helping to realise the United Nations Sustainable Development Goals (SDGs). • We create employment opportunities, and invest in and develop our employees. We directly beneft them and our suppliers through the salaries, benefts and payments we make for goods and services. • In our Care & Justice operations, we develop innovative programmes to rehabilitate offenders and provide them with the encouragement and skills needed to help them rebuild their lives once released. • We deliver a wide range of specialist security services that mitigate the risk or impact of criminal behaviour and help to create safer and more stable communities. • Our colleagues work with governments and non- governmental organisations in high-risk environments such as former confict areas, to support humanitarian, stabilisation and economic-reconstruction efforts. • Our focus on safety has helped reduce the risk of injury and fatality. • We encourage industry standards to be raised. By embedding our policies and practices into less developed regions, as well as by supporting new approaches such as the Ethical Employment Partnership or the International Code of Conduct for Private Security Providers, we have helped to improve industry standards around the world. The SDGs call upon businesses to advance sustainable development through the investments they make, the solutions they develop, and the practices they adopt. In this report, we have mapped case studies against the SDGs to highlight where G4S is helping to advance the SDGs through our programmes and operations. Visit sustainabledevelopment.un.org for more information on the United Nations Sustainable Development Goals. 18 G4S plc Integrated Report and Accounts 2017 Regional Leadership Programme On a Group-wide basis, our efforts are focused on developing the next generation of leaders, primarily through our fagship Regional Leadership Programme, which is devised centrally but delivered locally so that it is tailored to meet our diverse needs. The Programme offers high-potential individuals, in a range of line, functional and business-development roles, the opportunity to enhance their knowledge and strengthen their leadership skills. So far 90 employees have graduated from the programme, and a further 59 are already on course to do so in 2018. Recruiting and developing women Recruiting and developing women into line-management roles for our operations remains a challenge across the Group as well as the security industry as a whole. We actively monitor our gender balance and were pleased that in 2017 an independent business-led review supported by UK Government (the Hampton-Alexander Review) showed G4S as the top performing company in the business services sector in the FTSE 100. There is more to do in this area and as part of our wider diversity and inclusion strategy we have identifed a number of actions to help us to continue to make progress. Talent reviews Annual talent reviews and quarterly talent exchange discussions are helping to identify potential candidates for future regional programmes early and are ensuring career opportunities are more widely available to employees across the Group. Broadening use of training and development materials Whilst our investment in training and development has to be highly focused, we are doing more to promote the use of materials we already have available to build wider capability across the entire management population. For example, in 2017 we launched a 16-week development programme containing relevant materials such as articles, assessments, online exercises and e-books relating to a number of specifc topics such as change management, delegation and coaching skills. The programme is currently running, with thousands of employees subscribing. As learning technology evolves, our ability to provide access to materials in a more fexible and bite-sized way, to suit our busy managers, is increasing. For example, for specifc functions like Sales and Business Development, we are establishing on-line academies which will help employees identify their own development gaps and navigate the materials available to fnd those best suited to meet their needs. SUSTAINABLE DEVELOPMENT GOALS Engaging for success We are in no doubt that having well-trained, engaged and motivated employees helps us to deliver for our customers and make G4S a success. Consequently, we invest a lot of time and effort in listening to our employees’ views and responding to their feedback. We do this in a variety of ways including direct dialogue, consultation forums and our employee survey. To ensure the survey is accessible to all employees, it is offered in over 40 languages and three formats (paper, online and mobile). Engagement levels for senior managers were also tested in a separate survey targeted at the leadership team. Response rates for both surveys remained high in 2017. In the case of the global engagement survey in 2017 the response rate at 73% was at the same level as 2015 and for the leadership survey was higher at 87%, compared with 85% in 2015. Feedback from the global survey helps identify what businesses need to stop doing, start doing and continue to do to improve levels of employee engagement. The feedback from the management survey showed improvements in almost every area, suggesting high levels of confdence and support for the business strategy, our values and the executive team. 73% Response rate to the biennial employee engagement survey undertaken in 2017 84% Favourable response rating from the global employee engagement survey 90 graduates from the regional leadership programme which continues in 2018 Integrated Report and Accounts 2017 G4S plc 19 Strategic report Our strategy continued S E U L A V D N A E L P O E P Union representation Our union and employee representative forums at global level are via the global union UNI, and the GMB, with whom we signed an Ethical Employment Partnership in 2008. At a European level we have a well-established European Works Council and at a local level there are a number of union recognition agreements in place. Working together with our recognised unions helps us raise standards both internally and, where appropriate, across the wider industry and identify potential problems early and address them constructively. Promoting the right organisational culture During 2017, 300 cases were raised by colleagues via Speak Out, our global whistleblowing system. This was 25% fewer than the previous year, but detailed analysis shows that employee grievances are being reported and handled more effectively via other channels. We believe it is very important that employees feel confdent to speak out confdentially to ensure standards are met to protect people. All cases reported to Speak Out are reviewed and are directed to the most appropriate channel for action. The majority of matters raised via Speak Out are grievances which are transferred to the relevant HR department, as they are best placed to investigate and resolve the matter promptly. Concerns regarding operational procedures are investigated by local management to ensure that relevant standards are being followed. Total number of whistle blowing cases 500 400 300 200 100 0 402 300 158 65 14 15 16 17 Anti-bribery and corruption Investigations relating to other matters, such as bribery, ethical or fnancial issues, are conducted by our internal network of investigators or by independent experts. Matters of a serious nature are investigated at a senior and independent level, with 59 investigations completed during 2017. The Group Ethics Steering committee has continued to oversee implementation of our whistleblowing policy, case management of whistleblowing reports, and to conduct regular reviews of serious cases, the investigations’ progress and the resulting actions. SPEAK OUT Values: Integrity and Respect Safety, Security and Service Excellence SDGs: IF YOU SEE OR SUSPECT WRONGDOING… …do the right thing and speak out! Every G4S employee has a responsibility to ensure that we uphold our core values, adhere to the law and deliver against the important commitments set out in our business ethics policy and ethics code. Speak Out, our global whistleblowing system, is a key method of ensuring that we maintain a high standard of ethics, respect and integrity. Speak Out is hosted by an independent specialist hotline and case management provider. It enables every employee to report concerns that they may have about the behaviour of individuals, or the business operations, which they feel contravene the ethics code or our core values. We encourage any employee who wishes to raise a matter of ethical concern to contact the free telephone hotline or make a report online. Both channels are available 24 hours a day, seven days a week, and are completely confdential. 0808-234-8852 www.g4s-speakout.com IT IS SAFE TO SPEAK OUT! You are encouraged to report any serious issues without fear of retaliation. All concerns raised in good faith will be taken seriously and treated with respect. SPEAK OUT is for reporting serious wrongdoing. Any other concerns (such as pay queries, uniform issues or general employment grievances) should be directed to your line manager, or HR for a quick resolution. Securing Your World 20 G4S plc Integrated Report and Accounts 2017 Improving health and safety The safety of our employees and those in our care is one of our key priorities. To enable us to keep our customers and the communities we serve safe, we must prioritise the safety as well as the health and wellbeing of our employees. It is our responsibility to ensure that our colleagues return home from work safely every day. There were three non-natural deaths in custody in 2017. All deaths in custody are investigated by the relevant authorities to determine the cause of death. One of the incidents was due to self harm. Pronouncements will be made by the relevant coroner on the two remaining incidents following their investigations. In 2016, we disclosed a death in custody which was later pronounced as due to unintentional drug overdose by the coroner. 6.7 Per 1,000 employees lost time injury incidence in 2017 65 Human rights self assessments completed in 2017 Respecting human rights We are proud of our role in society and of the positive contribution we make to the realisation of human rights through the range of services we offer and the standards which we apply. However, we also recognise that we have a duty to ensure that we are not at risk of violating human rights through the services we provide, the customers we work with, the suppliers we use, or through the treatment of our own employees and others who are in our care. G4S’ human rights policy and its related framework are based upon the UN Guiding Principles on Business and Human Rights. Alongside our values of Integrity and Respect, the framework reinforces the continued development of a business model which aids the realisation of the Sustainable Development Goals through the improvement of industry standards, employment opportunities and helping to create secure and stable communities. By having clear values and standards, and educating and training colleagues to uphold them, we are creating a positive culture which means our colleagues can be trusted to do the right thing and behave in a way which meets our standards. In cases where colleagues are deemed not to have upheld those standards, we undertake swift, thorough and impartial investigations into the causes of such behaviour and take appropriate action to remedy them. In addition to this resulting in consequences for the individual or individuals concerned, we learn from such instances and enhance our safeguards to prevent similar issues arising in the future. The nature of our work and the environments we operate in mean that safety and security present a strategic risk to our business. We believe that setting the highest standards for health and safety across our industry helps keep our colleagues safe and builds loyalty and commitment to G4S among our employees. Leading by example and having expertise in health and safety gives employees, customers and stakeholders confdence that we will work in a safe way. We recognise that our businesses operate in different contexts and face varying levels of risk. All businesses within the Group are required to meet a set of core health and safety standards. We must make sure that we are constantly learning and continuously enhancing our processes, in order to continue to keep colleagues safe despite a changing environment. Compliance is monitored via audits and reviews of performance at regional, group and board level via the CSR committee. Health and safety is included in Group Internal Audit’s scope as part of non-fnancial risks. During 2017 we have: • Continued to improve the performance of businesses which have had multiple fatalities. Serious incidents have reduced by 37% in these businesses since 2015 • Introduced a reporting and tracking process for those incidents which have the potential to result in a fatality, and increased the coverage of our injury reporting to 98% of businesses • Reviewed our front-line health and safety induction training and drafted a mandatory syllabus • Revised the G4S Golden Rules of Safety Sadly, during 2017, 25 of our colleagues lost their lives in work-related accidents. On a comparative basis this is a reduction from 47 fatalities in 2016. The number of road-traffc fatalities has decreased by 48% since 2013, when the frst road-safety programme was launched. While the number of attack-related fatalities decreased in our Cash Solutions businesses, this has not been due to a reduction in the number of armed attacks. The businesses continue to work with the relevant authorities to introduce new procedures and improved controls. During 2017 the Group’s lost time injury incidence rate was 6.7 per 1,000 employees (98% of businesses reporting). This compares with a rate of 7.7 in 2016 (96% of business reporting). Integrated Report and Accounts 2017 G4S plc 21 Strategic report Our strategy continued S E U L A V D N A E L P O E P G4S ACADEMY Values: Innovation and Teamwork G4S Academy is a recently-launched initiative within G4S Denmark, focused on creating an intelligent culture that can embrace and adapt to technological change, and predict future customer demands by leveraging our unique, untapped in-house knowledge and sharing it with customers. The standards set by our human rights policy have been embedded into our business policies and processes, such as our ethics policy, HR core standards, and the group risk and compliance systems. For example, investment proposals are assessed on whether they can be achieved in line with our company values and standards, as well as on the basis of appropriate operational delivery, commercial risk and fnancial return. During 2017, we have: • Developed and implemented a human rights awareness programme for senior managers, beginning with the Group Internal Audit department. • Conducted 65 human rights control self-assessments of businesses operating in high-risk countries. • Commenced a programme of internal audits of human rights controls of businesses in high-risk countries, carrying out audits in 2017. • Assessed operational and other business issues against our ‘risk universe’, such as human rights and other CSR risks. • Published our frst slavery and human-traffcking statement, setting out the actions we have taken to help prevent modern slavery within our business and supply chain, including the development and implementation of our Supplier Code of Conduct and our migrant worker policy (g4s.com/modernslavery). • Updated our Supplier Code of Conduct • Commissioned an independent review of Brook House Immigration Removal Centre following allegations of unacceptable behaviour and treatment of detainees by employees (see page 82). IMPROVING DRIVER SAFETY Values: Safety, Security and Service Excellence Innovation and Teamwork SDGs: The number of road-traffc fatalities has decreased by 48% since 2013 when the frst road safety programme was launched. During 2017, we introduced new high-visibility clothing for our motorcyclists in Thailand, and brightly coloured seat belts in Hong Kong which enabled a visual check. 22 G4S plc Integrated Report and Accounts 2017 Respecting Human Rights • Review human rights risks across the Group’s geographic footprint and update our human rights heatmap. • Conduct human rights control self assessments and continue programme of internal audits of businesses operating in high-risk environments. • Carry out human rights risk assessment in key business areas • Review and implement key actions resulting from the independent review of Brook House IRC (see page 82). • Continue to build awareness of human rights responsibilities across the Group’s businesses. Anti-bribery and corruption • Continue to increase awareness of Speak Out and create an environment in which colleagues are confdent that they may raise concerns without fear of retaliation ACTIONS FOR 2018 Create and promote the right organisational culture • Launch management values training materials, embed front-line materials and complete update of HR policies and processes to refect G4S values • Continue the delivery of regional leadership programmes and promote development paths and learning opportunities for employees at different levels • Implement action plans from global employee- engagement survey and address actions from management survey • Review opportunities to improve gender balance and follow up on UK gender pay gap reporting Improving Health and Safety • Continue to implement the revised front-line health and safety induction training • Introduce updated controls for security offcers working at entrance gates • Share and adopt best practice across the Group in managing critical risk areas • Develop action plans for businesses which have had multiple fatalities, as well as monitoring their implementation MOUNT GAMBIER PRISON, AUSTRALIA Values: Integrity and Respect Safety, Security and Service Excellence Innovation and Teamwork SDGs: G4S has operated Mount Gambier Prison since 1995 and in September 2017 was awarded a new fve-year contract which includes an option of a further term of up to fve years. Mount Gambier Prison, the only privately-run prison in South Australia, is a medium-security men’s prison with a capacity of 493 beds. Taking over as general manager at the prison is the previous deputy director for G4S-managed HM Prison Rye Hill in the UK. As the new contract begins, the team will be developing new partnerships with the local community. These will include support services and technology partners. Rehabilitation and reintegration services will be provided, as well as programmes aiming to reduce prisoners’ risks of reoffending, thus supporting the Government’s policy to achieve a 10% reduction by 2020 and aiding reintegration back into the community. The prison’s management team will also continue to work alongside the State on the planned expansion of the facility, engaging with the community and providing signifcant employment opportunities in the region. Integrated Report and Accounts 2017 G4S plc 23 Strategic report Our strategy continued E C N E L L E C X E E C I V R E S D N A S R E M O T S U C We build long‑term customer relationships based upon trust and understanding of our customers’ businesses and objectives. 2017 ACHIEVEMENTS KPI KPI £1.4bn New business won 24,000 Customers completed net promoter score surveys KPI £2.45bn Technology‑ related security revenue in 2017 New business won Annual contract value (£bn) KPI 1.5 1.2 0.9 0.6 0.3 0.0 0.7 0.6 0.6 0.7 0.7 0.7 0.5 0.6 14 15 16 17 H1 H2 24 G4S plc Integrated Report and Accounts 2017 Positive demand for security services We believe that the long-term demand for our services remains positive, and we expect to grow revenues on average by around 4% to 6% per annum over the medium term. We continue to sustain contract retention rates of around 90%, have won substantial new business, and more than replenished our sales pipeline together with an improved quality of opportunities. Large diversifed customer base and sales pipeline One of the strengths of the Group is the diversifed nature of its contracts and sales pipeline. Our pipeline is diversifed by service, geography and customer. Our 150,000 customers are spread across many different types and customer segment. At the end of December 2017, we had won new business with an annual contract value of £1.4 billion and total contract value of £2.5 billion. Our sales pipeline has grown despite an increased emphasis on pipeline qualifcation, ensuring we focus on the best opportunities and improve our win rate. As the Group has invested in innovative products and services, we also see an improvement in the quality of the sales pipeline in terms of more technology-related, longer- term, higher-value-added opportunities. YALE UNIVERSITY, USA Values: Safety, Security and Service Excellence Innovation and Teamwork SDGs: Using G4S-owned AMAG technology, Yale University, one of the world’s best-known and oldest Ivy League institutions, has carried out, almost unnoticed, a full scale upgrade of its access-control and site security system across 350 main campus buildings. Securing a prestigious university in a busy urban area presents particular challenges. High expectations by students, parents and staff, combined with modern security and environmental factors, demanded an exceptional security solution. The innovative AMAG approach was to use their Symmetry SR Retroft System, which is designed so that the customer can use their existing wiring and card readers to avoid a disruptive, prolonged, expensive and complex upgrade and without damage to the historic Yale buildings. This unique “plug and play” design allowed Yale to replace old controllers with Symmetry SR Controllers, and provides Yale with a range of advanced integration options so that additional security measures can be added if and when required. Investment in sales leadership and account management Since 2013, we have invested in sales leadership, sales and service training, customer relationships, account management and a mandatory sales management system. Our understanding of customer requirements has increasingly resulted in opportunities to sell more technology-enabled solutions. This is particularly the case in developed markets, where higher wages and lower hardware costs have made technology solutions more cost-effective. We have also invested in capturing global customer opportunities, which has delivered success by winning new work or new customers such as Bank of America (see case study overleaf). Net promoter score and contract retention Since 2016, we have embarked on a group-wide Net Promoter Score (NPS) survey process with existing customers. In 2017, using automated survey tools, we doubled the number of surveys conducted, with over 24,000 surveys, including our top 20 customers in most countries, conducted successfully in 29 languages and we improved NPS scores in most countries compared with 2016. ACTIONS FOR 2018 • Improve win rate • Improve contract retention • Improve net promoter scores MAJOR REDEVELOPMENT, UNITED STATES Values: Safety, Security and Service Excellence Innovation and Teamwork SDGs: 4-6% Per annum revenue growth over the medium term Since 2016, G4S has been providing detailed risk and threat assessment as well as an integrated solution and unifed security at the largest multi-use redevelopment programme in the United States. This includes access control, systems integration, monitoring (fre, video, intrusion), Risk360, SecureTrax, design and management of the security and operating centre, and manned security offcers. £2.5bn Total contract value of new business won in 2017 CARGILL, BRAZIL Values: Safety, Security and Service Excellence Innovation and Teamwork SDGs: Cargill has been providing food, agriculture, fnancial and industrial products and services across 70 countries for the last 150 years. In Brazil, it has 10,000 employees across 17 states and G4S Brazil has been providing electronic security services (CCTV and access control) to Cargill since 2016. After an in-depth study, G4S Brazil designed a CCTV and access control solution in 2017 for each Cargill site in countryside locations. This can be challenging due to isolation of the sites and the requirement for power generators to be used. This solution will be expanded from the current ten sites to 130 sites over the next three years. 350 buildings Integrated Report and Accounts 2017 G4S plc 25 Strategic report Our strategy continued N O I T A V O N N I D N A Y G O L O N H C E T Since its formation in 2004, G4S has positioned itself as a leader in integrated security, providing a combination of manpower and technology, systems and software. Through our customer relationships and insight, we have increased focus on investing in the development and marketing of new technology and services to strengthen our service offering, to support growth and to improve margins over time. 2017 ACHIEVEMENTS KPI KPI 30% growth in cash automation locations globally 26% growth in retail cash solutions in North America KPI 11.4% Growth in technology‑ related revenues in 2017 26 G4S plc Integrated Report and Accounts 2017 Well‑positioned for trends towards more technology solutions with disciplined capital allocation Increasingly our bespoke offering for customers includes technology in the form of systems and software. For some customers, we own the equipment in their facilities but for others, usually larger customers, we tend to sell the required equipment to the customer, underpinned by long-term management and maintenance contracts. Some of our services and technology solutions, which have commercial momentum in key markets, are featured in this section. Secure Solutions – Integrated Security G4S positions itself, not as a technology company but, as a security systems integration company: Revenue by customer type in 2017 (%) Major corporates & industrials Government* Financial Institutions Retail Private energy/utilities Consumers Transport & Logistics Ports & airports Leisure & Tourism 34% 20% 18% 10% 6% 6% 2% 2% 2% * Our work for Goverment is c7% Care & Justice. The remainder is embassy security, local goverment, support for disaster relief, charity and NGO work, border protection and landmine clearance. BANK OF AMERICA, NORTH AMERICA Innovative long‑term security partnership with one of the world’s largest banks Values: Safety, Security and Service Excellence Innovation and Teamwork SDGs: Leading global fnancial institution Bank of America is one of G4S’ largest commercial customers. Bank of America serves 47 million consumers and small businesses across 4,500 retail fnancial centres in 35 countries around the world. During 2017, our North America business renewed its integrated secure solutions contract with the bank, including a new region covered by the contract, and including access to the Group’s proprietary RISK360 software, with a resultant 10% growth in revenue. Investing in world‑leading proprietary products and services In our Secure Solutions segment, we continue to invest in product and service innovation combined with sales and operational support in the following areas: • Software tools including evidence-based risk assessment, incident management and travel advisory systems such as RISK360. For example, a global fnancial organisation used RISK360 to reduce incident reporting time by 50%. • Proprietary security systems such as Symmetry Connect access control systems (see Yale case study on page 24) and visitor management systems. Technology-related security revenues are now £2.45 billion. Cash solutions – Retail Solutions, bank‑branch automation For our fnancial and retail customers, we have developed a number of innovative and effcient services. We have over 19,500 cash technology installations, often combined with our software and managed service and have a strong and growing pipeline: • Automated cash solutions for retailers – this bespoke solution covers smart safes and cash recyclers, including our own Deposita equipment in emerging markets through to full cash management automation solutions for some of the world’s largest retailers. • Automated bulk-teller solution for banks – the Deposita solution of hardware, proprietary software and managed service is also being used in bank branches. • Mobile banking service – due to the increase in electronic payments and internet banking, traditional bank branch usage has declined in some markets, resulting in bank branch closures. However, the banks recognise the value of personal interaction with customers and so in some developed and emerging markets G4S has launched a mobile banking service using the skills and feet of our traditional cash-in-transit business in a more integrated and innovative way. ACTIONS FOR 2018 • Improve cross-market innovation and growth • Continue to drive market penetration of integrated security solutions • Build on our market leadership in cash automation services with more customers in more markets • Continue to invest in innovative and effcient services for customers • Cross-selling and up-selling within and across markets • Continued investment in people, technology, software and systems 10% Growth in our new renewed contract with Bank of America. The three year integrated security solutions contract is the Group’s largest individual contract. Integrated Report and Accounts 2017 G4S plc 27 Strategic report Our strategy continued Y T I V I T C U D O R P D N A E C N E L L E C X E L A N O I T A R E P O Our productivity programmes have started to show clear benefts and we have increased confdence that there remain many more opportunities to be a more effcient organisation. In August 2017, we announced that we expected to deliver recurring operating and fnancing effciencies of £90 million to £100 million per annum by 2020. 2017 ACHIEVEMENTS KPI KPI 130 business units across 90 countries completed organisation benchmarking £90m-100m effciency savings per annum by 2020 1,300 re‑negotiations with suppliers 1st pilot launched in the entire Irish manned security business in November 2017, combining HR, operations and fnance in one streamlined IT‑enabled process 28 G4S plc Integrated Report and Accounts 2017 More focused business – cultural change Historically a signifcant part of the Group’s strategy and development was growth through bolt-on acquisitions and, in many cases, these acquisitions were not fully integrated into the Group. With the Group offering many services in a large number of countries, this resulted in an ineffcient organisation, with many management layers built up over time, resulting in ineffciency and lack of accountability. The Group is now more focused, on two core business segments, and we are implementing programmes to ensure our organisation and operational costs are just as focused – with support functions as shared-service centres. This requires a substantial cultural change in the organisation and has to be done methodically and properly. Reinvesting for growth A signifcant proportion of the gains we have made from our effciency programmes have been reinvested in the business to improve governance, increase the opportunities for growth as well as in processes to drive further effciency. We have increasing confdence in being able to deliver further effciencies as outlined in the “programme progress table opposite” and we expect the majority of these will increasingly fow through to the bottom line. Effcient organisation design and management de‑layering Following benchmarking in 130 business units across 90 countries in 2017, we have begun delayering the management frameworks in the business and are now working to have more effcient regional, functional and operational frameworks as follows: Procurement and property The Group procurement team has continued driving its activities throughout the different regions with a category- focused and regionally-deployed strategic approach. Key areas of improvement included supplier base rationalisation, standardisation of procurement processes and demand management, renegotiation of payment terms and the delivery of savings across all categories. Globally, in 2017, the team delivered over HINKLEY POINT C, UK Values: Safety, Security and Service Excellence Innovation and Teamwork SDGs: Hinkley Point C will be the frst nuclear plant to be built in the UK in over 20 years. The build project will last ten years and involves a high level of complexity and risk, with over 5,600 workers on site. G4S will be providing an integrated- security solution covering physical security and facilities management, access control, CCTV, RISK360, control room, vetting, incident response – command & control, contractor on-boarding, risk audits and protester management. Programme progress – helping to deliver between £70 million and £80 million sustainable operational cost savings per annum by 2020, with an additional c£20 million from re‑fnancing: Programme Safety performance Status Organisational effciency: operations and support functions Procurement and property IT-enabled automation and shared-service centres One G4S; standardised operating and functional processes Progress Foundations laid: building culture and improving performance Benchmarked 130 business units across 90 countries • >1,300 supplier negotiations • Reduced suppliers and demand • Rationalising property • IT service management model • Progressive, disciplined programme Signifcant opportunity 1,300 individual re-negotiations with tangible results in all regions and savings in excess of 50% in some cases. New procurement tools were implemented to provide more effcient and controlled procurement, such as the tool rolled out in the UK to manage the procurement of contingent labour. This will be progressively rolled out to other regions. In 2018 focus will remain on consolidating the supplier base, standardisation of procurement processes, demand management and delivering savings. Operational excellence We have a number of initiatives in place to introduce standardised operational and functional processes. We are also using IT-enabled automation and shared- service centres to improve productivity. One example of this is Javelin. Lean‑process design – Javelin Project Javelin is a new operating model for our business which takes the best working practices and processes from across G4S. Javelin replaces our previous systems and processes for recruitment, core HR, talent management, procurement, fnance, contract management, payroll, billing, scheduling, tele-contact, IVR platform and operational control systems with a single Cloud based platform. The pilot for Javelin was launched in Ireland in November 2017. The purpose of the pilot programme was to learn how to best deliver this complex change programme within our business, identify areas of our combined processes that work well and capture areas for improvement before further roll-out. The enhanced version of Javelin encompassing all of the lessons learned will be deployed into Ireland before implementation commences in the UK later this year. Automating our core processes for HR (screening, payroll), operations (scheduling, holidays and leave) and fnance (billing) will reduce the amount of time between the work we do for customers and billing for those services. ACTIONS FOR 2018 • Continue with restructuring and organisational effciency programmes • Commence roll-out of Javelin in the UK • Continue to focus on consolidating the supplier base, standardisation of procurement processes, demand management and delivering savings Ten-year Contract to provide integrated security at Hinkley Point C. Integrated Report and Accounts 2017 G4S plc 29 Strategic report Our strategy continued E N I L P I C S I D L A I C R E M M O C D N A L A I C N A N I F Through a strong focus on cash management and portfolio management, net debt/Adjusted EBITDA reduced to 2.4x at the end of 2017 from 2.8x at the end of 2016, in line with our target set in 2015. 2017 ACHIEVEMENTS KPI KPI 2.4x Net debt/ Adjusted EBITDA at end of 2017, within our target of <2.5x 106% operating cash fow from core businesses as a proportion of Adjusted PBITA £527m operating cash fow from core businesses £156m in net disposal proceeds received in 2017 30 G4S plc Integrated Report and Accounts 2017 Operating cash fow Operating cash fow from core businesses in 2017 was £527 million, down from £633 million in 2016 as expected. Operating cash fow in 2016 was particularly strong, refecting the benefcial impact of better terms and conditions with a large number of suppliers and the recovery of weak cash fow performance at the end of 2015. Our 2017 cash fow conversion performance of 106% of Adjusted PBITA (2016: 133%) was in line with our guidance that average operating cash fow conversion will be more than 100% of Adjusted PBITA. We continue to focus on improved working capital management through strengthening bid evaluation frameworks to increase focus on frequency of invoicing and shorter payment terms. Reducing the time between event to billing • Improving processes and automating event billing information such as hours worked (for example Project Javelin on page 29), milestones met, collections and deliveries in the cash solutions business. • Centralising of billing events of global and strategic accounts in some countries. • Automation of invoices removing the resource and delay of a manual process. • Seeking to distribute invoices electronically, at lower cost and quicker than via post. Contract risk management Our contract risk management model was implemented in 2014, and aims to ensure we sign contracts that we can deliver effciently and effectively and is shown in the pie chart below: G4S CONTRACT RISK MANAGEMENT AND GOVERNANCE MODEL Board risk committee The board Risk Committee will undertake a review of a major contract at each of its meetings. Bid risk assessment Based on fnancial, legal, reputational and operational risk criteria. Referred to the region, Group or board as appropriate for review and approval. Group internal audit Internal audit conducts audits of selected contracts. Bid approval Bids’ customer value propositions, commercial terms and risk mitigation strategies are challenged. Expected risk-weighted return is assessed before approval is given or withheld. On-going contract assurance Contracts subject to on-going scrutiny at regional or Group level based on commercial scale and level of risk. Contract mobilisation Key contractual requirements and risk- mitigation strategies, based on complexity and risk profle of mobilisation, are mapped to accountable contract managers. Strengthening collections performance • Changed incentive plans in 2016 with greater emphasis on cash-fow generation. Changing behaviours Cash-fow generation is an important part of management incentive plans. • Improved management information to increase accountability and infuence behaviour. • Weekly calls with fnance and operations to drive cash collection. Managing accounts payable • The Group’s days’ payable outstanding is 42 days (2016: 35 days) which is still shorter than days’ sales outstanding of 52 days (2016: 46 days), but the gap is reducing. This shows that, despite the progress made, there is still an opportunity to improve further. • Ensuring that supplier contracts are linked with customer contracts. • Re-negotiating improved terms through procurement teams. Capital allocation – on‑going priorities for use of cash All investment is reviewed to ensure that the Group’s return on investment targets are met, and all major capital investment projects are approved by the appropriate authority in line with delegation limits. Other measures, such as whether we are able to achieve the benefts of the project in line with the Group values and whether the commercial risks are acceptable, are also considered. We intend to remain soundly fnanced with average operating cash fow conversion of more than100% of Adjusted PBITA and a net debt to Adjusted EBITDA ratio of less than 2.5x. Priorities for excess cash will be investment, dividends and, in the near term, further leverage reduction. CAPITAL ALLOCATION • Net debt/Adjusted EBITDA of below 2.5x • Priority uses of any surplus cash fow: Investment in growth and productivity • • Dividend growth • Leverage reduction Portfolio management The Group made further progress with its portfolio management programme in 2017. The programme has greatly improved the Group’s strategic focus and has also realised over £500 million in disposal proceeds in relation to the 41 businesses sold to date. This includes gross proceeds of £166 million in 2017 relating to the disposal of the Group’s businesses in Israel and Bulgaria, the Group’s cash businesses in Peru and Paraguay, the US Youth Services business and the UK children’s homes business. The proceeds from these disposals have reduced the Group’s leverage and have been reinvested in an organic growth and productivity programme from which we expect to see good returns. Pension defcit repair plan G4S had a net defned pension defcit for accounting purposes of £318 million (2016: £368 million) net of applicable tax as at 31 December 2017. For more details see page 173. The lower defcit refects a small increase in the discount rate assumption used and the payment of defcit repair contributions of £40 million during the year under the current defcit repair plan. The triennial review of the scheme and pension contributions will begin in 2018 and is expected to be completed in 2019. Debt refnancing G4S had gross debt of £2.5 billion (2016: £2.6 billion) and net debt of £1.5 billion at the end of 2017 (2016: £1.7 billion). Around £548 million of the £1 billion debt which matures in 2018/2019 incurs post-hedging average interest rates of between 6.90% and 7.75% (see page 41). The Group has good access to capital markets and a diverse range of fnance providers and as a result began to refnance its debt at much lower rates in 2017 and early 2018 which should result in a material reduction in the Group’s interest charge from 2019 onwards. FINANCIAL OUTLOOK • Average organic revenue growth of 4-6% per annum • Restructuring and effciency programmes to deliver £70m-80m annual costs savings from 2020 and around £20m of refnancing cost reduction per annum by 2020 • Compounding beneft of investment, growth and productivity to deliver strong earnings growth • Operating cash fow from core businesses of over 100% of Adjusted PBITA • Continued focus on cash management and working capital • Continued disciplined approach to capital investment – expect to invest £100m-£150m per annum • Maintain net debt/Adjusted EBITDA below 2.5x • Dividends increasing in line with long-term growth in earnings Integrated Report and Accounts 2017 G4S plc 31 Strategic report S R O T A C I D N I E C N A M R O F R E P Y E K Key performance indicators Our progress in implementing our strategic objectives is measured using key performance measures aligned to those objectives and to the Group values: FINANCIAL – CORE BUSINESSES KPI Revenue1 (£bn) growth since 2013 Adjusted PBITA1 (£m) growth since 2013 £7.4bn +17% £496m +31% 7.2 7.4 6.4 6.6 6.8 8 7 6 5 4 3 2 1 0 496 476 435 415 379 500 400 300 200 100 0 13 14 15 16 17 13 14 15 16 17 We have an organic growth strategy based on strong market positions in structural growth markets. We have invested in improved customer service, innovation and sales and business development capabilities. There is also great potential to sell more complex solutions which tend to have longer contract terms and higher margins. Over the medium term we expect to grow revenues on average by 4% to 6% per annum. In 2017, revenues grew 3.2% to £7.4bn (2016: £7.2bn), with developed markets growing 4.3%, refecting strong growth in North America and modest growth in Europe and the UK. Emerging markets grew 1.5% with good growth across Africa, Asia Pacifc and Latin America offset by a decline in the Middle East & India region. The Group has implemented a number of productivity programmes that are now driving effciency and operational improvement across the Group. These include effcient organisation design, management de-layering, lean operating processes, effcient reporting and assurance processes, upgraded IT systems and effcient procurement. In 2017, Adjusted PBITA grew 4.2% to £496m (2016: £476m) as a result of revenue growth of 3.2% and our productivity initiatives having tangible compounding benefts. Adjusted PBITA in emerging markets was down 4.8% due to the challenging environment in Middle East & India whilst in developed markets Adjusted PBITA increased by 9.1%. Description Performance in 2017 Link to strategic objectives Link to long term incentive plan Link to annual performance bonus 32 G4S plc Integrated Report and Accounts 2017 Strategic report OTHER FINANCIAL AND NON-FINANCIAL KPI An analysis of net debt: Adjusted EBITDA performance is provided on page 30. In addition to the fnancial KPIs, the Group has a set of performance measures aligned to its strategic priorities. These measures include employee retention, contract and customer retention, lost-time injuries and other health and safety measures. A description of these performance measures and our progress against them is shown throughout the strategic report. See pages 14 to 25 for more information. PEOPLE AND VALUES CUSTOMERS AND SERVICE EXCELLENCE TECHNOLOGY AND INNOVATION OPERATIONAL EXCELLENCE AND PRODUCTIVITY FINANCIAL AND COMMERCIAL DISCIPLINE Link to strategy People and values Customers and service excellence Technology and innovation Operational excellence and productivity Financial and commercial discipline Operating cash fow1 (£m) growth since 2013 Adjusted EPS1 (pence per share) growth since 2013 £527m +20% 17.9p +48% 633 527 480 441 391 700 600 500 400 300 200 100 0 18 15 12 9 6 3 0 17.9 16.9 14.3 13.0 12.1 13 14 15 16 17 13 14 15 16 17 A key priority for the Group is to drive improved cash generation, through enhanced working capital management and capital discipline and embedding a “cash matters” culture throughout the Group. Greater emphasis has been placed on cashfow generation in management incentive plans since 2016. G4S is aiming to deliver sustainable growth in adjusted earnings over the long-term. Adjusted EPS growth is a component of both the annual and long-term management incentive plans. Operating cash fow was £527m (2016: £633m), down 16.7% as expected following a higher than normal cash generation in 2016. The cash conversion rate was 106% (2016: 133%), in line with our guidance of over 100% of Adjusted PBITA. Good cash fow and working capital management performances were delivered across most of the Group. Helped by revenue growth, improved Adjusted PBITA margins and lower non-controlling interests, adjusted earnings from core businesses increased 5.7% to £277m (2016: £262m) in 2017. Adjusted EPS from core businesses increased 5.9% to 17.9p (2016: 16.9p). 1. For details of the basis of preparation of results from core businesses and an explanation of Alternative Performance Measures (APMs) used, see page 35. Results from core businesses are reconciled to statutory results on page 44. For more detail on the Group’s strategic priorities please see pages 14 to 31. For more detail on 2017 fnancial performance please see the Chief Financial Offcer’s review on pages 37 to 50. Integrated Report and Accounts 2017 G4S plc 33 W E I V R E V O E C N A M R O F R E P R S C CSR performance Key priority based on 2017 stakeholder materiality exercise (see page 83) HEALTH AND SAFETY HUMAN RIGHTS The safety of our employees and those in our care is one of our corporate values and a priority for the Group. Our respect for human rights is core to the sustainable success of the business and continues to be an important part of our risk‑assessment and mitigation process. ANTI-BRIBERY AND CORRUPTION We continue to develop and encourage a workplace culture in which all employees understand the company’s standards of ethics and feel confdent that they may raise ethical concerns. KPIs 47% Reduction in employee fatalities 65 Human rights control self assessments of businesses operating in high‑risk countries 300 Cases reported and managed via our global whistleblowing system Speak Out during 2017 KEY CSR INDICATORS Number of employees Percentage of female managers Percentage of frontline female employees Work-related fatalities Attack Non-attack Road-traffc incident Lost time incidence rate (per 1,000 employees) Non-natural deaths in custody (UK/Australia) Coverage by collective agreements (%) Employee turnover (%) Number of human rights control self-assessments in high-risk countries Number of human rights audits in high-risk countries Number of whistleblowing cases t/CO2e GHG emissions per £m revenue Total GHG emissions t/CO2e Scope 1 t/CO2e Scope 2 t/CO2e Scope 3 t/CO2e (air travel) Visit g4s.com for more information. 2017 570,000 22.8% 14.2% 25 8 6 11 6.7 3 31% 25.3% 65 37 300 62.9 501,467 297,211 103,915 20,368 2016 585,000 25.5% 13.6% 47 20 10 17 7.7 9 32% 27.6% 54 – 402 68.1 514,466 296,543 108,369 15,261 2015 610,000 23.4% 13.4% 46 17 9 20 8.5 2 33% 29.4% – – 158 72.3 526,403 304,551 108,398 16,088 2014 623,000 23.4% 12.8% 41 14 8 19 – – 30% 30.8% Index p17 p18-19 p18-19 p21 p21 p21 p21 p21 p21 p20 p17 – – 65 p21-22 p21-22 p20 75.0 p117-118 542,429 p117-118 312,708 p117-118 107,232 p117-118 17,573 p117-118 34 G4S plc Integrated Report and Accounts 2017 A L T E R N A T I V E P E R F O R M A N C E M E A S U R E S ( A P M S ) Alternative Performance Measures (APMs) The Group applies the basis of preparation for its statutory results shown on page 136. As explained below, the Group makes use of Alternative Performance Measures (APMs) in the management of its operations and as a key component of its internal and external reporting. Whilst broadly consistent with the treatment adopted by both the Group’s business sector peers and by other businesses outside of the Group’s business sector, these APMs are not necessarily directly comparable with those used by other companies. Business reporting structure Since 2016, the Group has reported its results across three distinct components, in line with its strategy for managing the business: • Core businesses (formerly referred to as “Continuing businesses”), which comprise the Group’s on-going activities; • Onerous contracts, which are being managed effectively to completion: The onerous contracts component largely comprises a small number of material legacy onerous contracts that were identifed by management as loss-making and are being run to completion. The results of these contracts are presented separately so that stakeholders can clearly assess their fnancial impact on the Group as well as consider them separately when assessing the fnancial performance which the Group is likely to deliver into the future; and • Portfolio businesses, which are being managed for sale or closure, as part of the portfolio rationalisation programme announced by the Group in November 2013. Businesses are classifed as portfolio businesses when the Group Executive Committee, having considered their performance, market conditions, competitive environment etc., considers that shareholder value is most likely to be maximised through a sale transaction rather than through continuing use. These businesses are available for immediate sale in their present condition, but do not represent a major line of business or geographical area of operation and hence do not meet the defnition of a discontinued operation under IFRS 5. Due to the scale and breadth of the Group, together with the complex changing environment in the different countries where the Group operates, the portfolio businesses programme is dynamic. Changes in performance and market conditions subsequent to the original launch of the portfolio businesses programme have led the Group Executive Committee to consider that some additional businesses should be sold or closed. In certain cases, changes in market conditions or business performance have provided suffcient evidence for the Group Executive Committee to conclude that shareholder value will best be maximised through retention of some businesses previously categorised as portfolio businesses, and hence such businesses have been re-classifed as core businesses. Since 30 June 2017 there have been no changes to the portfolio businesses other than the completion of some minor disposals. The portfolio programme is considered to be substantially complete at 31 December 2017. Going forwards no further transfers into or out of the portfolio businesses will occur. When presenting these three components separately, the objective is to provide additional information and analysis to enable a fuller understanding of the Group, the way it is managed, and to identify easily the performance of those businesses that are expected to form part of the Group in the long term. These three components, together with the impact of restructuring costs, specifc items and other items disclosed separately from Adjusted PBITA (see below) on the face of the Consolidated income statement, constitute “continuing operations” under IFRS. Discontinued operations, in accordance with IFRS 5, represent areas of the business which are being managed for sale or closure but which represent material business segments or entities. The Group now has minimal operations that meet the IFRS 5 defnition of discontinued operations. The comparative results for each component of continuing operations, and for discontinued operations, are re-presented for consistency to refect the impact of businesses re-classifed between components or sold during the current period. Financial performance indicators The key fnancial measures used by the Group in measuring progress against strategic objectives are set out below, and are reconciled for the current and prior year to the Group’s statutory results on page 44. a. Revenue Statutory revenue arising in each of the three business components. Revenue from core businesses is a Key Performance Indicator (“KPI”). b. Adjusted proft before interest, tax and amortisation (“Adjusted PBITA”) The Group uses Adjusted PBITA as a consistent internal and external reporting measure of its performance, as management views it as being more representative of fnancial performance from the normal course of business and more comparable period to period. Adjusted PBITA excludes strategic restructuring costs, goodwill impairment and amortisation of acquisition-related intangible assets and specifc and other separately disclosed items, which the Group believes should be disclosed separately by virtue of their size, nature or incidence, as explained on page 36. Restructuring costs: These costs relate to the wider strategic transformation of the Group and are excluded from Group and regional Adjusted PBITA since they refect Group decisions and are not considered to be refective of the underlying fnancial performance of the individual businesses. This programme is of a strategic nature and, as such, is monitored and approved by the Group Executive Committee. During 2016 and 2017 activities under the programme have focused primarily on Integrated Report and Accounts 2017 G4S plc 35 Strategic report Alternative Performance Measures (APMs) continued transforming the operating model in the regions of UK & Ireland and Europe. Going forwards, the Group has announced a three-year plan to 2020 to implement effcient organisational design and leaner processes, which is likely to require further restructuring investment. Local, non-strategic restructuring costs in the businesses continue to be included within Adjusted PBITA, consistent with prior years. Goodwill impairment and Amortisation of acquisition- related intangible assets: The goodwill and acquisition-related intangible assets (mainly related to the capitalised value of customer lists), which resulted in these charges, arose when the Group acquired a number of its current businesses. As a contrast, organically-developed businesses in the Group, whilst clearly benefting from intangible assets such as talent and customer relationships, do not have any associated goodwill or acquisition-related intangible assets recognised in the Group’s Consolidated statement of fnancial position. Impairment and amortisation of goodwill and acquisition-related intangible assets are excluded from Adjusted PBITA as they relate to historical acquisitions activity rather than the underlying trading performance of the business, and this presentation enables effective comparison of business performance across the Group, regardless of whether businesses were acquired or developed organically. This approach provides management with comparable information for day-to- day decision making. The income and trading profts earned from previously-acquired businesses are, however, included within Adjusted PBITA, and this treatment may differ from how other groups present profts and amortisation of intangible assets relating to businesses acquired. The Group reports amortisation of all non-acquisition- related intangible assets, which are mainly related to development costs and software, as a charge within Adjusted PBITA, to refect the amortisation of capital expenditure invested in these assets to deliver the day-to-day operations, consistent with the treatment of depreciation of capital expenditure invested in property, plant and equipment. Specifc items: These items are those that, based on management’s judgment, need to be disclosed separately in arriving at operating proft by virtue of their size, nature or incidence. They are excluded from the Group’s adjusted performance measures since they are not considered to be representative of the underlying fnancial performance of the business. In determining whether an event or transaction is specifc, management considers quantitative as well as qualitative factors such as the frequency or predictability of occurrence. All items that are reported as specifc items are evaluated and approved by the Group’s Audit Committee prior to being separately disclosed. The Group seeks to be balanced when reporting specifc items for both debits and credits, and any reversal of excess provisions previously created as specifc items is recognised consistently as a specifc item. The associated tax impact of specifc items is recorded within the specifc items tax charge. In addition, tax-specifc charges or credits, such as those arising from changes in tax legislation which have a material impact, and which are unrelated to net specifc items, are also included within the specifc items tax charge. Consistent with the treatment of pre-tax specifc items, signifcant tax charges or credits that occur, which are not related to core businesses but which would have a signifcant impact on the Group’s tax charge, would also be classifed as tax-specifc items. Profts and losses on disposal or closure of subsidiaries and losses from discontinued operations: These items are excluded from the Group’s adjusted performance measures since they are not refective of the underlying fnancial performance of the Group. Further details regarding these excluded items can be found in note 8 on page 148. Adjusted PBITA from core businesses is a KPI. c. Operating cash fow Net cash fow from operating activities of continuing operations, adjusted to exclude strategic restructuring spend and cash fows from portfolio operations and onerous contracts. Operating cash fow from core businesses is a KPI. d. Earnings Proft attributable to equity shareholders of G4S plc. Adjusted earnings from core businesses excludes specifc and separately disclosed items and is a KPI. e. Earnings per share (“EPS”) Proft attributable to equity shareholders of G4S plc, per share, from continuing operations. Adjusted EPS from core businesses excludes specifc and separately disclosed items, and is a KPI. f. Net debt to Adjusted EBITDA The ratio of total net debt, including investments, fnance lease liabilities and cash and overdrafts within net assets of disposal groups held for sale, to adjusted earnings attributable to equity shareholders before interest, tax, depreciation and amortisation. This ratio is a determinant factor in the board’s assessment of the fnancial strength of the Group, and is a key measure of compliance with covenants in respect of the Group’s borrowing facilities. Certain of these fnancial performance indicators in respect of core businesses also form a signifcant element of performance measurement used in the determination of performance-related remuneration and incentives, as follows: • Adjusted PBITA – annual bonus plans for senior managers in regional management; • Operating cash fow – annual bonus plans and long-term incentive plan for all senior management including executive directors; • Adjusted earnings – annual bonus plans for executive directors and functional directors who are members of the Group Executive Committee; and • Adjusted EPS growth – long-term incentive plan for all senior management including executive directors 36 G4S plc Integrated Report and Accounts 2017 F O C U S E D O N L O N G - T E R M D E L I V E R Y Chief Financial Offcer’s review “We made good progress in 2017 and our core businesses delivered revenue growth of 3.2% and adjusted earnings growth of 5.7%.” Tim Weller, Chief Financial Offcer FINANCIAL HIGHLIGHTS STATUTORY RESULTSe Revenue £7.8bn+3.1% (2016: £7.6bn) Earningsc £236m+19.2% (2016: £198m) Adjusted PBITA £491m+6.5% (2016: £461m) Final dividend 6.11p +5.0% (2016: 5.82p) CORE BUSINESSESa Revenue KPI £7.4bn+3.2% (2016: £7.2bn) Adjusted Earningsa KPI £277m+5.7% (2016: £262m) Adjusted PBITA KPI £496m+4.2% (2016: £476m) Operating cash fow KPI £527m-16.7% (2016: £633m) Net debt: Adjusted EBITDAd Resulting in a total dividend of 2.4x (2016: 2.8x) 9.70p +3.1% (2016: 9.41p) Chief Financial Offcer’s review Introduction Revenue Adjusted PBITAb Adjusted PBITAb margin Earningsc Earnings Per Sharec Operating Cash Flow Statutory Resultsd Actual Foreign Exchange Rates Core Businessesa Constant Foreign Exchange Rates 2017 £7,828m £491m 6.3% £236m 15.2p £488m 2016 £7,590m £461m 6.1% £198m 12.8p £615m % +3.1 +6.5 – +19.2 +18.8 (20.7) 2017 £7,427m £496m 6.7% £277m 17.9p £527m 2016 £7,195m £476m 6.6% £262m 16.9p £633m % +3.2 +4.2 – +5.7 +5.9 (16.7) a. See notes on page 44 for a reconciliation of group results. b. Adjusted PBITA is explained and defned on page 35 in the basis of preparation of Alternative Performance Measures. c. Earnings is defned as proft attributable to equity shareholders of G4S plc. Adjusted earnings and adjusted earnings per share (“EPS”) from core businesses exclude specifc and other separately disclosed items, as explained on page 36, and are reconciled to statutory earnings and EPS on page 44. d. Net debt to Adjusted EBITDA is an Alternative Performance Measure as defned on page 36 and is adjusted to exclude specifc and separately disclosed items. e. See page 136 for the basis of preparation of statutory results. Integrated Report and Accounts 2017 G4S plc 37 Strategic report Chief Financial Offcer’s review continued Basis of preparation The following discussion and analysis on pages 38 to 50 is based on, and should be read in conjunction with, the consolidated fnancial statements, including the related notes, that form part of this annual report. The consolidated fnancial statements have been prepared in accordance with IFRS as adopted by the EU as explained on page 136. Business Performance – statutory results Statutory results at actual exchange rates Revenue Adjusted proft before interest, tax and amortisation (Adjusted PBITA) Specifc items (net) Restructuring costs Proft on disposal/closure of subsidiaries/businesses Goodwill impairment Acquisition-related amortisation Operating proft Interest costs (net) Proft before tax Tax Proft after tax Loss from discontinued operations Proft for the year Non-controlling interests Earnings (proft attributable to equity holders of the parent) EPS Operating cash fow 2017 £m 7,828 491 (34) (20) 74 – (10) 501 (115) 386 (128) 258 (6) 252 (16) 236 15.2p 488 2016 £m 7,590 461 (13) (12) 7 (9) (32) 402 (106) 296 (76) 220 (3) 217 (19) 198 12.8p 615 YoY 3.1% 6.5% 24.6% 8.5% 30.4% 68.4% 17.3% 100.0% 16.1% (15.8%) 19.2% 18.8% (20.7%) Revenue Revenue increased by 3.1% compared with the prior year statutory reported results presented at historical exchange rates. On a constant-currency basis, revenue decreased by 1.2%, refecting a reduction in revenue from businesses identifed for sale or closure of £335m primarily due to businesses disposals in the current and prior years including the Group’s US Youth Services business and its business in Israel (see page 39 and note 17) in 2017. Revenue from onerous contracts was slightly higher than the prior year at £119m (2016: £115m). Excluding revenue from onerous contracts and from businesses identifed for sale or closure, revenue grew by 3.2% at constant exchange rates. Business performance is discussed in more detail by region on page 51. Adjusted PBITA Adjusted PBITA of £491m (2016: £461m) was up 6.5% including the benefts of exchange rate movements in the year. On a constant- currency basis, Adjusted PBITA increased 1.9% refecting the strong performance of the Group in developed markets, improved product mix and the results of our on-going productivity programmes, partially offset by the weakness in the Middle East & India and a reduction in Adjusted PBITA from businesses held for sale or closure of £11m primarily due to business disposals in the current and prior years (see page 44). Excluding Adjusted PBITA from onerous contracts and businesses identifed for sale or closure, Adjusted PBITA increased by 4.2% at constant exchange rates. 38 G4S plc Integrated Report and Accounts 2017 Net specifc items Specifc items resulted in a net charge of £34m (2016: £13m), of which £19m (2016: £4m) primarily relates to the anticipated total losses over the next 15 to 20 years in respect of certain UK contracts. The net specifc item charge also includes £6m relating to the estimated cost of settlement of subcontractor claims from commercial disputes in respect of prior years, and £9m relating mainly to the settlement of labour-related disputes in respect of prior years, in North America and Latin America. Specifc items in 2016 included a £10m charge due to the revision of estimates relating to legacy acquisitions and labour claims in Latin America, £7m relating to commercial restructuring in Middle East & India, and a net £4m supplementary onerous contract provision primarily in respect of the Compass asylum seekers contract, all offset by an £8m credit relating mainly to the recovery of a legal claim in Europe and of certain disputed debtor balances in the UK. Restructuring costs The Group invested £20m (2016: £12m) in restructuring programmes during the year, mainly in the UK & Ireland and Europe regions as part of the multi-year strategic productivity programme being implemented across the Group, which is now drawing to a close. In addition, the Group incurred non-strategic severance costs of £10m (2016: £9m) which are included within Adjusted PBITA. Going forwards the Group has announced a three-year plan to 2020 to implement effcient organisational design and leaner processes, which is likely to require further restructuring investment. Proft on disposal and closure of subsidiaries and goodwill impairment As part of the portfolio programme, the Group realised a net proft of £74m (2016: £7m) relating to the disposal of a number of its operations including the businesses in Israel and Bulgaria, the US Youth Services business, the UK children’s homes business and the Group’s cash businesses in Peru and Paraguay. In 2016, the Group recorded a goodwill impairment charge of £9m in relation to businesses identifed for sale or closure. Acquisition‑related amortisation Acquisition-related amortisation of £10m (2016: £32m) is lower than the prior year as certain intangible assets recognised on a number of legacy acquisitions became fully amortised in 2016. Net interest costs Net interest payable on net debt was £92m (2016: £90m). The increase in 2017 was primarily due to a temporary increase in gross borrowings (matched by an increase in cash balances) following the issuance of a €500m Public Bond in November 2016 and a €500m Public Bond in June 2017 that were used mainly to re-fnance the March and May 2017 debt maturities in addition to drawings under the Revolving Credit Facility. Net other fnance costs of £12m (2016: £6m) increased compared with the prior year due to an additional £2m relating to discount unwound on provisions, a £2m charge in relation to overseas tax settlements, and a £2m indebtedness-related foreign exchange gain recognised in 2016. The pension interest charge, related to the unwinding of discount in relation to long-term pension liabilities, was £11m (2016: £10m), resulting in a total net interest cost of £115m (2016: £106m). Integrated Report and Accounts 2017 G4S plc 39 Strategic report Chief Financial Offcer’s review continued Tax The statutory tax charge of £128m (2016: £76m) for 2017 includes a tax charge of £92m (2016: £85m) on the adjusted profts of core businesses, as explained on page 46, a tax credit on onerous contracts of £4m (2016: £nil), a tax charge of £7m (2016: £2m) in respect of portfolio businesses, a net tax charge of £18m (2016: tax credit of £9m) in respect of acquisition-related amortisation and other separately disclosed items, and a tax charge of £19m (2016: £nil) in respect of the tax impact of the US tax reform (see page 49). The Group’s statutory tax charge represents an effective rate of 33% (2016: 26%) on proft before tax of £386m (2016: £296m). The effective tax rate is a function of a variety of factors, with the most predominant being the geographic mix of the Group’s taxable profts and the respective country tax rates, profts arising on the disposal of certain subsidiaries being taxed at a higher rate, the recognition of, and changes in the value of, deferred tax assets and liabilities, permanent differences such as expenses disallowable for tax purposes, and irrecoverable withholding taxes. The higher effective tax rate compared with the prior year is primarily driven by a one-off charge relating to the re-measurement and impairment of US deferred tax assets arising as a result of US tax reform (as explained on page 49), together with profts arising on the disposal of certain subsidiaries being taxed at a higher tax rate. The effective tax rate on the Group’s statutory profts was also signifcantly higher than the effective tax rate on the adjusted profts of core businesses (explained on page 46), primarily due to two non-core factors. Firstly, the impact of US tax reform, which is excluded from the tax charge on adjusted profts from core businesses, and secondly, as a result of profts arising on the disposal of certain subsidiaries being taxed at a higher rate. Non‑controlling interests Proft attributable to non-controlling interests was £16m in 2017, a decrease from £19m for 2016. The decrease compared with the prior year refects the non-controlling partners’ share in the lower level of proftability of certain businesses in the Middle East & India region. Proft for the year The Group reported proft for the year attributable to equity holders of the parent (“statutory earnings”) of £236m (2016: £198m), an increase of 19.2% compared with the prior year including the benefts of improved Adjusted PBITA, the proft on disposal of subsidiaries and the impact of foreign exchange movements. On a constant-currency basis, earnings increased by 14.0%. Earnings per share Statutory earnings per share increased to 15.2p (2016: 12.8p), based on the weighted average of 1,548m (2016: 1,546m) shares in issue. A reconciliation of the Group’s statutory proft for the year to EPS is provided below: Proft for the year Non-controlling interests Proft attributable to equity holders of the parent (earnings) Average number of shares (m) Statutory earnings per share Statutory 2017 £m 252 (16) 236 1,548 15.2p Earnings per share Statutory 2016 at actual exchange rates £m 217 (19) 198 1,546 12.8p Adjusted Statutory 2016 at constant exchange rates £m 227 (20) 207 1,546 13.4p Review of the Group’s consolidated statement of fnancial position Signifcant movements in the consolidated statement of fnancial position Non-current loan notes were £1,486m (2016: £1,715m), refecting the re-classifcation of certain US Private Placement notes repayable in July 2018 and the €500m Public Bond repayable in December 2018 as current liabilities, offset by the addition of the new €500m Public Bond issued in June 2017 and repayable in 2024. The following movements in the Group’s consolidated statement of fnancial position are set out elsewhere in this report, as follows: • cash, cash equivalents and overdrafts are explained on page 41; • net debt is analysed on page 50; • provisions are analysed in note 33 on page 179; and • retirement beneft obligations are explained on page 43. 40 G4S plc Integrated Report and Accounts 2017 Total equity Total equity at 31 December 2017 was £854m (2016: £863m). The main movements during the year were: proft for the year of £252m (2016: £217m), other comprehensive losses of £47m (2016: income of £109m) which included a re-measurement gain on deferred retirement beneft schemes of £26m (2016: loss of £169m) as explained on page 43, an exchange loss on translation of foreign operations of £125m (2016: gain of £429m) and a gain from changes in the fair value of cash fow hedging fnancial instruments of £56m (2016: loss of £197m) and dividends paid in the year of £179m (2016: £162m). The signifcant foreign currency gain of £228m (net of changes in fair value of cash fow hedging fnancial instruments) recognised in the consolidated statement of comprehensive income in the prior year was mainly as a result of the weakening of Sterling compared with the US dollar and Euro following the UK referendum result in June 2016. In 2017, Sterling strengthened compared with the US dollar, partially offset by a further weakening against the Euro, resulting in a net foreign exchange loss of £69m recognised in the Consolidated statement of comprehensive income for the year. Review of the Group’s cash fow and fnancing Consolidated statement of cash fow Net cash fow from operating activities of continuing operations was £488m (2016: £615m), a decrease compared with the prior year as the Group reverted to a more customary level of operating cash generation following the particularly strong performance in the prior year, net cash infow from total operating activities was £402m (2016: £522m), net cash generated by investing activities was £81m (2016: net cash outfow of £18m), including £156m (2016: £82m) of net business disposal proceeds and net cash outfow from fnancing activities was £570m (2016: £307m). Cash, cash equivalents and overdrafts at 31 December 2017 were £571m (2016: £672m), a net decrease including the impact of exchange rate movements of £101m (2016: net increase of £284m). The Group’s statutory cash fow is presented in full on page 135. Net debt The Group’s net debt as at 31 December 2017 was £1,487m (December 2016: £1,670m). The Group’s net debt to Adjusted EBITDA ratio improved to 2.4x (2016: 2.8x). A detailed reconciliation of movements in net debt is provided on page 50. Net debt maturity In May 2017, the Group’s credit rating was affrmed by Standard & Poor’s as BBB- (negative). As of 31 December 2017 the Group had liquidity of £1,571m (2016: £1,692m) comprising cash, cash equivalents and bank overdrafts of £571m (2016: £672m) and unutilised but committed facilities of £1bn (2016: £1bn). The Group issued a €500m Public Bond in June 2017 which matures in June 2024 and pays an annual coupon of 1.5%. The next debt maturities are £44m and $224m US Private Placement notes due in July 2018 and a €500m Public Bond due in December 2018. The Group has good access to capital markets and a diverse range of fnance providers. Borrowings are principally in Sterling, US dollars and Euros, refecting the geographies of signifcant operational assets and profts. The Group’s main sources of fnance and their applicable rates as of 31 December 2017 are set out below: Debt instrument/Year of issue US PP 2008 US PP 2007 US PP 2008 Public Bond 2012 Public Bond 2009 Public Bond 2016 Public Bond 2017 Revolving Credit Facility 2015c Nominal amounta £44m US$250m US$298.5m €500m £350m €500m €500m £1bn (multi-currency) Issued interest rate 7.56% 5.96% – 6.06% 6.78% – 6.88% 2.63% 7.75% 1.5% 1.5% Post hedging average interest rate 7.56% 2.20% 6.90% 2.62% 7.75% 2.24% 3.21% 2018 44 154 417 Year of redemption and amounts (£m)b 2019 2020 2021 2022 2023 2024 78 55 107 350 448 421 Total 44 185 209 417 350 448 421 Undrawn Undrawn 615 457 55 – 78 448 – 421 2,074 a. Nominal debt amount, for fair value carrying amount see note 31. b. Translated at exchange rates prevailing at 31 December 2017, or hedged exchange rates where applicable. c. £964m of the original £1bn multi-currency revolving credit facility matures in January 2022, with the remainder maturing in January 2021. As at 31 December 2017 there were no drawings from the facility. Integrated Report and Accounts 2017 G4S plc 41 Strategic report Chief Financial Offcer’s review continued The Group’s average cost of gross borrowings in 2017, net of interest hedging, was 4.1% (2016: 4.1%). Financing and treasury activities The Group’s treasury function is responsible for ensuring the availability of cost-effective fnance and for managing the Group’s fnancial risk arising from currency and interest rate volatility and counterparty credit. Group Treasury is not a proft centre and is not permitted to speculate in fnancial instruments. The treasury department’s policies are set by the board. Treasury is subject to the controls appropriate to the risks it manages, which are discussed in note 31 on pages 168 to 172. To assist the effcient management of the Group’s interest costs, the Group operates a multi-currency notional pooling cash management system with a wholly-owned subsidiary of an A-rated bank. The Group presents pooled cash and overdrafts gross in the Consolidated statement of fnancial position. Other information Signifcant exchange rates applicable to the Group The Group derives a signifcant portion of its revenue and profts in the currencies shown below, with their respective closing and average rates: £/US$ £/€ £/South Africa Rand £/India Rupee £/Israel Shekel £/Brazil Real As at 31 December 2017 1.3524 1.1250 16.7557 86.3531 4.6951 4.4794 At 2017 average rates 1.2964 1.1453 17.3187 84.3570 4.6484 4.1506 As at 31 December 2016 1.2345 1.1705 16.9500 83.8670 4.7483 4.0165 At 2016 average rates 1.3558 1.2265 19.8742 91.0371 5.1912 4.7252 Applying December 2017 closing rates to the Group’s statutory results for the year to 31 December 2017 would result in a decrease in revenue of 1.9% to £7,680m (for the year ended 31 December 2016: increase of 2.5% to £7,782m) and a decrease in Adjusted PBITA of 1.9% to £482m (for the year ended 31 December 2016: increase by 2.5% to £473m). The weakening of average Sterling exchange rates compared with the prior year led to an increase in revenue of 4.5% and an increase in Adjusted PBITA of 4.7% as explained above. The impact of exchange rate movements reduced the Group’s net debt by £21m compared with the prior year. Dividend In assessing the dividend, the board considers: • future investment requirements; • the Group’s pension obligations; • net debt to Adjusted EBITDA; • the availability of distributable reserves in the parent company; and • reward to shareholders. Following the achievement of the Group’s leverage-reduction target, the directors propose a 5% increase in the fnal dividend to 6.11p (DKK 0.5097) per share (2016: 5.82p per share; DKK 0.5029) refecting the board’s confdence in the Group’s performance and prospects. Our dividend policy is to increase the dividend in line with the long-term growth in earnings. The interim dividend was 3.59p (DKK 0.2948) per share and the total dividend, if approved, will be 9.70p (DKK 0.8045) per share, an increase of 3.1% compared with 2016 (for the year ended 31 December 2016, the interim dividend was 3.59p; DKK 0.3143 and the total dividend was 9.41p; DKK 0.8172). The proposed dividend cover is 1.8x (2016: 1.8x) on adjusted earnings from core businesses. 42 G4S plc Integrated Report and Accounts 2017 Pensions As at 31 December 2017 the net defned beneft pension obligation in the Consolidated statement of fnancial position was £381m (2016: £437m) of which £283m (2016: £341m) related to material funded defned beneft schemes. Net of related deferred tax balances, the Group’s net pension obligation was £318m (2016: £368m). The most signifcant of the Group’s pension schemes is in the UK and accounts for over 88% (2016: 94%) of the Group’s total material scheme obligations. The scheme has approximately 30,000 members and further details of the make-up of the scheme are given in note 32 on page 174. Scheme assets Obligations Net UK obligations 2017 £m 2,345 (2,595) (250) 2016 £m 2,339 (2,659) (320) The reduction in the UK scheme net obligations refected a decrease in the scheme obligations of £64m partially offset by an increase of £6m in the value of scheme assets. The decrease in the obligations is a result of the discount rate used for valuation purposes increasing to 2.55% (2016: 2.50%), the projected pension infation rates decreasing to 3.2% (2016: 3.3%), and the payment of scheduled defcit repair contributions of £40m (2016: £39m) during the year. The Group will pay pension defcit repair contributions of £41m in 2018 in line with the agreed contribution schedule. The next funding valuation is due in 2018, following which future contributions will be subject to review and potential renegotiation. Interest-rate risk and interest-rate swaps The Group’s investments and borrowings at 31 December 2017 were a mix of fxed rates of interest and foating rates of interest linked to LIBOR and EURIBOR. The March 2007 and July 2008 private placement notes and the May 2009, December 2012, November 2016 and June 2017 public notes were all issued at fxed rates, whilst the Group’s investments and bank borrowings were all at variable rates of interest linked to LIBOR and EURIBOR. The Group’s interest-risk policy requires Treasury to fx a proportion of its interest exposure on a sliding scale in US dollars, Sterling and Euro, using the natural mix of fxed and foating interest rates emanating from the bond and bank markets and by utilising interest-rate and cross-currency swaps. Part of the proceeds of the private placement and public notes have been swapped to foating interest rates, and accounted for as fair-value hedges, with a net gain in the hedges at 31 December 2017 of £14m (2016: net gain £27m). The market value of the pay-fxed receive-variable swaps and the pay-fxed receive-fxed cross-currency swaps outstanding at 31 December 2017, accounted for as cash-fow hedges and net-investment hedges, was a net asset of £59m (2016: net asset of £31m). Foreign currency The Group has many overseas subsidiaries and joint ventures, denominated in various different currencies. Treasury policy is to manage signifcant translation risks in respect of net operating assets and its consolidated net debt/Adjusted EBITDA ratio by holding foreign- currency denominated loans, cross-currency swaps and to a lesser extent forward-currency contracts. At 31 December 2017, the Group’s US dollar and Euro net assets were approximately 91% and 90% respectively, hedged by foreign currency debt. As at 31 December 2017, net debt held in US dollars and Euros, and in those currencies offcially pegged to these two currencies, equated broadly to a ratio of 2.3x Adjusted EBITDA generated from these currencies (2016: 2.2x Adjusted EBITDA). Tax policy The Group’s tax policy is set out at g4s.com/taxstrategy Corporate governance The Group’s policies regarding risk management and corporate governance are set out in the Risk management section on pages 60 to 65 and in the Corporate governance report on page 84. Integrated Report and Accounts 2017 G4S plc 43 Strategic report Chief Financial Offcer’s review continued Business performance – Alternative Performance Measures (APMs) Basis of preparation In the following review, to aid comparability, 2016 prior year results are presented on a constant-currency basis by applying 2017 average exchange rates, unless otherwise stated. Summary Group results Year ended 31 December 2017 (at 2017 average exchange rates) £m Revenue Adjusted PBITAa Proft before tax Tax Proft after tax Earningsd EPSd Operating cash fowe Core businessesa 7,427 496 383 (92) 291 277 17.9p 527 Onerous contracts 119 – (19) 4 (15) (15) (1.0)p (13) Year ended 31 December 2016 (at 2017 average exchange rates) £m Revenue Adjusted PBITAa Proft before tax Tax Proft after tax Earningsd EPSd Operating cash fowe Core businessesa 7,195 476 375 (90) 285 262 16.9p 633 Onerous contracts 115 – – – – – – (10) Year ended 31 December 2016 (at 2016 average exchange rates) £m Revenue Adjusted PBITAa Proft before tax Tax Proft after tax Earningsd EPSd Operating cash fowe Core businessesa 6,896 455 354 (85) 269 247 16.0p 633 Onerous contracts 112 – – – – – – (10) Portfolio businessesb 282 (5) (7) (7) (14) (15) (1.0)p (7) Portfolio businessesb 617 6 1 (3) (2) (3) (0.2)p 10 Portfolio businessesb 582 6 1 (2) (1) (2) (0.1)p 10 Acquisition‑related amortisation and otherc Restructuring (20) 4 (16) (16) (1.0)p (19) 49 (37) 12 5 0.3p – Acquisition‑related amortisation and otherc Restructuring (13) 3 (10) (10) (0.6)p (18) (52) 9 (43) (42) (2.7)p – Acquisition‑related amortisation and otherc Restructuring (12) 2 (10) (10) (0.6)p (18) (47) 9 (38) (37) (2.4)p – Statutory 7,828 491 386 (128) 258 236 15.2p 488 Adjusted statutoryf 7,927 482 311 (81) 230 207 13.4p 615 Statutory 7,590 461 296 (76) 220 198 12.8p 615 a. Results from core businesses, presented at constant exchange rates other than for operating cash fow, exclude results from portfolio businesses identifed for sale or closure and from onerous contracts. For the Group’s 2017 results, continuing businesses have been renamed ‘core’ businesses to provide a clear distinction from the Group’s statutory results from continuing operations. In addition, PBITA has been renamed ‘Adjusted PBITA’ to refect the exclusion of specifc and separately disclosed items set out on page 35. Core businesses and Adjusted PBITA are defned and calculated in exactly the same way as continuing businesses and PBITA were previously defned and calculated. The basis of preparation of results of core businesses and an explanation of Alternative Performance Measures, including Adjusted PBITA, are provided on page 35. b. Portfolio businesses that remain part of the Group, having not yet been sold or closed, contributed £158m revenue (2016: £167m at 2017 average exchange rates; £155m at 2016 average exchange rates) and a loss of £9m to Adjusted PBITA (2016: loss of £21m at 2017 average exchange rates; £20m at 2016 average exchange rates). c. Other includes net specifc items (other than those presented within onerous contracts), net proft on disposal/closure of subsidiaries/businesses, the results of discontinued operations and, in 2016, goodwill impairment. The associated tax impact of these net specifc items is recorded within the tax charge within “other”. In addition, tax-specifc charges or credits, such as those arising from changes in tax legislation which have a material impact, and which are unrelated to net specifc items, are also included within the tax charge within “other”. The full accounting policy regarding specifc and other separately disclosed items is provided on page 36. d. Earnings is defned as proft attributable to equity shareholders of G4S plc. Adjusted Earnings and Adjusted Earnings per share (“EPS”) from core businesses exclude specifc and other separately disclosed items, and likewise the tax impact of those specifc and other separately disclosed items and the impact of tax-specifc charges or credits unrelated to those specifc and other separately disclosed items, as explained on page 36. Adjusted Earnings and Adjusted EPS from core businesses are reconciled to statutory earnings and statutory EPS above. e. Operating cash fow is defned on page 36 and is stated after pension defcit contributions of £40m (2016: £39m) and for the year ended 31 December 2016 is presented at 2016 average exchange rates. Operating cash fow from core businesses is reconciled to the Group’s movements in net debt on page 50. Statutory operating cash fow is net cash fow from operating activities of continuing operations. f. The ‘adjusted statutory’ fgures represent the comparative 2016 statutory results translated at 2017 average exchange rates (other than for operating cash fow) but should not be considered as or used in place of the Group’s statutory results. 44 G4S plc Integrated Report and Accounts 2017 Results from core businesses At 2017 average exchange rates (other than operating cash fow) Revenue Adjusted proft before interest, tax and amortisation (Adjusted PBITAa) Adjusted PBITAa margin Interest Adjusted proft before taxa Tax Adjusted proft after taxa Non-controlling interests Adjusted earningsa (proft attributable to equity holders of the parent) Adjusted EPSa Operating cash fowa,b 2017 £m 7,427 496 6.7% (113) 383 (92) 291 (14) 277 17.9p 527 2016 £m 7,195 476 6.6% (101) 375 (90) 285 (23) 262 16.9p 633 YoY % 3.2% 4.2% +10b.p. 11.9% 2.1% 2.2% 2.1% (39.1)% 5.7% 5.9% (16.7)% a. Alternative Performance Measures (“APMs”) for core businesses are explained on pages 35 and 36 and are reconciled to the Group’s statutory results on page 44. b. Operating cash fow for 2016 is shown at actual 2016 exchange rates. Revenue At £2.7bn, emerging markets' revenues increased 1.5% on the prior year, with growth in all regions except for Middle East & India, and represented 37% of Group revenue (2016: 37%). Developed markets’ revenues were 4.3% higher than the prior year with 6.0% growth in North America, 3.9% in Europe and 2.1% in UK & Ireland. Revenue from Cash Solutions was up 2.3% on 2016 and from Secure Solutions was up 3.4% on 2016. Adjusted PBITA Adjusted PBITA of core businesses of £496m (2016: £476m) was up 4.2%. This growth refects the strong performance of the Group in developed markets, improved product mix and the results of our on-going productivity programmes, partially offset by the weaker trading in the Middle East & India. Overall, the Adjusted PBITA margin increased to 6.7% (2016: 6.6%) with improvements delivered in six out of the seven regions. Interest Net interest payable on net debt from core businesses was £90m (2016: £85m). The increase in 2017 was primarily due to a temporary increase in gross borrowings (matched by an increase in cash balances) following the issuance of a €500m Public Bond in November 2016 and a €500m Public Bond in June 2017 that were used mainly to re-fnance the March and May 2017 debt maturities in addition to drawings on the Revolving Credit Facility. Net other fnance costs of £12m (2016: £6m) increased compared with the prior year due to an additional £2m relating to discount unwound on provisions, a £2m charge in respect of overseas tax settlements, and a £2m indebtedness-related foreign exchange gain recognised in 2016. The pension interest charge, related to the unwinding of the discount in relation to long-term pension liabilities, was £11m (2016: 10m), resulting in a total net interest cost of £113m (2016: £101m). Tax A tax charge of £92m (2016: £90m) was incurred on the adjusted profts of core businesses of £383m (2016: £375m) which represents an effective tax rate of 24% (2016: 24%). The effective tax rate is a function of a variety of factors, with the most predominant being the geographic mix of the Group’s taxable profts and the respective country tax rates, the recognition of, and changes in the value of, deferred tax assets and liabilities, permanent differences such as expenses disallowable for tax purposes, and irrecoverable withholding taxes. At any point in time, the Group is typically subject to tax audits in a number of different countries. In situations where a difference of opinion arises between the Group and a local tax authority in respect of its tax flings, the Group will debate the contentious areas and, where necessary, resolve them through negotiation or litigation. The Group relies upon advice and opinions from the Group tax department, local fnance teams and external advisors, to ensure that the appropriate judgments are arrived at in establishing appropriate accounting provisions in relation to such disputes. Integrated Report and Accounts 2017 G4S plc 45 Strategic report Chief Financial Offcer’s review continued Non‑controlling interests Proft from core businesses attributable to non-controlling interests was £14m in 2017, a decrease from £23m for 2016, refecting the non-controlling partners’ share of the lower level of proftability of certain businesses in the Middle East & India region. Adjusted proft for the year (“adjusted earnings”) – core businesses The Group generated adjusted proft from core businesses attributable to equity holders (“adjusted earnings”) of £277m (2016: £262m), an increase of 5.7% for the year ended 31 December 2017. Adjusted earnings per share Adjusted earnings per share from core businesses increased to 17.9p (2016: 16.9p), based on the weighted average of 1,548m (2016: 1,546m) shares in issue. A reconciliation of adjusted proft for the year from core businesses to Adjusted EPS is provided below: Adjusted proft for the year from core businesses Non-controlling interests Adjusted proft attributable to equity holders of the parent (earnings) Average number of shares (m) Adjusted earnings per share – core businesses Adjusted earnings per share – core businesses 2016 at actual exchange rates £m 269 (22) 247 1,546 16.0p 2016 at constant exchange rates £m 285 (23) 262 1,546 16.9p 2017 £m 291 (14) 277 1,548 17.9p Onerous contracts The Group’s onerous contracts generated revenues of £119m (2016: £115m) for the year ended 31 December 2017. The Group recognised additional provisions of £19m (2016: £4m), classifed as specifc items, primarily related to the anticipated total losses over the next 15 to 20 years in respect of certain UK contracts. It is expected that around 60% of the Group’s total provision for onerous customer contracts of £62m will be utilised by the end of 2020. Portfolio operations The Group made further progress with its portfolio management programme in the year. This programme has greatly improved the Group’s strategic focus and has also generated approximately £510m in disposal proceeds in relation to the 38 businesses sold up to 31 December 2017. Disposals in the year include the Group’s businesses in Israel and Bulgaria, its cash businesses in Peru and Paraguay, the US Youth Services business and the UK children’s homes business, generating total gross proceeds of £166m. Since the year end, and up to the date of this report, a further three businesses have been sold, generating additional gross proceeds of £9m. The portfolio programme is considered to be substantially complete at 31 December 2017. Since 30 June 2017 there have been no changes to the portfolio businesses other than the completion of some minor disposals. Going forwards no further transfers into or out of the portfolio businesses will occur. 46 G4S plc Integrated Report and Accounts 2017 2017 core businessa reconciliation The table below reconciles 2017 results from core businesses as they would have been presented based on the core businesses classifed as such in 2016 to 2017 results from core businesses as presented in the 2017 results. Results from core businesses For the year ended 31 December 2017 Revenue Africa Asia Pacifc Latin America Middle East & India Emerging markets Europe North America UK & Ireland Developed markets Total revenue Adjusted PBITA Africa Asia Pacifc Latin America Middle East & India Emerging markets Europe North America UK & Ireland Developed markets Total Adjusted PBITA before corporate costs Corporate costs Total Adjusted PBITA Earnings Operating cash fowf a. See basis of preparation on page 44. 2017 Results based on 2016 core businesses £m New onerous contracts in 2017b £m Onerous contracts re-classifed to core businesses in 2017c £m Businesses re-classifed to portfolio in 2017d £m Businesses re-classifed from portfolio in 2017e £m 2017 Results based on 2017 core businesses £m 457 736 700 845 2,738 1,356 2,006 1,251 4,613 7,351 46 65 29 58 198 104 123 118 345 543 (49) 494 276 532 – – – – – – – (5) (5) (5) – – – – – – – – – – – – – – – – – – – – 73 73 73 – – – – – – – – – – – – – – – (7) – (7) – – – – (7) – – – – – – – – – – – – – – (6) (1) – – – – – – – 15 15 15 – – – – – – – 2 2 2 – 2 1 2 457 736 693 845 2,731 1,356 2,006 1,334 4,696 7,427 46 65 29 58 198 104 123 120 347 545 (49) 496 277 527 b. In 2017 the performance of an additional contract in the UK & Ireland, previously categorised within core businesses, has deteriorated such that it is now considered onerous. We have therefore reported the results of this contract in onerous contracts in 2017 and have re-presented the 2016 results accordingly. c. In 2017 the performance of three UK & Ireland contracts previously categorised as onerous has improved such that they are no longer onerous. We have therefore reported the results of these contracts in core businesses in 2017 and have restated the 2016 results accordingly. d. Also in 2017, we determined that the Group would exit three minor operations in Latin America, and the results of these businesses are therefore reported within portfolio businesses in 2017, with the 2016 results re-presented accordingly overleaf. e. In 2017, the performance of a business in the UK & Ireland, previously categorised within portfolio operations, improved such that the Group formally concluded to retain it. We have therefore reported the results of this business in core businesses in 2017 and re-presented the 2016 comparatives accordingly. f. Operating cash fow is stated after pension defcit contributions of £40m and is shown at actual 2016 exchange rates. Integrated Report and Accounts 2017 G4S plc 47 Strategic report Chief Financial Offcer’s review continued Re‑presentation of prior year results from core businessesa The table below reconciles revenue and Adjusted PBITA from core businesses as reported previously to the re-presented prior year revenue and Adjusted PBITA from core businesses. Results from core businesses For the year ended 31 December 2016 Revenue Africa Asia Pacifc Latin America Middle East & India Emerging markets Europe North America UK & Ireland Developed markets Total revenue Adjusted PBITA Africa Asia Pacifc Latin America Middle East & India Emerging markets Europe North America UK & Ireland Developed markets Total Adjusted PBITA before corporate costs Corporate costs Total Adjusted PBITA Earnings Operating cash fowe a. See basis of preparation on page 44. Onerous contracts re-classifed to core businesses in 2017b £m As previously reported £m Businesses re-classifed to portfolioc £m Businesses Re‑presented at 2016 re-classifed exchange from portfoliod rates £m £m Exchange rate movements £m Re-presented at 2017 exchange rates £m 422 679 621 842 2,564 1,224 1,817 1,218 4,259 6,823 42 57 23 76 198 85 111 110 306 504 (50) 454 246 638 – – – – – – – 70 70 70 – – – – – – – – – – – – – (6) – – (9) – (9) – – – – (9) – – (1) – (1) – – – – (1) – (1) – (1) – – – – – – – 12 12 12 – – – – – – – 2 2 2 – 2 1 2 422 679 612 842 2,555 1,224 1,817 1,300 4,341 9 36 43 48 136 81 75 7 163 431 715 655 890 2,691 1,305 1,892 1,307 4,504 6,896 299 7,195 42 57 22 76 197 85 111 112 308 505 (50) 455 247 633 1 3 2 5 11 6 4 – 10 21 – 21 15 – 43 60 24 81 208 91 115 112 318 526 (50) 476 262 633 b. In 2017 the performance of three UK & Ireland contracts previously categorised as onerous has improved such that they are no longer onerous. The results of these contracts are therefore reported in core businesses in 2017 and the 2016 results re-presented accordingly. c. In 2017 we determined that we would exit three minor operations in Latin America and the results of these businesses are therefore reported in portfolio businesses in 2017 and the 2016 results re-presented accordingly. d. Also in 2017, the performance of a business previously reported as a portfolio business in UK & Ireland has improved, and management formally concluded that this business will be retained. The results of this business are therefore reported in core businesses in 2017 and the 2016 results re-presented accordingly. e. Operating cash fow is stated after pension defcit contributions of £39m and is shown at actual 2016 exchange rates. 48 G4S plc Integrated Report and Accounts 2017 Restructuring The Group invested £20m (2016: £13m) in restructuring programmes during the year, mainly in the UK & Ireland and Europe regions, relating to the multi-year strategic productivity programme being implemented across the Group which is now drawing to an end. In addition, the Group incurred non-strategic severance costs of £10m (2016: £9m) which are included within Adjusted PBITA from core businesses. Going forwards the Group has announced a three-year plan to 2020 to implement effcient organisational design and leaner processes, which is likely to require further restructuring investment. Acquisition‑related amortisation, specifc and separately disclosed items Net specifc items Net proft on disposal/closure of subsidiaries/businesses Goodwill impairment Acquisition-related amortisation Acquisition-related amortisation, specifc and separately disclosed items before tax Tax charges arising on acquisition-related amortisation, specifc and separately disclosed items Tax impact of US Tax Cuts and Jobs Act Acquisition-related amortisation, specifc and separately disclosed items after tax Loss from discontinued operations Non-controlling interests’ share of acquisition-related amortisation, specifc and separately disclosed items Total acquisition-related amortisation, specifc and separately disclosed items – impact on earnings 2016 at constant exchange rates £m (14) 5 (9) (34) (52) 9 – (43) (3) 2016 at actual exchange rates £m (13) 7 (9) (32) (47) 9 – (38) (3) 4 (42) 4 (37) 2017 £m (15) 74 – (10) 49 (18) (19) 12 (6) (1) 5 Net specifc items Specifc items resulted in a net charge of £15m (2016: £14m) comprising £6m related to the estimated cost of settlement of subcontractor claims from commercial disputes in respect of prior years, and £9m related mainly to the settlement of labour-related disputes in respect of prior years in North America and Latin America. Specifc items in 2016 included an £11m charge due to the revision of estimates relating to legacy acquisitions and labour claims in Latin America, £7m relating to commercial restructuring in Middle East & India, and a net £4m supplementary onerous contract provision primarily in respect of the Compass asylum seekers contract, all offset by an £8m credit relating mainly to the recovery of a legal claim in Europe and of certain disputed debtor balances in the UK. Proft on disposal and closure of subsidiaries/businesses and goodwill impairment As part of the portfolio programme, the Group realised a net proft of £74m (2016: £5m) relating to the disposal of a number of the Group’s operations including the Group’s businesses in Israel and Bulgaria, the US Youth Services business, the UK children’s homes business and the Group’s cash businesses in Peru and Paraguay. The Group recorded a goodwill impairment charge in the prior year of £9m in relation to businesses to be sold or closed. Acquisition‑related amortisation Acquisition-related amortisation of £10m (2016: £34m) is lower than the prior year as certain intangible assets recognised on a number of legacy acquisitions became fully amortised in 2016. Tax charges arising on acquisition‑related amortisation, specifc and other separately disclosed items Tax charges arising on acquisition-related amortisation, specifc and other separately disclosed items of £18m (2016: tax credit of £9m) relate primarily to the disposal of subsidiaries in the United States, Peru and Paraguay. Tax impact of US Tax Cuts and Jobs Act (“US tax reform”) On 22 December 2017, the US tax legislation known as the Tax Cuts and Jobs Act was signed into law by the US President and introduced signifcant changes in US tax laws with effect from 1 January 2018. As this legislation is considered to be substantively enacted as at 31 December 2017, any tax effects of the legislation arising in 2017 have been taken into account. For 2017, the changes in legislation resulted in a separately disclosed one-off charge to the income statement of £19m arising from the re-measurement and impairment of deferred tax assets due to the reduction in the US Federal tax rate, and from the impairment of foreign tax credits which are no longer expected to be recovered in future periods against foreign source income. On the basis of information currently available and from analysis completed since the legislation was enacted, the above are likely to be the most signifcant impacts for the Group. However, as more detailed analysis and future legislative guidance become available, it is possible that the Group may be further impacted in the current and subsequent years by the legislative changes. Integrated Report and Accounts 2017 G4S plc 49 Strategic report Chief Financial Offcer’s review continued Reconciliation between statutory operating proft and net debt A reconciliation between operating proft as presented in the Group’s Consolidated income statement to movement in net debt is presented below with 2017 amounts presented at actual rates for the year and the prior year amounts presented at 2016 average exchange rates. Operating proft Adjustments for non-cash and other items (see page 135) Net working capital movement Net cash fow from operating activities of continuing operations (page 135) Adjustments for: Restructuring spend Cash fow from continuing operations Analysed between: Core businesses Onerous contracts Portfolio businesses Investment in the business Purchase of fxed assets, net of disposals Restructuring investment Disposal of subsidiaries/businesses Acquisition of subsidiaries Net debt in disposed/acquired entities New fnance leases Net investment in the business Net cash fow after investing in the business Other uses of funds Net interest paid Tax paid Dividends paid Purchase of own shares Cash used by discontinued operations Transactions with non-controlling interests Other Net other uses of funds Net decrease in net debt before foreign exchange movements Net debt at the beginning of the year Effect of foreign exchange rate fuctuations Net debt at the end of the year 2017 £m 501 40 (53) 488 19 507 527 (13) (7) (104) (19) 156 (1) (11) (3) 18 2016 £m 402 126 87 615 18 633 633 (10) 10 (107) (18) 82 (1) (15) (7) (66) 525 567 (78) (86) (179) (10) – (16) 6 (363) (96) (84) (162) – (9) (2) 8 (345) 162 222 (1,670) 21 (1,487) (1,782) (110) (1,670) Cash fow from continuing operations before restructuring spend was £507m (2016: £633m). Cash outfow from portfolio businesses held for sale or closure was £7m (2016: £10m infow), and cash outfow from onerous contracts was £13m (2016: £10m), both of which were excluded from operating cash fows for core businesses. Operating cash fow from core businesses reduced to £527m (2016: £633m) as the Group reverted to a more customary level of operating cash generation following the particularly strong performance in the prior year. The Group invested £104m (2016: £107m) in net capital expenditure and received net proceeds of £156m (2016: £82m) from the disposal of businesses. The Group made no signifcant acquisitions during the year. Net cash infow after investing in the business was £525m (2016: £567m). The Group’s net cash outfow after investing in the business, fnancing, tax, dividends and pensions was £162m (2016: infow of £222m). The Group’s net debt as at 31 December 2017 was £1,487m (December 2016: £1,670m). Tim Weller Chief Financial Offcer 50 G4S plc Integrated Report and Accounts 2017 2017 REGIONAL AND SEGMENTAL REVIEW – CORE BUSINESSES At 2017 average exchange rates Africa Asia Pacifc Latin America Middle East & India Emerging markets Europe North America UK & Ireland Developed markets Revenue 2017 £m 457 736 693 845 2,731 1,356 2,006 1,334 4,696 Revenue 2016 £m 431 715 655 890 2,691 1,305 1,892 1,307 4,504 YoY % 6.0% 2.9% 5.8% (5.1%) 1.5% 3.9% 6.0% 2.1% 4.3% Total Group before corporate costs Corporate costs Total Group 7,427 7,195 3.2% 3.2% 7,427 7,195 3.2% 3.2% Organic growth* % 6.0% 2.9% 5.8% (5.1%) 1.5% Adjusted PBITA 2017 £m 46 65 29 58 198 Adjusted PBITA 2016 £m 43 60 24 81 208 3.9% 6.0% 2.1% 4.3% 104 123 120 347 545 (49) 496 91 115 112 318 526 (50) 476 YoY % 7.0% 8.3% 20.8% (28.4%) (4.8%) 14.3% 7.0% 7.1% 9.1% 3.6% 2.0% 4.2% * Organic growth is calculated based on revenue growth at 2017 average exchange rates, adjusted to exclude the impact of any acquisitions or disposals during the current or prior year. Regional and service line fnancial performance The Group’s business performance reporting for internal management presents results for core businesses, onerous contracts and portfolio operations both separately and in total, analysed between segments based on geographic regions. The Group’s segmental results for core businesses are presented above, excluding onerous contracts and portfolio operations identifed for sale or closure. A reconciliation between results from core businesses and statutory results by segment is presented below, and a reconciliation at total Group level can be found on page 44. All commentary, results and tables on pages 51 to 59 are presented for results from core businesses only, with prior year comparatives presented at constant exchange rates, unless stated otherwise. Regional summary (see pages 52 to 58) During 2017, Group revenues grew 3.2% to £7.4bn, with strong growth in North America (up 6.0%), helped by Retail Cash Solutions, broad growth in most emerging markets except Middle East & India and in Europe (3.9%), and stable growth in the UK & Ireland region at 2.1%. Adjusted proft before interest, tax and amortisation (Adjusted PBITA) increased 4.2% to £496m, with the Adjusted PBITA margin 10 b.p. higher at 6.7% with weak performance in Middle East & India offsetting strong performances in the other six regions which were helped by revenue growth and productivity improvements. 6.0% Organic revenue growth in North America in 2017 For the year ended 31 December 2017 For the year ended 31 December 2016 Statutory results £m Portfolio operations £m Onerous contracts £m Core businesses £m Statutory results £m Portfolio operations £m Onerous contracts £m Core businesses at 2016 average exchange rates £m Exchange movements £m Core businesses at 2017 average exchange rates £m Revenue Africa Asia Pacifc Latin America Middle East & India Europe North America UK & Ireland Total revenue Adjusted PBITA Africa Asia Pacifc Latin America Middle East & India Europe North America UK & Ireland Total Group before corporate costs 548 761 732 852 1,490 2,029 1,416 7,828 39 65 28 56 109 124 119 540 (91) (25) (39) (7) (93) (23) (4) (282) – – – – (41) – (78) (119) 7 – 1 2 (5) (1) 1 5 – – – – – – – – 457 736 693 845 1,356 2,006 1,334 7,427 46 65 29 58 104 123 120 501 714 660 859 1,441 1,904 1,511 7,590 35 56 15 76 95 115 119 (79) (35) (48) (17) (176) (87) (140) (582) 7 1 7 – (10) (4) (7) 545 511 (6) – – – – (41) – (71) (112) – – – – – – – – 422 679 612 842 1,224 1,817 1,300 6,896 42 57 22 76 85 111 112 9 36 43 48 81 75 7 299 1 3 2 5 6 4 – 505 21 431 715 655 890 1,305 1,892 1,307 7,195 43 60 24 81 91 115 112 526 Integrated Report and Accounts 2017 G4S plc 51 Strategic report Regional and service line review continued 2017 HIGHLIGHTS – CORE BUSINESSES +6.0% Organic growth $8bn Africa security market in 2015* 119,000 Employees 7.0% Adjusted PBITA growth Revenue £m Adjusted PBITA £m 2017 457 2016 YoY % 431 +6.0% 2017 46 2016 43 YoY % 7.0.% * Freedonia World Security Services Report January 2017. A C I R F A t e k r a m g n i g r e m E Key customer sectors – mining, oil and gas, retail, energy, agriculture and fnancial services G4S is the largest provider of integrated security solutions in the region, with operations in 23 African countries. The region’s largest countries by revenue are South Africa and Kenya. Revenue growth across the Africa region was 6.0%, with growth in both secure solutions and cash solutions. Cash solutions revenue growth benefted from continued strong growth in cash volumes and retail solutions such as Deposita, which uses technology and software to service the retail and banking sectors. Adjusted PBITA increased by 7.0%. New and renewed contracts won across the region include manned security, security technology and systems and risk management services work for multi-lateral agencies. Our sales and business development opportunities in Africa is broad based, covering more than 20 countries and key sectors such as aviation, banking, mining, consumables, telecomms and oil and gas. CAPITEC/DEPOSITA Values: Safety, Security and Service Excellence Innovation and Teamwork Following a number of years in development, G4S subsidiary Deposita launched a bank-branch automation solution in 2017 for Capitec, the fastest-growing banking group in Africa. We have the technology installed and operating in 160 branches of this major bank, and we expect that to continue to grow with this client and with others. The technology reduces the cost of handling cash and improves customer service. We provide hardware, software, real-time banking integration, same day value for the clients of our bank customers, service in the branch or support in the launch stage of this product, and then remote service and support. 52 G4S plc Integrated Report and Accounts 2017 2017 HIGHLIGHTS – CORE BUSINESSES +2.9% Organic growth $42bn Asia Pacifc security market in 2015* 56,000 Employees 8.3% Adjusted PBITA growth Revenue £m Adjusted PBITA £m 2017 736 2016 YoY % 715 +2.9% 2017 65 2016 60 YoY % 8.3% * Freedonia World Security Services Report January 2017. Key customer sectors – banking, retail, government, manufacturing and energy G4S is the leading security provider in the Asia Pacifc region with operations in 21 countries. Our largest countries by revenue are Australia, Hong Kong and Thailand. Revenue growth in Asia Pacifc was 2.9% and Adjusted PBITA increased by 8.3%, refecting the benefts of our productivity programmes and a favourable revenue mix. We secured new and renewed contracts across a broad range of sectors including fnancial services, consumer products and government services in Australia. We won our 100th customer for retail and banking solutions in the region in February 2018. Across the region we have a diverse set of new business opportunities in security, cash management and care and, in Australia, justice services. E m e r g i n g m a r k e t A S I A P A C I F I C STANDARD CHARTERED BANK/ASIA PACIFIC, MIDDLE EAST & INDIA Values: Safety, Security and Service Excellence Innovation and Teamwork Building on an existing strong relationship with Standard Chartered Bank (SCB) which has been in place for more than 20 years and where currently G4S provides Cash and/or Secure Solutions support in more than 20 countries for SCB. In 2017 SCB embarked on a group project with G4S to address the bank’s strategic goal of digitising the cash collection process for its corporate customers using the CASH360 solution. The programme will launch in Q1 2018 in Indonesia where there is a signifcant appetite from their large corporate clients to deploy cash depositary machines in client premises, with plans to roll-out the model in a structured manner across other SCB franchise markets. Where appropriate the Deposita hardware, software and the G4S managed service solution enables SCB to provide same day credit for the customer cash deposited in the CASH360 device with the cash returning directly to the G4S cash processing centre. The solution provides mutual growth opportunities and improves the effciency and security of the corporate customer cash handling processes as well as improving the customer’s cash fow. Integrated Report and Accounts 2017 G4S plc 53 Strategic report Regional and service line review continued 2017 HIGHLIGHTS – CORE BUSINESSES +5.8% Organic growth $14bn 67,000 Employees 20.8% Latin America security market in 2015* Adjusted PBITA growth Revenue £m Adjusted PBITA £m 2017 693 2016 YoY % 655 +5.8% 2017 29 2016 24 YoY % 20.8% * Freedonia World Security Services Report January 2017. A C I R E M A t e k r a m g n i g r e m E N I T A L Key customer sectors – fnancial services, extractive, retail, embassies and manufacturing G4S is a leading integrated Cash Solutions and Secure Solutions provider for commercial and government customers across 16 countries in Latin America, with Brazil, Colombia and Argentina being our largest markets in the region by revenue. Our revenue growth across Latin America markets was 5.8%, principally driven by growth in Brazil, Argentina and Colombia. We improved productivity across the region, particularly in Brazil and Adjusted PBITA increased by 20.8%. During 2017, we continued expanding our footprint and leveraging our expertise, winning new contracts in manned security and cash solutions for the banking, retail and mining sectors. Of note is the success winning and retaining US Embassy contracts, renewing the contracts for Barbados, Granada, Trinidad & Tobago and Colombia and growing in the region to Argentina, Paraguay, Saint Lucia, Martinique, Antigua and Peru. The focus on marketing Integrated Solutions brought signifcant improvements for the technology business. Whilst competition remains robust and wage infation needs proactive management, demand for our security and FM services is expected to be positive during 2018 and our businesses are well positioned in our key markets. LOCALIZA, BRAZIL, LATAM Values: Innovation and Teamwork Localiza is the biggest car-rental company in Latin America and is one of the largest in the world by size of its feet. Previously, Localiza car-rental branches had a cleaning team for each branch, no matter the size or opening hours, which resulted in high costs and complex management. Following an in-depth study by the G4S facilities management business in Brazil, we won a new contract which uses mobile cleaning teams, reducing Localiza costs by 20%, increasing effciency, and ensuring they maintain high-quality standards of cleaning which are recognised as part of Localiza’s service excellence. 54 G4S plc Integrated Report and Accounts 2017 2017 HIGHLIGHTS – CORE BUSINESSES -5.1% Organic growth $8bn Middle East security market in 2015* 172,000 Employees -28.4% Adjusted PBITA decline Revenue £m Adjusted PBITA £m 2017 845 2016 890 YoY % (5.1%) 2017 58 2016 81 YoY % (28.4%) * Freedonia World Security Services Report January 2017. Key customer sectors – oil and gas, retail, energy, banking and agriculture G4S is the leading security provider in the Middle East & India region, with operations in 19 countries. Our largest countries by revenue are India, Saudi Arabia and UAE. Revenue in the Middle East & India region was down 5.1% on the prior year as the macro-economic and fscal environment weighed on the trading in the Gulf. As previously reported, our business in India was adversely impacted in 2017 by the effects of demonetisation and by changes to regulatory processes. Adjusted PBITA was 28.4% lower across the region, refecting the decline in revenue. Our businesses in this region have been adjusting to the challenging trading environment and we expect trading to begin to stabilise during 2018. E m e r g i n g m a r k e t I M D D L E E A S T & I N D I A KUWAIT-AL ZOUR REFINERY Values: Safety, Security and Service Excellence SDG: In 2017, G4S Risk Consulting led a G4S Kuwait bid to win a contract to provide security during the construction of a new world-class refnery to be built by the Kuwait National Petroleum Company. The refnery will supply both domestic and global market demand for ultra-low sulphur petroleum products. The new refnery is expected to be completed in 2019. G4S won the contract with a consultancy-led security solution, integrating manpower and electronic security equipment to deliver the optimum level of security and cost effciency. Integrated Report and Accounts 2017 G4S plc 55 Strategic report Regional and service line review continued 2017 HIGHLIGHTS – CORE BUSINESSES +3.9% Organic growth $37bn European security market in 2015* 45,000 Employees 14.3% Adjusted PBITA growth Revenue £m Adjusted PBITA £m 2017 1,356 2016 YoY % 1,305 +3.9% 2017 104 2016 91 YoY % 14.3% * Freedonia World Security Services Report January 2017. E P O R U E t e k r a m d e p o e v e D l Key customer sectors – automotive, energy, fnancial services, aerospace, defence, chemicals, biotechnology, food, aviation and retail G4S Europe has activities in 21 countries in Scandinavia, Benelux, Southern Europe and Eastern Europe. It has strong market positions in Cash Solutions and around 20% of the region’s revenues are security systems‑related. Our sustained investment in Europe in sales, technology and service continued to produce positive results, and revenues rose by 3.9% across all service lines. Adjusted PBITA rose by 14.3% in the region, refecting the compound benefts of revenue growth and successful productivity programmes. We established a technology academy in Denmark where our growing technology business has become one of our technology centres of excellence, supporting product and service development across the region. In Cash Solutions, we continued to grow our annuity revenues from CASH360, won a large new CASH360 contract with one of the largest retailers in the Netherlands, to be implemented from Q1 2018. We have also recently launched a new service in Europe, G4S Pay, which includes an electronic payment module with CASH360 and is in over 400 locations. We succeeded in winning new security contracts for aviation and retail customers, electronic monitoring equipment, systems security for infrastructure and cash management and we retained some of the largest contracts in the region through successful rebids in the aviation and banking sectors. Our European pipeline has a large number of opportunities across a diversifed range of customer segments. BRUSSELS AIRPORT Values: Safety, Security and Service Excellence Innovation and Teamwork SDG: In 2017, G4S Belgium won a six-year contract to continue to provide security services at Brussels Airport, one of Europe’s busiest travel hubs. With a team of 900 employees, G4S will provide terminal security, passenger and remote screening, hold-baggage screening, access control for VIPs, crew and general aviation personnel, and supervisor presence inside the airport authority’s operations centre. A ground-breaking approach to the contract helped G4S secure the win. The team developed an ‘output’-based contract, working closely with the customer to establish their key performance indicators. Confdent that G4S can deliver over and above the customer’s requirements, G4S is paid for the services which are successfully delivered. G4S provides aviation and security services in 120 airports, across 45 countries, as well as working for 85 airlines. In Belgium, G4S also secures Brussels South Charleroi Airport, providing 400 highly-trained personnel. 56 G4S plc Integrated Report and Accounts 2017 2017 HIGHLIGHTS – CORE BUSINESSES +6.0% Organic growth $46bn North American security market in 2015* 54,000 Employees 7.0.% Adjusted PBITA growth Revenue £m Adjusted PBITA £m 2017 2,006 2016 YoY % 1,892 +6.0% 2017 123 2016 115 YoY % 7.0% * Freedonia World Security Services Report January 2017. G4S North America is an integrated Secure Solutions business for commercial customers, with some government contracts including border protection, and has a market‑leading innovative cash management solution for retail customers. l D e v e o p e d m a r k e t N O R T H A M E R I C A In North America, our revenues grew by 6.0%, with good growth rates in both our Cash Solutions and Secure Solutions businesses. In Cash Solutions, G4S technology-enabled cash management services are now delivered to over 6,900 retail locations across the United States, including over 5,000 in large store formats where G4S has established a market-leading position. We believe that our retail cash solution offers unique customer value and this is refected in a substantial pipeline and active pilot programmes. Our Secure Solutions business produced revenue growth of around 5% as our integrated security solutions continued to fnd traction in the market place. This rate of revenue growth was constrained as we continued to apply commercial discipline in those market locations facing tight labour conditions. In North America we continue to monitor and manage wage infation, particularly in Canada following recent minimum-wage increases. Overall in the United States we are managing wage infation pressure through productivity improvements and commercial discipline, and we believe that increased unit labour costs are encouraging customers to move to our integrated security solutions combining G4S security professional personnel with technology. We continue to see good demand for our products and services across the US and Canada. Adjusted PBITA increased by 7.0%, helped by a favourable revenue mix and effciency gains, partially offset by the cost of investing in capacity to support our growing integrated secure solutions and retail solutions businesses. MAJOR RETAILER, US Values: Safety, Security and Service Excellence Innovation and Teamwork In 2017, G4S won a new fve-year retail solutions contract for a major US chain of membership-only retail warehouse clubs. The technology began to be installed from the end of September. The benefts for both our bank and retail customers include: • Reduced labour costs – our proprietary software automates the compilation of cash till foats and processing • Improved cash fow – the retailer obtains ‘same-day’ credit and our cloud-based cash management software platform is integrated with the customer’s back offce, point-of-sale and accounting programmes • Reduced transportation costs – cash is recycled in store • Reduced bank processing fees Integrated Report and Accounts 2017 G4S plc 57 Strategic report Regional and service line review continued 2017 HIGHLIGHTS – CORE BUSINESSES +2.1% Organic growth $6bn 40,000 Employees 7.1% UK & Ireland security market in 2015* Adjusted PBITA growth Revenue £m Adjusted PBITA £m 2017 1,334 2016 YoY % 1,307 +2.1% 2017 120 2016 112 YoY % 7.1% * Freedonia World Security Services Report January 2017. t e k r a m d e p o e v e D l D N A L E R I & K U G4S is the leading provider of Cash and Secure Solutions in the region, with a broad range of expertise covering specialist‑event security, provision of services to the UK Government including Care & Justice services, and Cash Solutions. Revenue in the UK & Ireland increased by 2.1%, with a solid performance in our core businesses, including double-digit growth in our security technology business. The deployment of integrated security solutions, combining technology and manned security, was instrumental in retaining and expanding a number of our existing contracts and is increasingly relevant in winning new business. We are able to draw on substantial expertise in our UK & Ireland security systems business, supported by product research and development at our UK technology centre. Revenue from our Care & Justice services and FM businesses was broadly fat as we maintained a disciplined and selective approach to new contract bidding. Adjusted PBITA increased by 7.1%, refecting the combination of revenue growth and the beneft of our on-going productivity programmes. The roll-out of our lean process design for the back- offce operations of our manned security business commenced in Ireland in the third quarter of 2017 and we expect it to be implemented in the UK during 2018. JOBCENTRE PLUS, UK Values: Integrity and Respect Safety, Security and Service Excellence Innovation and Teamwork SDGs: In 2017, G4S UK&I won the integrated security contract for the job centres in the UK for the Department of Work & Pensions (DWP). G4S previously had the manned security contract through Telereal Trillium and managed the access control system across most of the estate. The DWP’s objective was to procure a security service allowing for a potential reduction in the number of sites from 900 to around 700, and so is fexible and supports the DWP’s transformation programme plan over the next two years. The DWP transformation programme aims to reduce costs whilst maintaining safety of the users of its properties. We have modernised the way in which security is provided using an Effects-Based Methodology, which has been aligned with the Centre for the Protection of National Infrastructure (CPNI) best practice. Essentially we are looking to minimise threats by reducing and better managing anxiety of members of the public at DWP sites, reducing the likelihood of incidents occurring. 58 G4S plc Integrated Report and Accounts 2017 2017 REGIONAL AND SEGMENTAL REVIEW – CORE BUSINESSES CONTINUED 2017 REVENUE AND ADJUSTED PBITA BY REGION – CORE BUSINESSES Revenue (%) Adjusted PBITA (%) Revenue 6% Africa 10% Asia Paciÿc 9% Latin America Middle East & India 12% 18% Europe 27% North America 18% UK & Ireland Adjusted PBITA 8% 12% 5% 11% 19% 23% 22% SERVICE LINE OPERATING REVIEW – CORE BUSINESSES SECURE SOLUTIONS At 2017 average exchange rates Emerging markets Developed markets Total Revenue 2017 £m 2,343 3,875 6,218 Revenue 2016 £m 2,277 3,736 6,013 Adjusted PBITA Adjusted PBITA 2016 £m 149 225 374 2017 £m 143 242 385 YoY % 2.9% 3.7% 3.4% Our services range from conventional manned security offerings to risk consulting, highly sophisticated security technology, security systems and integrated solutions. We are investing in the resources and capabilities which enable us to innovate and apply technology in the design and delivery of integrated solutions for our customers, and this is refected in the increasing share of revenue from these solutions. Our technology-related security revenues for the Group grew by 11.4% to £2.45 billion (2016: £2.2bn). Our Secure Solutions business segment also includes our Care & Justice and FM services. Our Care & Justice business is concentrated in the UK and Australia and provides custody, detention, rehabilitation, education and transport services, typically in complex operating environments. As previously reported, our Secure Solutions businesses faced challenging trading conditions in the Middle East & India region and this partially offset the good rates of proftable growth in our other markets. Overall, the Secure Solutions businesses delivered 3.4% growth in revenue and 2.9% growth in Adjusted PBITA. YoY % 7.6% (4.0%) 7.6% 2.9% Increase in developed markets Secure Solutions Adjusted PBITA in 2017 CASH SOLUTIONS At 2017 average exchange rates Emerging markets Developed markets Total Revenue 2017 £m 388 821 1,209 Revenue 2016 £m 414 768 1,182 YoY % (6.3%) 6.9% 2.3% Adjusted PBITA Adjusted PBITA 2016 £m 59 93 152 2017 £m 55 105 160 Revenues in Cash Solutions grew 2.3% and Adjusted PBITA rose by 5.3%. The overall growth in revenue and proft was driven by strong volume growth, particularly in our Retail Cash Solutions business in North America, CASH360 in Europe and Deposita in Africa and Asia. At the end of January 2018, we had an installed base of over 19,500 cash automation solutions at retail and banking customers, around a 30% increase compared with 14,600 in 2016. The strong growth in Adjusted PBITA in our developed markets refects the benefts of our systematic restructuring and productivity programmes which have been implemented over the past three years, partially offset by investment in sales and business development. The robust growth in developed markets was partially offset by the effect of weak trading in our Middle East & India region, where our businesses have been adjusting to the challenging trading environment and where we expect trading to begin to stabilise during 2018. CORPORATE COSTS Corporate costs comprise the costs of the G4S plc board and the central costs of running the Group including executive, governance and central support functions, and were slightly lower compared with the prior year. (6.8%) 12.9% 5.3% YoY % 12.9% Increase in developed markets Adjusted PBITA in Cash Solutions developed markets Integrated Report and Accounts 2017 G4S plc 59 Strategic report         Risk management and our principal risks Our aim is to identify material risks that could impact us, and to focus management attention on effective mitigation of the signifcant risks to achievement of our strategic objectives and safeguard our reputation. An evolving risk landscape During 2017 we continued to see challenges from uncertainty and changes in political leadership, terrorist events, weak economic recovery, geopolitical shifts, general migration and the on-going instability in the Middle East. These have created risks and opportunities for the security industry. G4S continues to face operational and health and safety risks often particular to the security industry, along with fnancial and commercial risks common to all multinational companies. Regulations on data privacy continue to be tightened with high fnes for non-compliance. Our drive for increased growth through delivering signifcant cost savings and innovative service excellence to customers may lead to a changed risk profle. We continue to assess that the risk to G4S from the vote for the UK to leave the EU is not signifcant as we mainly operate within national boundaries with around 83% of total Group revenues outside the UK and minimal cross-border trading. However, depending on the terms of the UK’s exit from the EU there might be a range of business factors that could affect us including the availability of labour, regulations and taxation. It is also possible that continuing uncertainty during the negotiation period reduces economic growth in the UK and Europe, further affecting both our customers and our competitors. We continue to monitor developments through our risk and governance framework. What we did in 2017 Progress continues to be made on increasing risk awareness and ensuring accountability for risk management rests with business management teams. The Group’s mandated control standards have been further enhanced to ensure they address our key risks, with appropriate training and challenge to facilitate their effective performance. Control self-assessments were completed by all businesses. These are reviewed, challenged and best practice shared by region and group functional experts, and compliance has been tested through internal audits. Our quarterly Regional Audit Committees continued to focus on fnancial judgments and to address internal and external audit fndings, which has enabled further improvement in fnancial control awareness and effective performance. 60 G4S plc Integrated Report and Accounts 2017 What we will do in 2018 We will continue to refne our key standards and controls, and through support and training we will help all businesses operate them effectively. Functional teams will use the results of control self-assessments to assist countries with full compliance. In addition, internal audits will continue to test the operational effectiveness of our standards and controls. Regional Audit Committees will continue to review, challenge and direct improvements in the performance of control standards, fnancial judgments and reporting. Through continued engagement and review by country, region and Group management, we will enhance the quality and timeliness of the identifcation of risks and the delivery of mitigating actions. During the year we will further improve the reporting of risks and use metrics to assist with risk identifcation. Risk Management and Appetite As in prior years we have undertaken a bottom-up review, with businesses completing an assessment of their major risks and developing mitigating actions to reduce the likelihood of those risks crystallising. These reviews require management teams to identify the essential controls needed to mitigate high inherent risks to acceptable residual risk levels, in line with the group’s risk appetite, further encouraging effective compliance with the Group’s core standards and controls. These risk assessments are reviewed, challenged and amended as necessary by regional teams, who are also responsible for monitoring delivery of required improvements. This is combined with a top-down review from group functional leaders, to ensure that the risks captured are complete and appropriately assessed. The risks are then summarised and presented to the Risk Committee for consideration before being presented to the board for review. The resulting principal residual risks, with any identifed changes and mitigating actions, are outlined in the following pages 62 to 65. The residual risk level has not changed signifcantly compared to the prior year. G4S operates in high-risk areas of business, in which our core competence and value-add to customers is managing those risks effectively. We have a higher risk appetite for growing and transforming businesses in which we have the expertise to deliver and to achieve a good commercial return for the risk we are accepting. We have a low to very low risk appetite for non- compliance with laws and regulations, appropriate culture and values, health and safety and people risks, as these are priority areas for our stakeholders and failure in these key risk areas could have a material impact on our business. ENTERPRISE RISK MANAGEMENT GOVERNANCE MODEL BOARD The board has responsibility for ensuring risk-management processes are effective by reviewing the most critical risks and controls. RISK COMMITTEE The Risk Committee meets four times per year and reviews the Group’s risk appetite, assesses the Group’s principal residual risks and assesses the overall enterprise risk management process. AUDIT COMMITTEE The Audit Committee meets four times per year and ensures the Group’s control framework is operating effectively. GROUP EXECUTIVE COMMITTEE REGIONAL AUDIT COMMITTEES The Group Executive Committee oversees the management of the Group’s principal residual risks. The committees meet four times a year, also attended by the external auditor, and review: 1. The progress of closing internal and external audit fndings; and 2. Reports on status of fnancial controls and signifcant accounting judgments. The committees are responsible for whistleblowing and related investigations across the regions. GROUP AND REGIONAL ETHICS COMMITTEES OPERATING COMPANIES AND SHARED-SERVICE FUNCTIONS Our operating companies and shared-service functions identify and assess the risks to their business objectives management team meetings and trading reviews. and plan appropriate mitigating actions. These are recorded in our Group-wide risk management tools. A thorough review is conducted as part of the annual Control self-assessments of compliance with Group control standards are completed annually (bi-annually for fnancial control standards). planning process with updates made in senior Operating companies We employ three lines of defence to control and manage risks across the Group. 1ST LINE: BUSINESS OPERATIONS AND SUPPORT Responsibility for the frst line sits with the managers of our businesses, whether line management or support. The senior management team within each business is responsible for implementing and maintaining appropriate controls across their business. Result: Ensures standards expected by the Group, our customers and other stakeholders are met. 2ND LINE: CONTROL AND OVERSIGHT FUNCTIONS The second line consists of oversight functions at both regional and Group level including: risk, fnance, legal, human resources, operations, information technology, commercial and CSR. Result: Provides support to business managers. 3RD LINE: INTERNAL INDEPENDENT ASSURANCE The third line comprises the internal audit function. As part of its annual programme of work, internal audit conducts regular reviews of risk management processes and gives advice and recommendations on how to improve the control environment. Result: Provides independent assurance over the design and operation of controls. Financial reporting risks are considered as part of the external audit. EXTERNAL AUDIT Integrated Report and Accounts 2017 G4S plc 61 Strategic report Risk management and our principal risks continued Principal risk Link to strategy We reviewed the appropriateness of our ‘Golden Rules’ which refect critical safety risks and are mandatory for all G4S businesses, and failure to adhere to them is linked to our disciplinary procedures. Good practice and progress in delivering H&S improvements are recognised and rewarded, while poor practice and insuffcient progress lead to close executive scrutiny, and can impact performance-related pay for business leaders if appropriate. Mitigation priorities for 2018 We will continue to refne our standards, policies and controls where we see an opportunity to reduce H&S risks further. The compliance with these group requirements will again be self assessed during 2018 and reviewed by H&S and internal audit teams. A revised H&S training programme for our front-line employees is under development which supplements existing training provided by businesses on key H&S risks. Safety improvement plans are required for all businesses. Business leaders take responsibility for leading safety performance and putting H&S at the forefront of their day-to-day activities. opportunity to raise concerns themselves. In 2017, our whistleblowing hotline and case-management system received a total of 300 reports from our employees (2016: 402). Matters of a serious nature were investigated at a senior and independent level, with 59 investigations completed during 2017 (2016: 55). Mitigation priorities for 2018 For our front-line employees, we will extend the values-based training materials already developed to refect common experiences or particular challenges which come to light from whistleblowing cases, internal grievances or feedback from the global employee-engagement survey conducted in 2017. For managers, the newly-revised competency framework has helped guide the development of on-line training, which is due to be launched in 2018. The training uses realistic scenarios in which participants are required to make value-based decisions from a range of options in order to achieve the right outcomes. The training will be mandatory, and cascaded to all managers to complete before the end of 2018. Our reward and recognition schemes will continue to be aligned to the values, to ensure they are promoted in everything we do. A new group-wide scheme will supplement local efforts and enable us to showcase the types of behaviour which exemplify the values and refect the great work that our employees do. HEALTH AND SAFETY (H&S) Risk The provision of security services to protect valuable assets, often in hostile or dangerous circumstances, presents health and safety challenges. In addition to the signifcant impact on individuals, a serious breach of health and safety could disrupt the Group’s business, have a negative impact on our reputation and lead to fnancial and regulatory costs. In 2017, 25 (2016: 47) employees lost their lives in work-related incidents, of which eight (2016: 20) were as a result of armed attacks and 11 (2016: 17) were road-traffc incidents as the year-on-year improvement in road safety continued. There were three (2016: 9) non-natural deaths of people in our custody. Risk mitigation We are committed to protecting the health, safety and well-being of our staff, people in our care or custody and third parties. The Group’s mandatory H&S standards target the critical safety risks in the Group including road and frearm safety and are supplemented by training for front-line staff through to business leaders. During 2017 the annual self-assessment by countries of compliance with our standards was supported by site reviews from local, regional and Group H&S managers and was included in the scope of country internal audit visits. Reporting was enhanced to include high potential incidents which are investigated thoroughly. Controls are reviewed in light of lessons learned from serious incidents. CULTURE AND VALUES Risk G4S provides security for people, premises and valuable assets. The Care & Justice services business provides services to detainees, victims of crime, people needing assistance, and other members of the public. We operate in many different countries with a diversity of local and national cultures. Having an appropriate set of values strongly embedded as our corporate culture is very important to ensure staff meet our high expectations including compliance with our ethical business conduct standards. Failure to do so risks not delivering on our commitment to our colleagues, customers and other stakeholders and may fail to comply with legislation and international standards. Risk mitigation We have a set of values, detailed on page 17, which are continually reinforced to all employees through a variety of key processes including recruitment, induction training, and recognition schemes as well as communications materials. Nominated values ambassadors in businesses are helping to cascade values-related communications. HR and learning and development leaders have assisted in the production of materials for increasing awareness and understanding of our values. In everything we do, no matter how challenging the circumstances, we require our people to behave in line with our values and to be prepared to use our whistleblowing facility, Speak Out, if they become aware that others are not doing so. Ethics steering committees at a Group level and in each region oversee the whistleblowing investigation process and provide constructive guidance to countries on ethical matters. We continue to focus on building awareness of the importance of our corporate values and whistleblowing, particularly in places where we work with people who may be more vulnerable and have less 62 G4S plc Integrated Report and Accounts 2017 Principal risk PEOPLE Link to strategy Risk In a global and diverse security business such as ours, there are risks associated with recruiting, training, engaging, rewarding and managing people, as well as ensuring we retain critical talent to deliver increasingly sophisticated services through our 570,000 employees. Screening and vetting is a particular challenge in some territories which lack supporting infrastructure from the relevant authorities. Any incident where our people fail to meet expectations of customers and other stakeholders could lead to fnancial and reputational damage to the Group’s business. Whilst our controls are robust we still face the risk of an employee not behaving in line with our values. Risk mitigation The Group’s mandatory human resource standards cover core requirements for delivering the HR strategy, such as ensuring there are effective organisational structures in place, that employees are screened, inducted and trained to perform their jobs, and that there are appropriate mechanisms in place for managing on-going performance and recognising great performance. During 2017 the annual self-assessment by countries of compliance with our standards was supported by site reviews from local and regional teams, and included in the scope of country internal audit visits. MAJOR CONTRACTS Risk The Group operates a number of long-term, complex, high-value contracts with multinational companies, governments or strategic partners. Key risks include; accepting onerous contractual terms; poor mobilisation of contracts; not transitioning effectively from mobilisation to on-going contract management; not delivering contractual requirements; inaccurate billing for complex contracts; ineffective contract-change management; and not managing sub-contractors appropriately. Risk mitigation During 2017 we updated our strict thresholds for the approval of major bids, involving detailed legal review and senior management oversight. For a selection of our most signifcant contracts in the UK, we perform 360° reviews of all aspects of contract management and performance. We also perform a quarterly fnancial review of the top 25 and low-margin contracts in each region. We review in detail the performance and potential of managers across the Group to help identify development needs and build succession plans. We also deliver regional leadership programmes to nurture talented individuals early in their careers, and help develop them into more senior roles as they move through the organisation. Staff turnover is a key indicator to us of employee satisfaction, and reducing it improves service excellence and reduces recruitment costs. During the year staff turnover reduced from 27.6% in 2016 to 25.3% in 2017 (see page 17). Mitigation priorities for 2018 We will use the information from our ffth global employee survey to help develop initiatives to enhance standards further and ways in which to ensure the standards are embedded. Compliance with our Core HR Standards will again be self-assessed during 2018 and reviewed by local, regional and group teams as well as tested by internal audit. Direct support will be provided as necessary to enhance compliance with our standards. For our large multinational customers, account managers oversee performance of these contracts across relevant countries and have regular updates with customers to ensure we deliver against contractual terms. Mitigation priorities for 2018 While great improvements have been made in reducing the risk of taking on onerous contracts, as the impact can be signifcant, we will continue to enhance the quality of the analysis used in the bidding process and ensure that lessons are learned from underperforming contracts. We will also embed into the SalesForce opportunity management tool our updated approval requirements to make compliance and monitoring effective. Link to strategy People and values Customers and service excellence Growth and innovation Operational excellence and productivity Financial and commercial discipline Integrated Report and Accounts 2017 G4S plc 63 Strategic report Risk management and our principal risks continued Principal risk LAWS AND REGULATIONS Link to strategy Risk G4S operates under many complex and diverse regulatory frameworks, some of which have extraterritorial reach and many where regulations change regularly. Risks include: new or changed restrictions on foreign ownership; diffculties obtaining all relevant licences to operate; complying with employment legislation covering a wide range of requirements; complying with often complex and broad ranging local tax regulations; increasing litigation and class actions; bribery and corruption and complying with human rights legislation. Failure to meet the required standards can lead to higher costs from claims and litigation; inability to operate in certain jurisdictions, through either direct ownership or joint ventures; loss of management control; damage to our reputation; and loss of customer confdence. Risk mitigation Our policies and procedures clearly set out the requirement for local management teams to comply with all relevant laws and regulations. Group and regional leadership, together with our Ethics Committees at Group and regional level provide oversight and support our businesses to mitigate the risks. Group legal and regional leadership closely monitor changes in foreign ownership laws and make appropriate plans to respond. G4S continues to liaise with relevant governments and authorities to infuence positively the regulatory environments in which we work. Mitigation priorities for 2018 We will continue to focus on seeking full compliance with laws and regulations across all jurisdictions we operate in and ensure that concerns are addressed appropriately by local management with support and guidance from Group and regional leaders. GROWTH STRATEGY Risk Our focus is on investing in the development and marketing of innovative and integrated products and services and improving business effciency to strengthen service excellence and support improved margins over time. There are risks with adopting such a strategy: that we fail to create higher-value solutions that differentiate us from local commoditised competitors; that we fail to deliver our core services effectively and consistently; that we lose contracts or growth opportunities through price competition and market changes; that we fail to enter target markets successfully; that we become over-reliant on large customers; and that our business transformation initiatives do not deliver as expected. Risk mitigation We continue to focus on delivering excellent service through the best-practice service delivery guidelines in place for both Secure Solutions and Cash Solutions service lines. Our newly developed information systems supporting the end-to-end order-to-cash process in our Secure Solutions service line, including fnance, human resources and operational delivery, was launched in Ireland in 2017. We use our centres of excellence to develop innovative solutions for customers, particularly in electronic security and CASH360 in Cash Solutions. We leverage our global network to offer integrated solutions internationally and our global accounts programme supports and promotes our multinational accounts initiatives. Our consistent focus on delivering excellent service to customers has led to an increase in our Net Promoter Scores. We are able to mitigate local reduction in growth opportunities through the diversity of industries and markets we serve, and by leveraging our portfolio of products to offer alternative cost- effcient solutions. All our product development initiatives and business transformation projects are closely monitored by Group and regional teams, with appropriate challenge and approval to maximise the opportunity and minimise the risks. Mitigation priorities for 2018 In 2018, we will focus our investments in innovative product development and in transforming the effciency of our business and the capabilities of our people and systems. Customer satisfaction reviews will guide how we deliver integrated solutions to existing and potential customers across all businesses. This would include: proprietary security systems, video and intelligent camera systems, video management systems, global security intelligence systems and software tools including incident-management systems such as RISK360 in our Secure Solutions business. For Cash Solutions, development would include: retail solutions, CASH360, Deposita cash-recycling systems and solutions for our smaller retailers. Our new information systems for the Secure Solutions service line will be implemented in the UK in 2018, with plans to expand into other countries once proven to deliver as expected. Focused business transformation projects will also be implemented to drive further effciency and improve margins. Oversight, challenge and approval of detailed business cases for all such initiatives will be enforced by Group and regional teams. Link to strategy People and values Customers and service excellence Growth and innovation Operational excellence and productivity Financial and commercial discipline 64 G4S plc Integrated Report and Accounts 2017 Principal risk GEOPOLITICAL Link to strategy Risk We operate in many countries across the world, with wide-ranging government and political structures, different cultures with varying degrees of compliance with laws and human rights, particularly within confict and post-confict zones. The risk factors include: political volatility, including the outcome of elections and referendums affecting trade rules and regulations and changes in policies towards business, revolution, terrorism, military intervention, mistreatment of migrant workers and employees working for our suppliers. These risks impact us in many ways: the health and safety of our staff and customers; the continued operation of our businesses; and the ability to secure our assets and recover our profts. Risk mitigation We collaborate with our local partners; conduct early risk assessments before and during security assignments; develop robust operating procedures; and work closely with our local and global customers in managing the risks of operating in such environments. We have clear standards on human rights which all businesses must comply with. Those based in high-risk countries self assess their compliance with these standards annually, with this assessment reviewed by Group and checked by internal audit. We have a mandatory supplier code of conduct which includes anti-bribery and modern slavery requirements. Our G4S Risk Management business has particular expertise in providing secure solutions in very high risk, low infrastructure environments. Mitigation priorities for 2018 In markets where potential government policy or trade agreements may have a signifcant impact on our ability to trade we will continue to engage with national and international governments to promote the benefts that G4S brings to a market and an economy, to ensure that we minimise the impact of any trade restrictions or trade policy. We will increase the number of countries that complete human rights control self-assessments and carry out human rights risk assessments in all key business areas. We will also work to build awareness of human rights responsibilities across the business and our partners and increase engagement with suppliers to ensure they are also complying with human rights. INFORMATION SECURITY Risk Increased regulations and sanctions relating to the potential failure to secure sensitive and confdential data, which we are entrusted with by customers, staff, suppliers and other stakeholders, have increased our risks in this area. Like all organisations, we face cyber attacks from a variety of sources which, if successful, could result in censure and fnes by national governments; loss of confdence in the G4S brand and specifc loss of trust by customers, especially those in government and fnancial sectors. Additionally, we face the risk of disruption to service delivery from system failures, incomplete backup routines, inadequate business continuity and disaster recovery plans. Risk mitigation We have “defence-in-depth” technologies (i.e. multiple layers of defence) in key systems to protect business information entrusted to us. During 2017 we brought our IT function under direct management of the Group team, to enhance the way our systems are supported and run. This will ensure policies and best practice are applied consistently across all operating businesses. In late 2017 we commenced a programme of investment in Cyber defence tools, to improve the levels of compliance for managing these risks across the many systems and infrastructures that exist globally. We are also introducing additional standards and guidance to ensure compliance with General Data Protection Regulation (GDPR) across the UK and Europe. Mitigation priorities for 2018 We will continue to strengthen the effective performance of our IT processes through the centrally-managed IT structure, and complete the implementation of our new Cyber Tools programme to increase the security of our IT systems and infrastructure, including managed cyber security products, centralised infrastructure management tools and cyber vulnerability assessments. CASH LOSSES Risk We provide a wide range of cash-management services, including cash processing, ft-sorting of notes for recycling, holding funds on behalf of customers, secure storage, a range of ATM services, as well as transporting high values of cash and valuables including international shipments and fully-outsourced cash-management solutions such as CASH360. Our cash business is at risk of external attacks, internal theft, poor cash reconciliations and weak management supervision, which could lead to loss of proft, increased cost of insurance and health and safety considerations for our staff and the public. Risk mitigation During 2017 we refned the standards for Reconciliation and Operational Cash Controls and continued through an ‘e-learning academy’ and direct support, to ensure wide-spread awareness and effective performance of these controls. Self assessments against these standards are performed twice a year by each branch and head offce and compliance is supported and monitored by regional teams and through internal audit. We also have clearly-defned standards for physical cash security for our employees, vehicles and processing centres. The Group and regional cash security teams are responsible for monitoring compliance with these through self-assessments performed by branches and visits to country; for monitoring attacks and other cash losses; and for communicating lessons learned. Innovative security-defence products such as cash-box tracking, vehicle protection foam and protective boxes are used in a number of businesses. Mitigation priorities for 2018 Our new Global Cash Solutions division will give additional focus to drive improvement in the effective performance of physical security and cash reconciliations throughout our cash businesses, to reduce both the number and value of losses. Integrated Report and Accounts 2017 G4S plc 65 Strategic report Chairman’s statement S I am delighted that, building on the S E C C U S foundations laid in recent years, the Group has improved both its performance and fnancial position in 2017. This is particularly notable, in light of the challenging trading conditions that prevailed in the Middle East & India markets. E L B A N I A T S U S O T Y E K – E R U T L U C E C N A N R E V O G G N O R T S A As shown in the business review section of this report, the Group has made substantial progress on its strategic priorities. The board is pleased with the focus, energy and leadership that the executive team brings to the Group. Strong governance culture Ensuring that G4S is resilient and agile and therefore able to deal with constant change and evolving economic and geo-political situations, is of paramount importance. This can only be achieved with a skilled and experienced board and management team and an appropriate culture and governance structure. The board and I see strong governance, adapted to the Group’s needs, circumstances and business model, as a source of competitive advantage. G4S is a large, geographically diverse organisation, doing business in complex and sometimes sensitive environments. Sharing a common understanding of the company’s purpose and values is essential. To promote this, the board continues to support the application of G4S values throughout the organisation. A strong governance culture is supported by continuous monitoring, review and promotion of the Group’s values, standards and policies. It is also essential that directors feel able to provide not only support but also constructive challenge. BOARD AREAS OF FOCUS IN 2017 In my statement last year, I listed six areas of focus for the board. These were: • Annual review of Group strategy and management’s execution of the strategy • Induction and integration of new board members • Board and management succession planning • Monitoring business performance • Continued understanding of the Group’s businesses and management teams • Maintaining emphasis on risk management and effcient structures We made good progress in all these areas and further information on the key areas of activities for the board in 2017 are set out in the governance report. 66 G4S plc Integrated Report and Accounts 2017 John Connolly, Chairman Therefore we strive to foster open and effective communication within the boardroom and with the executive team. This process is informed by best practice as well as feedback received and views collated from our key stakeholders. There are a number of ways in which the board gathers stakeholders’ views, which are set out on pages 78 and 79. This year, as in previous years, I met with major shareholders as part of our annual programme of governance meetings. Given the business undertaken by the Group and the complex markets in which we operate, it is essential to understand the key risks faced by the organisation and to ensure that the company has appropriate policies, systems, processes and management action plans to mitigate these risks to an acceptable level. The board therefore maintains a Risk Committee, which is separate from the Audit Committee, to provide the necessary focus on risk management and mitigation. Supporting change Planning for the future requires us to review the board's composition regularly to ensure that it remains ft to support the changing needs of the Group. Management development and succession planning are also key areas of interest for the board. This was also particularly important this year, as management implemented important organisational changes, with the Secure Solutions business segment now organised into four regions and the creation of a global Cash Solutions division. In 2017, the board visited the Americas business and the technology business in the UK. Further details of these visits can be found on pages 78 and 79. In both instances, the board and I were impressed with the quality of the products and services offered and the importance of technology both in creating new services and also enhancing offerings when combined with traditional security and cash services. As chairman, it is my role to ensure that the board has the right skills to understand, support and challenge these developments. We give careful consideration to this need during the board members recruitment process but also when reviewing committees composition, as we did in December. I am confdent that the board has signifcant, diverse and relevant skills and experience, with strong international exposure and knowledge of a signifcant number of industries (further information on the board balance is set out on page 74). Our statutory results showed a 3.1% increase in revenue, which rose to £7.8 billion, Adjusted PBITA up 6.5% to £491 million and earnings up 19.2% to £236 million benefting primarily from a combination of proftable growth in our core businesses and profts on disposal of a number of businesses as our portfolio rationalisation programme drew to a close. Performance evaluation Our externally facilitated performance evaluation was conducted between July and December 2017. The results confrmed that the board and its committees continue to operate well, with all directors contributing to the overall success of the Group. I led the performance evaluation process, with assistance from the Senior Independent Director and the company secretary. All the directors participated. The knowledge gained from the previous external evaluation allowed us to conduct a more focused evaluation this year. The board and committees performance review process is described in detail on page 77 and I am pleased to confrm that no signifcant issues were raised. Changes to the board Due to continued ill health, Ian Springett retired from the board on 20 June 2017. We were very sorry that Ian was unable to join our board and we wish him well for the future. Paul Spence, who was already a member of the Audit Committee, served as interim chair with effect from 20 January. I am very grateful to Paul for his strong stewardship. The Nomination Committee oversaw the process to fnd a new non-executive director qualifed to act as chairman of the Audit Committee, which led to John Ramsay joining the board on 1 January 2018. I am pleased to welcome John, whose experience in highly international, innovation-focused businesses and his extensive background in fnance and accounting will be very valuable to our board and in leading our Audit Committee. As announced in December 2017, after eight years on the board, Clare Spottiswoode will step down after the company’s annual general meeting on 15 May 2018. I would like to thank Clare for her thoughtful contributions to the board and her strong commitment, as chair of the CSR Committee since 2014, to help the company develop and promote CSR policies and processes. The Nomination Committee has initiated a search to fnd a new non-executive director to join the board. Further information about the work of the Nomination Committee during the year under review is set out on page 80. Results I am pleased to report on another year of good fnancial progress with continued growth in revenue and earnings and, importantly, a reduction in net debt with achievement of the Group’s leverage target of below 2.5 times net debt to Adjusted EBITDA by the end of the year. As noted elsewhere, our core businesses in all regions apart from the Middle East & India grew revenue and Adjusted PBITA such that total Group revenue from core businesses was up 3.2% to £7.4 billion and Adjusted PBITA grew by 4.2% to £496 million. The management team’s continued focus on cash and working capital enabled the Group to deliver good operating cash fow conversion and this, coupled with net proceeds from disposal of a number of portfolio businesses of £156 million offset by organic capital investment of over £100 million, meant that the Group’s net debt to Adjusted EBITDA ratio reduced from 2.8 times at the end of 2016 to 2.4 times at the end of 2017, in line with the board’s stated leverage reduction target. The board is confdent in the Group’s outlook and proposes to increase the fnal dividend by 5% to 6.11p (DKK 0.5097) per share, payable on 15 June 2018. With an interim dividend of 3.59p (DKK0.2948) paid on 13 October, this will bring the total dividend for the year to 9.70p per share. People The Group has around 570,000 employees in over 90 countries, often providing complex services in diffcult environments. This can create signifcant challenges. It is therefore pleasing that the outcome of the 2017 employee engagement survey, which consisted of questions relating to G4S’ new corporate values, provided an 84% favourable response rate. On behalf of the board, I wish to thank the employees of G4S for their engagement, enthusiasm, hard work and dedication. John Connolly Chairman COMPLIANCE WITH THE UK CORPORATE GOVERNANCE CODE The board’s statement on the company’s corporate governance performance is based on the April 2016 edition of the UK Corporate Governance Code (the “Code”), which is available on the Financial Reporting Council’s website (frc.org.uk). The company complied throughout the year under review with the provisions of the Code, except in relation to the composition of the Audit Committee. This matter is addressed on page 85. The Corporate governance report, together with the Audit Committee report, the Risk Committee report and the Directors’ remuneration report, describe how the board has applied these provisions. Integrated Report and Accounts 2017 G4S plc 67 Governance before joining British American Tobacco (BAT) in 1994 and held various executive leadership positions worldwide over the next 20 years at BAT including COO & Regional Director for Asia Pacifc. Current external commitments: Non-executive Chairman of Britvic plc and non-executive director of Ferguson plc. 4.Winnie Kin Wah Fok Non-Executive Director Appointment to the board: October 2010 Committee membership: CSR Committee and Remuneration Committee Skills and experience: An auditor by training, with a Bachelor of Commerce degree from the University of New South Wales, Australia and fellowship or membership of accounting bodies in Australia, Hong Kong and England. Career experience: International board and senior management experience with extensive knowledge of Asian markets and strong involvement in Scandinavia. Involved in management positions in fnance, audit and corporate advisory work and has had a wide range of roles in private equity frms investing with a particular focus in Asia. Current external commitments: Senior advisor to Wallenberg Foundations AB; non-executive director of Volvo Car Corporation; and SEB AB and investment committee member for the HOPU Investment Fund. 5. Steve Mogford Non-Executive Director/Senior Independent Director Appointment to the board: May 2016 Committee membership: Audit Committee, Nomination Committee and Risk Committee Skills and experience: First Class BSc Honours Degree in Astrophysics, Maths and Physics from Queen Elizabeth College, University of London. Extensive experience of delivery of complex programmes in the defence, infrastructure and utilities market. Career experience: Served a 30-year career with British Aerospace, later BAE Systems, during which time he held several senior management positions before becoming COO, with particular responsibility for programmes, major projects and customer support, and a member of the BAE Systems plc board. Chief executive of SELEX Galileo for four years prior to joining United Utilities Group plc in 2011 as CEO. Current external commitments: CEO of United Utilities Group plc. 6. John Ramsay Non-Executive Director Appointment to the board: January 2018 Committee membership: Audit Committee (chair) and CSR Committee. Skills and experience: A chartered accountant with extensive international experience in innovation-focused businesses. D R A O B R U O Board of directors 1. John Connolly Non-Executive Director/ Chairman of the board Appointment to the board: June 2012 Committee membership: Nomination Committee (chair) and Risk Committee Skills and experience: A chartered accountant with extensive experience working in a global business environment and in sectors with strategic relevance to the Group. Career experience: Spent his career until May 2011 with global professional services frm Deloitte, was Global Managing Director and then Global Chairman between 2007 and 2011. He was Senior Partner and CEO of the UK Partnership from 1999 until his retirement from the frm. Current external commitments: Chairman of the Great Ormond Street Hospital Charity board of trustees and director of a number of private companies. 2. Ashley Almanza Chief Executive Offcer Appointment to the board: May 2013 Committee membership: Risk Committee Skills and experience: Degree in Commerce from University of Natal and an MBA from the London Business School. Extensive board and executive management experience in complex international businesses. Career experience: A number of senior executive roles at BG Group from 1993 to 2012, including CFO from 2002 to 2011 and Executive Vice President from 2009 to 2012, during which he led BG Group’s UK, European and Central Asian businesses and the group’s commercial strategy in Central Asia. A non-executive director of Schroders plc between 2011 and 2016. Current external commitments: Non-executive director of Noble Corporation and Board member of the International Security Ligue. 3. John Daly Non-Executive Director Appointment to the board: June 2015 Committee membership: Remuneration Committee (chair) and Audit Committee Skills and experience: Diploma in marketing and an MBA from the University of Dublin. Signifcant executive management experience in major international businesses with extensive knowledge of Asia and the Middle East. Career experience: Worked in sales and marketing in the pharmaceutical industry 1 2 3 4 5 68 G4S plc Integrated Report and Accounts 2017 Career experience: Began his career at KPMG and developed his experience in emerging markets, working in Malaysia and Latin America for the manufacturer ICI. In 1993 was appointed Finance Head, Asia Pacifc for Zeneca Agrochemicals and later promoted to Group Financial Controller. In 2000 he joined Syngenta AG, as Chief Financial Controller, later being promoted to CFO until his retirement in 2016. Whilst at Syngenta he also served as interim CEO for nine months. Current external commitments: Member of the Supervisory Board of Koninkijke DSM N.V and a director of RHI Magnesita N.V. 7. Paul Spence Non-Executive Director Appointment to the board: January 2013 Committee membership: Risk Committee (chair), Audit Committee and CSR Committee Skills and experience: Degree in economics and decision science from the Wharton School, University of Pennsylvania. In-depth knowledge of outsourcing in both the public and private sectors and extensive international experience in key emerging markets. Career experience: Served a 30-year career with Capgemini, starting as managing partner of mid-Atlantic information and technology for Ernst & Young. He went on to gain signifcant international experience for 16 years as managing partner of Ernst & Young Consulting Australia, CEO of Capgemini Ernst & Young in Asia and then CEO in the UK. Then served on Capgemini’s executive management committee for eight years as deputy group CEO and then CEO of Capgemini Global Outsourcing Services. Current external commitments: Non-executive director of Actual Experience plc. 8. Clare Spottiswoode Non-Executive Director Appointment to the board: June 2010 Committee membership: CSR Committee (chair) and Remuneration Committee Skills and experience: MA degree in mathematics and economics from Cambridge University and M. Phil. degree in economics from Yale University. Considerable experience in the public sector, the energy markets and the fnancial services sector. Career experience: Worked for the UK Treasury, director general of Ofgas, the UK gas regulator, a policyholder advocate for Norwich Union’s with-profts policyholders at Aviva and a member of the Independent Commission on Banking and the Future of Banking Commission. Current external commitments: Non-executive director of Ilika plc, BW Offshore Limited, Just Group plc and Naftogaz, the Ukrainian state-owned oil and gas company as well as being a director of a number of other private companies. 9. Barbara Thoralfsson Non-Executive Director Appointment to the board: July 2016 Committee membership: Nomination Committee and Remuneration Committee Skills and experience: MBA in marketing and fnance, Columbia University, New York and a BA in psychology, Duke University, North Carolina. International executive and senior management experience in using technology to meet customers’ needs and develop new business models. Strong knowledge of North America, Latin America, Scandinavia and Asia. Career experience: After an early career in marketing, held senior management roles in the consumer goods and telecommunications sectors including CEO of NetCom ASA, Norway’s second largest mobile network operator, between 2001 and 2005 and has subsequently served on the board of several international technology companies. Current external commitments: Non-executive chair of ColArt Holdings Limited and non-executive director of Svenska Cellulosa Aktiebolaget SCA (publ), Essity Aktiebolag (publ) and Hilti AG. 10. Tim Weller Chief Financial Offcer Appointment to the board: October 2016 having previously served as non-executive director since April 2013. Committee membership: Risk Committee Skills and experience: BSc (Hons) Engineering Science degree from the University of Exeter. An accountant by training and a Fellow of the Institute of Chartered Accountants in England and Wales with signifcant experience of the energy and utilities sectors. Career experience: Joined KPMG in 1985, rising to partnership in 1997 before joining Granada plc as director of fnancial control. He held CFO positions with Innogy. a leading integrated energy company at the time, RWE Thames Water and United Utilities Group plc. He was CFO of Cable & Wireless Worldwide plc between 2010 and 2011 and CFO of Petrofac Limited between 2011 and October 2016. Current external commitments: Non-executive director of the Carbon Trust. 6 7 8 9 10 Integrated Report and Accounts 2017 G4S plc 69 Governance 5. Graham Levinsohn Regional CEO, Europe and Middle East 6. Jenni Myles Group HR Director Appointed: November 2017 Skills and experience: Graham has more than 20 years’ experience in the security industry, having joined Securicor Cash Services in 1994. He has held a number of commercial and line management positions in both the cash and security lines of the business. Graham was responsible for the creation of the UK cash centres outsourcing business in 2001 and divisional managing director for G4S Cash Services UK. He became Group strategy and development director in 2008 and joined the executive committee in 2010. He then assumed responsibility for Europe as Regional CEO in November 2013 before assuming responsibility for the Europe and Middle East Region in November 2017. He is a director of CoESS and a director of the International Security Ligue. Graham is a Fellow of the Chartered Institute of Marketing. Appointed: July 2015 Skills and experience: Jenni has extensive experience in employee engagement, talent management and organisational development, having held HR leadership roles in G4S business units and regions across both developed and emerging markets. She also spent a number of years in head offce as Director of Employee Engagement & HR, leading the Group’s employee engagement and labour relations strategy. Prior to joining G4S in 1998, Jenni held HR positions in a variety of business sectors such as automotive, FMCG and consulting. She is a Fellow of the Chartered Institute of Personnel & Development (FCIPD). 7. Søren Lundsberg‑Nielsen Group General Counsel Appointed: 2001 Skills and experience: Søren began his career as a lawyer in Denmark and since 1984 he has had a wide range of legal Executive committee 1. Ashley Almanza Chief Executive Offcer See page 68 for full biography 2. Tim Weller Chief Financial Offcer See page 69 for full biography 3. Mel Brooks Regional President, Africa Appointed: May 2015 Skills and experience: Mel joined G4S in 2012 and his roles included Group Strategy & Commercial Director and CEO for G4S India, where he led the transformation of the business, improving operations, customer service and sales. Prior to joining G4S, Mel held a number of senior line and functional roles in the defence and technology industries where he was responsible for service line and commercial strategies, technology development and leadership of a number of business unit turnaround programmes. 4. John Kenning Regional CEO, Americas Appointed: January 2018 Skills and experience: John has extensive commercial experience. He holds a bachelor’s degree in business from Miami University and prior to joining G4S in 2014, John’s previous roles included executive vice president and president, commercial business for the global division of OffceMax. He was also president, North America Commercial for ADT/Tyco Security Services, where he led the transformation of the business to a technology services leader. He is a board member for Miami University Advisory Athletic Board and a past board member of the Make-a-Wish Foundation. 1 2 3 4 5 70 G4S plc Integrated Report and Accounts 2017 experience as general counsel for international groups in Denmark, Belgium and the US before joining Group 4 Falck in 2001 as Group General Counsel. He was involved in the Group 4 Falck merger with Securicor and a number of other acquisitions by the Group. Søren has overall responsibility for all internal and external legal services for G4S as well as the Group’s insurance programme. Søren is non-executive director of Basico A/S, a member of the Danish Bar and Law Society, a member of the advisory board of the Danish-UK Association and author of the book Executive Management Contracts, published in Denmark. 8. Peter Neden Divisional CEO, Care & Justice Services & UK Facilities Management Appointed: January 2018 Skills and experience: Peter joined G4S in 2001. His roles included responsibility for the business development programme in the UK and Africa regions, as well as a number of senior positions in both the commercial and government businesses across the Group, including Regional President UK & Ireland. Prior to the merger between Group 4 Falck and Securicor, Peter was Securicor’s development director. He has a degree in economics from the University of Nottingham and his early career included a number of sales, marketing and general management roles within Centrica. 9. Jesus Rosano Divisional CEO, Global Cash Solutions Appointed: January 2018 Skills and experience: Jesus joined G4S in March 2014 as Latin America Chief Operating Offcer and since January 2016 was Group Strategy and Commercial Director. Jesus holds a bachelor’s degree in Engineering and Administration from ITESM University, Mexico. Prior to joining G4S he held senior line, functional and regional roles at DHL, in a number of markets in Latin America and North America over an 11-year period. Before DHL, Jesus worked in strategy consulting and investment banking. 10. Sanjay Verma Regional President, Asia Appointed: January 2018 Skills and experience: Sanjay joined G4S in May 2017 as Regional President Secure Solutions – Asia Pacifc. Sanjay has extensive business experience operating across Asia Pacifc having been based in India, China and Hong Kong. Sanjay joined G4S from Cushman & Wakefeld, a global real estate services frm. During his 17 years in that company he held a number of leadership roles including CEO, Asia Pacifc and Chief Executive, Global Occupier Services, covering 16 countries in the Asia Pacifc region. Sanjay is a graduate in electrical engineering and has a MBA in fnance & marketing. 11. Debbie Walker Group Corporate Affairs Director Appointed: March 2004 Skills and experience: Debbie is responsible for the corporate communications team which focuses on the Group’s key audiences – media, government, employees and customers. She is also responsible for the Group’s CSR and human rights strategies. Debbie is Chairman of the CBI Southeast Regional Council. Prior to the merger between Group 4 Falck and Securicor, she held a number of senior marketing and communications roles within the Securicor group, having joined in 1993. 6 7 8 9 10 11 Integrated Report and Accounts 2017 G4S plc 71 Governance Corporate governance report The board oversees the Group’s governance framework, reviews and approves the strategy, monitors management’s performance against agreed targets and ensures appropriate controls are in place and operating effectively. The board ensures leadership through effective oversight and review. Executive decisions, and development and implementation of strategy are delegated to management. The board fulfls a number of its responsibilities directly (see the list of matters reserved to the board overleaf) and others through its committees. K R O W E M A R F E C N A N R E V O G R U O BOARD Role and responsibilities • Review and approve the company’s strategy • Monitor management’s performance against agreed targets • Review, approve and promote the company’s values and standards • Review its own performance on a yearly basis CHIEF EXECUTIVE OFFICER GROUP EXECUTIVE COMMITTEE NOMINATION COMMITTEE Role and responsibilities • Review board composition • Lead the process for new board and committee appointments • Review board succession-planning processes See page 80. CORPORATE SOCIAL RESPONSIBILITY COMMITTEE Role and responsibilities • Review and approve the company’s CSR strategy or recommend policies to ensure these remain an integral part of the Group’s strategy • Monitor compliance with CSR policies throughout the Group and the integration of CSR processes within the Group’s risk management and approval processes See page 82. RISK COMMITTEE Role and responsibilities • Advise the board on the Group’s overall risk appetite and tolerance • Oversee the company’s risk management framework and review its effectiveness • Review major contracts and projects See page 84. AUDIT COMMITTEE Role and responsibilities • Oversee the fnancial reporting process and ensure the integrity of the company’s fnancial statements • Monitor internal audit • Approve external audit scope and fee, review and monitor external auditor’s independence See page 85. REMUNERATION COMMITTEE Role and responsibilities • Approve remuneration of chairman of the board, the executive directors, other members of the executive committee and the company secretary of the board • Monitor level and structure of remuneration of other senior management of the Group See page 93. GROUP RISK AND INTERNAL AUDIT FUNCTION 72 G4S plc Integrated Report and Accounts 2017 The board is responsible for a number of specifc matters in the following areas: MATTERS RESERVED TO THE BOARD • Strategy and management • Structure and capital • Financial reporting and controls • Risk and internal controls • Material contracts • Communication • Board membership and other appointments • Remuneration • Delegation of authority • Corporate governance matters • Policies • Other matters – such as settling material litigation The work of the board’s committees is described below in this report and the terms of reference of each of the committees are available on the company’s website at g4s.com/investors. To ensure a clear division of responsibilities Chairman of the board • Responsible for promoting good corporate governance and ensuring board compliance with regulatory requirements • Ensures board effectiveness on all aspects of its role • Promotes a culture of challenge, debate, openness and support • Ensures NEDs receive a comprehensive induction and on-going training to support the performance of their duties • Maintains regular contact with major shareholders and conveys their views to the board KEY ROLES IN OUR GOVERNANCE FRAMEWORK Chief Executive Offcer • Responsible for developing and implementing the Group’s strategy and plans • Responsible for the overall management and promotion of the Group • Manages the Group’s risk profle in accordance with the risk appetite set by the board • Ensures effective communication between the board and the business Chief Financial Offcer • Manages fnancial risks in accordance with the risk appetite set by the board and implements effective internal fnancial control processes across the Group • Responsible for fnancial planning to support the company’s strategic objectives • Leads the Group’s fnance, internal audit, procurement, information technology, tax and treasury functions • Provides regular fnancial reporting to the board Senior Independent Director • Acts as a sounding board for the chairman and as intermediary for the other directors when needed • Maintains a balanced understanding of the views of major shareholders • Maintains regular and effective communication with other directors Independent non‑executive directors (NEDs) • Challenge constructively • Monitor management’s performance against agreed targets • Satisfy themselves on the integrity of fnancial information and that fnancial controls and systems of risk management are effective • Leads the yearly appraisal of the • Determine appropriate levels of chairman’s performance • Chairs the Nomination Committee when it is considering issues directly affecting the chairman remuneration of executive directors • Prime role in appointing directors and in board succession planning Company Secretary • Secretary to the board and its committees • Responsible for advising the board through the chairman on all governance, regulatory and legislative matters • Ensures all directors have access to the advice and services of the company secretariat and external advice if necessary • Responsible for ensuring compliance with board procedures and processes • Supports the chairman and chief executive offcer in preparing and organising induction programmes for NEDs Integrated Report and Accounts 2017 G4S plc 73 Governance Corporate governance report continued Board composition, roles and attendance (as at 31 December 2017) Meetings attended Chairman John Connolly Executive Directors Chief Executive Offcer Ashley Almanza Chief Financial Offcer Tim Weller Non‑Executive Directors John Daly Winnie Fok1 Steve Mogford2 (Senior Independent Director) Paul Spence Ian Springett3 Clare Spottiswoode Barbara Thoralfsson Board Nomination CSR* 7/7 4/4 7/7 7/7 7/7 7/7 6/7 7/7 n/a 7/7 7/7 4/4 4/4 4/4 4/4 4/4 Risk 4/4 4/4 4/4 4/4 n/a Audit Remuneration* 4/4 3/4 3/4 4/4 n/a 4/4 4/4 4/4 4/4 * Three meetings of the Remuneration Committee and the CSR Committee were scheduled during the year and one additional meeting for each committee took place in January 2017. 1. Ms Fok was unable to attend one meeting of the Audit Committee due to a clash with another engagement. 2. Mr Mogford was unable to attend one board meeting and one meeting of the Audit Committee due to a commitment made prior to his appointment to the board. 3. Mr Springett was appointed to the board with effect from 1 January 2017 and shortly thereafter had to take an extended leave of absence to undergo treatment for a medical condition, therefore he was not expected to attend board meetings during this time. Due to continued ill health, Mr Springett retired from the board on 20 June 2017. BOARD BALANCE AND DIVERSITY Diversity The Group’s workforce refects the wide range of countries, cultures and environments in which the Group operates. The Group has long recognised that diversity can enhance decision making and performance and promotes diversity within the organisation. The result is a diverse mix of gender, age, race, religion, nationality, language, background and experience across the workforce. Diversity, including gender diversity, in the senior management population remains an area of particular focus for the board. As well as being diverse in terms of gender and nationality, the board also includes members with diverse skills, personal attributes and experience. While most members have international assignment experience, others bring extensive experience of a variety of industries. In addition, the board has a mix of both long-serving and new members. These differences greatly enrich debate in the boardroom, bring fresh perspectives and understanding. Although the board has not adopted a formal board diversity policy, nor has it set any specifc targets in this respect, diversity is a key consideration for the board. Recruitment of any new member to the board is always based on merit, against objective criteria, which take account of the diversity benefts each candidate can bring to the board. Further information in this regard is set out in the report of the Nomination Committee on pages 80 and 81. The board also considers diversity as part of its annual review of talent management and succession plans for the board and senior management team. As part of this review gender diversity, as well as initiatives in place or being developed to promote greater representation of women and an increase in cultural and ethnic diversity across the Group’s global leaders are also discussed. The board is mindful of its obligations under both DTR7.2.8 and Code Provision B.2.4 and is considering adopting a formal board diversity policy to capture the Board balance Non- Executive directors Executive 80% directors 20% Gender Male Female 70% 30% board’s approach to diversity and setting out the principles it follows in considering board appointments, board composition, and succession planning. However, the board is committed to ensuring that any such policy is informed by the results of the Group’s diversity and inclusion strategy review taking place in 2018. Therefore the board will keep this matter under review during the year. 74 G4S plc Integrated Report and Accounts 2017 Board composition As at the date of this report, the board comprises 10 members: the non-executive chairman (John Connolly), seven other non-executive directors and two executive directors. The names of the directors serving as at 31 December 2017 and their biographical details are set out on pages 68 and 69. All these directors served throughout the year under review, apart from Ian Springett, a non- executive director who retired from the board on 20 June 2017, and John Ramsay, who was appointed to the board on 1 January 2018. Clare Spottiswoode, having completed nearly eight years as a non-executive director of the company, will retire from the board after the company’s AGM in 2018. The process of seeking a candidate for a new non-executive director role is on-going. Independence The board considers all the non-executive directors to be independent and to bring objective oversight and challenge. The board acknowledges the recommended term within the Code and is mindful of the need for planned and orderly succession whenever possible. Therefore clear records of the tenure and skill set for each non-executive director are maintained. Director re‑election The company’s articles of association require that all continuing directors are subject to election by shareholders at the next annual general meeting following their appointment and that they submit themselves for re-election at least every three years and that at least one-third of the directors not standing for election for the frst time stand for re-election at each annual general meeting. However, in accordance with the Code’s provision on re-election of directors, all continuing directors stand for re-election every year. With the exception of Clare Spottiswoode who will step down at the end of the 2018 AGM, all continuing directors intend to stand for election or re-election, as the case may be, at the company’s upcoming AGM. Potential conficts Each of the directors has disclosed to the board any situations which apply to them as a result of which they have or may have an interest which conficts or may confict with the interests of the company. In accordance with the company’s articles of association, the board has authorised such matters. Should a director become aware that they may have an interest in an existing transaction with G4S, they should notify the board in writing or declare it at the next meeting. The company has procedures in place for managing such situations. The affected director will not vote on a matter in which they have an interest and the board may impose additional conditions if deemed appropriate. The board reviews such matters on a regular basis. Industry experience Business services Energy/utilities Finance FMCG Logistics Manufacturing/ operations Technology Pharmaceutical/ biotechnology Geographical experience Africa Asia Pacifc Europe Latin America Middle East & India North America UK & Ireland Board tenure 2017 2 years or less > 2 yrs 30% < 4 yrs 10% < 6 yrs 40% < 8 yrs 20% > 6 yrs > 4yrs Integrated Report and Accounts 2017 G4S plc 75 Governance Corporate governance report continued Board meetings Seven scheduled board meetings were held during the year ended 31 December 2017. Each year, one of these meetings is an extended two-day meeting at which, in addition to normal board business, the board and executive committee review the Group strategy. Prior to each board meeting, comprehensive papers are circulated to the directors addressing not only the regular agenda items on which the executives will report, but also details of any matters requiring approval or decisions, such as signifcant transactions or other matters reserved to the board. At each meeting, the board receives regular reports and in-depth presentations from line and functional executives and the board makes visits to business sites from time to time. After meetings of the board committees, the respective chairs report to the board on the matters considered by each committee. After each board meeting the chairman holds a meeting attended solely by the non-executive directors. There are seven board meetings scheduled for 2018 including a two-day board and strategy meeting. 2017 BOARD ACTIVITIES IN FOCUS • Appointed one new non-executive director • Reviewed results of employee engagement survey underpinned by group values • Held a two-day strategy forum with Group executive, in October • Discussed succession plans for board members and reviewed succession planning and senior management development • Oversaw the review of organisational structure • Received regular reports from the chair of the nomination, risk, CSR, audit and remuneration committees • Approved half-year results and year-end results • Monitored and reviewed developments in governance • Reviewed and approved Group treasury policy and Group tax policy • Approved Slavery and Human traffcking statement • Conducted visits to two customer sites in the US, (for further details see page 78), as well as business sites in the US and the UK • Took part in various engagements with shareholders and investors during the year – see page 79 • Reviewed the 2017 AGM proxy voting fgures INDUCTION, INFORMATION AND DEVELOPMENT A tailored induction is provided to new directors joining the board. The induction is designed to ensure directors joining the board have the necessary understanding of their role and how they can maximise their effectiveness. It is therefore tailored to the needs of each director and those of the role they will fulfl on the board. To build on the induction programme, directors receive further briefngs both to help in their own development and also to enhance their awareness of the different elements of the business. Briefngs are provided to board members on legal, governance, compliance and reporting developments and to members of board committees from time to time on matters relevant to their work on those committees. In addition, non-executive directors learn about the Group’s business and meet employees and management through site visits. Information about the interactions between members of the board, in particular non-executive directors, and the business during the year, are set out on pages 78 and 79. Tailored induction – Audit Committee chair Upon joining the board on 1 January 2018, a tailored induction programme was prepared for John Ramsay who took on the role of chair of the Audit Committee. A four-step programme was devised. Step 1 focused on promoting a good understanding of the business by providing access to information about the company, group structure, management team, board governance, minutes of board and committee meetings and risk management. Step 2 developed an understanding of the company’s business, markets and main relationships. Over a day, Mr Ramsay had individual sessions with members of the group executive team and senior managers. Areas covered included strategy and investor relations, governance and corporate social responsibility as well as legal, human resources and health and safety. Step 3 had a strong fnancial focus and consisted of a day dedicated to meetings with the group chief fnancial offcer, group fnancial controller, chief information offcer, director of risk and internal audit as well as the external auditor. Step 4 will consist of site visits due to be arranged during the course of H1 2018. 76 G4S plc Integrated Report and Accounts 2017 BOARD AND COMMITTEES PERFORMANCE REVIEW In accordance with guidance from the Code, the board and its committees are assessed yearly with the support of an external facilitator. During 2017, a fully externally- facilitated exercise was carried out by Oliver Ziehn and Merlin Underwood of Lintstock. Oliver Ziehn, Merlin Underwood and Lintstock have no other connection with the company. Stage 1 A thorough brief was provided by the chairman and company secretary in July 2017. Lintstock was given access to information about the board and particular areas of focus. Tailored questionnaires were then developed for the board and each committee. In early October, each of the directors, company secretary, Group HRD, Group Corporate Affairs Director, Director of Risk and Internal Audit, Group Financial Controller, Director of Compensation and Benefts, other regular board committee attendees, audit partners from PwC and Deloitte (remuneration consultant) was invited to complete the questionnaires online. In late October and early November, the Lintstock team conducted detailed interviews with each board director and the company secretary. Stage 2 The Linstock team compiled a report based on information and views gathered through replies to the questionnaires and follow-up interviews. Lintstock also reported on the performance of each of the directors and separately on that of the chairman. Stage 3 The reports, conclusions and recommendations were considered and discussed by the board and each of the board’s committees when reviewing their performance and informed the planning for the board and committees’ priorities in 2018. As part of this process, the individual director reviews were used as the basis for the chairman’s individual discussion with each of the directors about their performance and any training and development needs. The results of the board review were considered as part of the review of the committees’ composition by the Nomination Committee in December. The report on the chairman was used to inform the discussion amongst the non-executive directors conducted by the Senior Independent Director about the chairman’s performance, without the chairman being present. BOARD ACTION PLAN 2018 The board action plan for 2018 was informed among other things by the results of the board evaluation process and will include: • Annual review of Group strategy and execution of the strategy • Monitoring the effectiveness and performance of the organisation • Application of security technology in the business • Induction and integration of new board members • Board and management succession planning • Maintaining understanding of the Group’s stakeholders, including customers, employees and shareholders • Continued focus on corporate culture BOARD REVIEW OUTCOME Board The conclusions of this year’s review were positive and confrmed that the board operates effectively, with the board dynamics notably enhanced by recent additions to the board and by good information fow. Other areas which received positive feedback included the board’s relationship with senior management, time management and board support. A number of areas for further focus were also identifed. These included greater focus on succession planning, monitoring the implementation of strategy and the use of technology, gaining a better understanding of certain stakeholders’ views, particularly those of customers, continued focus on corporate culture and fostering an environment conducive to the reporting of serious concerns through the available channels. Committees The committees of the board were also reviewed and the results of the evaluation were also positive with committees perceived to be running effciently and making effective decisions. Further information about the results of each committee review and how these results inform the following year’s plan can be found in each of the board committee reports. Chairman The chairman’s performance was highly rated and his relationship with all board members identifed as a particular strength. Integrated Report and Accounts 2017 G4S plc 77 Governance Corporate governance report continued STAKEHOLDERS SOCIETY With about 570,000 employees operating in a variety of sectors in over 90 countries, often in challenging environments, the Group has a large and rich stakeholders’ network. The board’s engagement with the Group’s stakeholders takes a variety of forms and provides invaluable feedback that informs the board’s decision‑making process. CUSTOMERS • The CSR Committee received a presentation on CSR activities in developing countries and discussed these activities in light of the results of the materiality exercise undertaken during the year. • The board received an update on Africa’s pan-regional project, focusing on development through sport initiatives and in particular rugby. The project runs in several countries where G4S partners with Bhubesi Pride Foundation to carry out annual rugby coaching events, providing support including delivering talks on topics such as health and safety, career, life-skills and the environment. • Two customer-site visits were organised during the year and members of the board were able to meet and receive direct feedback. • The board sought to understand customer constraints and requirements as part of consideration of large contracts bid or renewal. • The CEO and other senior • The CEO, CFO and chairman executives provided customer feedback and information to the board during the year. attended a number of meetings with customers. EMPLOYEES • The board met employees during visits to other parts of the business, such as the board visit to the Americas at which the board met the senior management team as well as line management and operational employees both at the regional offce and during customer site visits. Further details of the board’s trip to the Americas businesses are set out below. • A number of board members attended the Global Leadership forum in London in March 2017. • The board received regular health and safety reports. • The results of the biennial employee survey were presented to the board. SUPPLIERS • During the year, the Supplier code of conduct was reviewed and reinforced to ensure greater alignment with our values. BOARD TRIP TO NORTH AMERICA Values: Integrity and Respect Safety, Security and Service Excellence In April 2017, the board meeting was held at the Group’s North America headquarters located in Jupiter, Florida. The board met with the North America senior management team as well as the Latin America management team. The board received in-depth presentations from both management teams and had the opportunity of meeting the senior team informally as well. During the trip, the board saw a demonstration of the retail cash solutions suite of products offered by the business and visited a customer facility at which such solutions are deployed. In addition, the board visited a customer location at which integrated security solutions are provided, meeting both G4S personnel and customers. 78 G4S plc Integrated Report and Accounts 2017 SHAREHOLDERS • The primary means used by the board for communicating with all company shareholders are the annual report, annual results, half-year results and the AGM. • In addition, during the year, the chairman, director of investor relations and company secretary met with major shareholders as part of an annual round of governance meetings. • The section of the website dedicated to investor • The chairman reported on those meetings to relations is also a useful tool, facilitating communication with institutional and private investors. It can be found at g4s.com/investors and includes material shared with institutional shareholders and analysts at company meetings. Analyst and investor meetings and presentations • Presentations as well as analyst and investor meetings are held following the release of the company’s annual results and half-year results announcements. These are also streamed via live webcast for those unable to attend in person. • After each such event, the presentation is made available in the Investor Relations section of the website. Other shareholder meetings • The company actively seeks to engage with shareholders and during 2017 the chief executive offcer and the chief fnancial offcer had contact via one-on-one meetings, group meetings and telephone conference calls with current and potential shareholders as well as with analysts. • The shareholders covered represented around 65% of the total share register (which includes passive funds) and over 205 institutions. The number of meetings is driven by demand. These meetings tend to be focused primarily on the Group’s trading operations and the implementation of its strategy. the board. • The chair of the CSR Committee, Clare Spottiswoode, and relevant senior executives organised a meeting with a group of Socially Responsible Investors in June 2017, updating them on the Group’s corporate responsibility programme. She reported feedback received to the board. Annual general meeting • The company’s annual general meeting is an important opportunity for communication between the board and shareholders, particularly private shareholders. • The next annual general meeting is due to take place on 15 May 2018, at the Holiday Inn in Sutton, and details of the meeting and the resolutions to be proposed are set out in the Notice of Meeting available to download from the website. It is intended that all the directors will attend and be available to answer questions from shareholders. • The meeting will be informed of the number of proxy votes cast and the fnal results of votes on the resolutions will be published subsequently on the website. STRATEGY SESSION AT UK TECHNOLOGY CENTRE Values: Safety, Security and Service Excellence Innovation and Teamwork In October 2017, the board and group executive team held a two-day strategy session at the G4S Technology Centre in Tewkesbury, England. The business had just exhibited at ASIS, the largest tradeshow in North America and launched a number of new products, including ‘RISK360’ version 7 and a number of AMAG products. Senior management at the technology centre provided demonstrations of these products, which enabled the board to gain a deeper understanding of the Group’s technology solutions. Integrated Report and Accounts 2017 G4S plc 79 Governance Corporate governance report continued THE NOMINATION COMMITTEE John Connolly Nomination Committee Chairman “2017 was again a busy year for the Nomination Committee. Adjustments to committee composition were required after a sudden onset of ill-health forced a newly appointed non-executive director to take a leave of absence before retiring from the board. Subsequently a new non-executive director qualifed to act as chairman of the Audit Committee was recruited. The committee also focused on identifying and planning for the long-term needs of the company.” Committee membership during 2017 John Connolly (Chairman) Steve Mogford Barbara Thoralfsson Member since June 2012 May 2016 July 2016 The Nomination Committee meets on an ad hoc basis, when the need arises. In 2017, the committee met four times. Members’ attendance at committee meetings is shown on page 74. Main activities of the Nomination Committee during the year (%) Recruitment of NEDs (55%) Succession planning (20%) Reviewing board committee (20%) membership Independence and extending terms of appointment (5%) Responsibilities The Nomination Committee’s remit covers broadly fve areas, namely, board composition, making recommendations to the board on appointments with a view to maintaining a balance of skills and experience on the board and its committees, succession planning, board performance evaluation and annual reporting. The committee’s terms of reference are available at g4s.com/investors. 80 G4S plc Integrated Report and Accounts 2017 Board composition In January 2017, the Nomination Committee met to discuss the adjustments that should be made to the composition of the Audit Committee following the sudden onset of a medical condition, which prevented Ian Springett from taking on his role as chair of the Audit Committee. Based on the information available at the time, the Nomination Committee considered the interim steps that should be taken to ensure the Audit Committee carried on operating effectively. Mindful of the Code and DTR 7.1 requirements with regard to the composition of the Audit Committee, the committee reviewed the skills and experience of the board members and identifed Paul Spence, who had strong and effective leadership and communication skills, and was already a member of the Audit Committee as well as chair of the Risk Committee, and Winnie Fok, who had accounting qualifcations and audit experience and who was previously a member of the Audit Committee. The Nomination Committee went on to recommend to the board Paul’s appointment as interim chair of the Audit Committee and that of Winnie as an additional member. On 20 June 2017, due to continued ill-health, Ian Springett retired from the board. The Zygos Partnership (Zygos) was appointed to assist with the search for a new non-executive director qualifed to act as the chairman of the Audit Committee. Zygos, who has no connection with the company other than as provider of recruitment consultancy services to the Nomination Committee, was provided with a brief, setting out the requirements for the role to be flled and preferred attributes of potential candidates. In selecting candidates, consideration was given to the skills and competence required to fll the role, the need to maintain and enhance diversity of relevant skills and experience on the board, as well as corporate culture and ft. Shortlisted candidates were then interviewed by the chairman, the members of the committee as well as the chief executive offcer and the chief fnancial offcer. The recruitment process initiated by the Nomination Committee led to the appointment on 1 January 2018 of John Ramsay. Succession planning Succession planning is very much a matter for the board as a whole and is considered by the board at least once a year. This year, as in previous years, the entire board reviewed succession plans as well as talent management and development for the senior management team. In addition, at its December meeting, the Nomination Committee reviewed and discussed the results of the board evaluation, current skills and experience available on the board. Discussing what further skills or experience may be useful to enable the board to support the developing needs of the Group helps inform future board recruitments. The committee also gave further consideration to board succession plans. Clare Spottiswoode having indicated that she would not seek re-election at the company’s 2018 AGM, the committee initiated a search for a new non-executive director to join the board in due course and Zygos was appointed to assist with the search. A tailored brief, setting out the particular requirements for the role was developed and provided to Zygos. Consideration was given to the need for potential candidates to possess a range of skills and experience allowing them to make a meaningful and broad contribution to the board. Diversity Diversity is a matter for the board as a whole and is an integral part of succession planning and recruitment for the board and senior management team. The board’s approach to diversity is set out on page 74. The Nomination Committee seeks assistance from executive search agencies which are signatories of the Voluntary Code of Conduct to help ensure the most diverse talent pools are reached and an approach in line with best practice is adopted. Consideration is also given to diversity when reviewing board composition and the result of the annual board performance evaluation. Directors’ length of service As part of its annual review of the board composition, the Nomination Committee reviews the directors’ length of service. In line with our Remuneration Policy, executive directors have a rolling service contract, whereas non-executive directors are appointed for an initial term of two years. Further information about the key feature of the executive directors’ service contracts and non-executive directors’ letters of appointment can be found on page 112. The table below sets out the date of appointment and (where applicable) unexpired term remaining for current members of the board. Independence and re-election to the board John Daly’s term of appointment, which was due to expire in June 2017, was considered by the Nomination Committee in May. The committee was satisfed that John continues to remain independent and committed to his role as a director and as chairman of the Remuneration Committee. In coming to this conclusion, the committee took into account his experience, qualities and skills, as well as his other commitments. The committee recommended to the board that his appointment be extended. Committees composition In December, the committee reviewed the composition of the committees of the board. Taking into account the balance of skills and experience on each committee, it was felt that Steve Mogford, as a current serving CEO with experience of delivery of complex programmes, would bring additional relevant expertise to the Risk Committee and that John Ramsay’s extensive experience in emerging markets would enable him to make a valuable contribution to the CSR Committee. Committee performance The performance of the Nomination Committee was reviewed as part of the process undertaken by each of the board committees, with assistance from Lintstock. Although the committee was considered to be effective, greater emphasis on succession planning was identifed as an area for increased focus, and is included as a key area for the committee’s work in 2018. The committee will also continue to ensure that it has appropriate plans for board and executive succession, which promote diversity of gender and social and ethnic backgrounds. Director Executive directors Ashley Almanza Tim Weller Non-executive directors John Connolly John Daly Winnie Fok Steve Mogford John Ramsay Paul Spence Clare Spottiswoodec Barbara Thoralfsson Date of appointment Unexpired term 1 May 2013a 1 April 2013b 8 June 2012 5 June 2015 1 October 2010 27 May 2016 1 January 2018 1 January 2013 14 June 2010 1 July 2016 n/a n/a 3 months 15 months 7 months 3 months 22 months 10 months 3 months 4 months a. Ashley Almanza was appointed to the board on 1 May 2013 as chief fnancial offcer and took on the role of chief executive offcer on 1 June 2013. b. Tim Weller joined the board on 1 April 2013 as a non-executive director until 24 October 2016, when he became chief fnancial offcer. c. Clare Spottiswoode will retire from the board at the conclusion of the company’s AGM on 15 May 2018. Integrated Report and Accounts 2017 G4S plc 81 Governance Corporate governance report continued THE CSR COMMITTEE Clare Spottiswoode CSR Committee Chair “Our people and values underpin everything we do. Our updated values are the standards which we have set for ourselves, the organisation as a whole and our stakeholders. In 2016 they were re-launched across the Group supported by a targeted communications programme, awareness building and training materials. The committee will continue to work to ensure that the values are embedded frmly throughout the entire organisation. This is my last statement as chairman of the CSR Committee. After almost eight years as a non-executive director, I will step down from the board and its committees at the conclusion of the company’s annual general meeting in May. I am pleased that since joining G4S in 2010, CSR has become frmly embedded in the Group’s processes and forms an integral part of our overall strategy. Despite a distinct improvement in work-related fatalities in 2017, the committee’s focus on health and safety will continue to remain a key part of its activity during 2018, as we re-affrm our goal of zero-harm.” Committee membership during 2017 Clare Spottiswoode (Chair) Winnie Kin Wah Fok Paul Spence Member Since January 2012 March 2012 January 2013 John Ramsay joined the board and the CSR Committee on 1 January 2018. Other regular attendees include the chief executive offcer for care & justice services, the regional president for the Africa region, the group corporate affairs director and the group HR director. There were three scheduled meetings and one unscheduled meeting of the CSR Committee during 2017. Members’ attendance at committee meetings is shown on page 74. Main activities of the CSR Committee during the year (%) Current issues (30%) Health and Safety (25%) CSR reporting (20%) Values/ Culture Ethics/ Whistleblowing Materiality assessment (15%) (10%) 82 G4S plc Integrated Report and Accounts 2017 Responsibilities The Group takes a holistic approach to corporate and social responsibility. The scale of the Group, geographic spread of its activities and the complex environments our employees operate in creates a variety of challenges. The CSR Committee was established in 2011 to review and monitor the Group’s CSR approach, which includes developing policies on various CSR-related matters for consideration by the board and to review and monitor how the Group performs against relevant policies. It oversees reporting on CSR matters and progress made during the year. Further details of the committee’s responsibilities can be found in the committee’s terms of reference which are available at g4s.com/investors. Specifc issues The CSR Committee receives regular updates on current issues from the human resources and CSR teams. In late August 2017, G4S became aware of allegations regarding the conduct and behaviour of a number of staff at Brook House Immigration Removal Centre. In response to these allegations, G4S took immediate action to strengthen the safeguarding of detainees at Brook House. Together with the UK Home Offce, an action plan was agreed and a joint working party created to oversee its implementation. The actions outlined in the plan are well underway and many have been completed. The key objective throughout has been to ensure that detainees are safe at Brook House. Investigations into staff conduct resulted in the dismissal of six members of staff. The committee has received regular updates on the measures that have been taken to address the issues raised, and on progress of investigations and operational improvement plans. I visited the centre personally in December to discuss the issues with managers, staff and detainees on site and to see the progress frst hand. We have commissioned Verita, a specialist consultancy, to carry out an independent review to understand the extent and root causes of the issues at Brook House. The review is examining G4S’ management, operational and staffng arrangements and the practices and behaviour of G4S’ staff. It is also assessing how G4S oversees the care and welfare of detainees, including in relation to mental-health issues, self-harm, violence prevention, use of force and proper reporting of incidents. The review is led by Kate Lampard CBE, a former barrister and vice chair of the South of England Strategic Health Authority and of the Financial Ombudsman Services Limited. The fndings will be presented directly to the Home Offce and the CSR Committee. Culture and values As a principal risk for the Group, culture and values as well as ethical compliance were reviewed by the board as a whole during the year. In addition, the CSR Committee oversees the programme supporting the embedding of the values across the Group including in all HR processes, from recruitment through to evaluation and performance management. The committee also reviewed and discussed the various   initiatives that supported the launch of the values, including training for management and front-line employees and enhanced communication of the whistleblowing arrangements to all employees. Health and safety As part of the CSR Committee’s focus on health and safety during the year, the committee oversaw an initiative to refresh health and safety induction training for front-line employees and the re-issue of a simplifed frearms policy across the Group. As part of its normal cycle of work, the committee received regular health and safety reports including updates on on-going initiatives and details of future plans and summaries of incidents. Sadly, in 2017, 25 employees lost their lives in work- related incidents. Although this is a signifcant reduction over previous years, in part, as a result of a reduction in road traffc accident fatalities, the focus and work of health and safety professionals and management teams in this area will continue. We will build on this progress and re-affrm our goal of zero harm. To further this endeavour and as mentioned last year, in 2017 the CSR Committee reviewed and supported the adoption of a new and consistent defnition of High Potential Incidents (“HPIs”) and the embedding of HPIs reporting across the Group. Work to ensure consistent reporting of HPIs is on-going, so as to ensure valuable insight is captured and efforts are focused preventatively. Materiality Assessment In order to ensure that G4S’ approach to CSR remains focused on the areas that are most relevant to the business and its stakeholders, a wide-ranging materiality assessment of ethical and sustainability issues is carried out. The committee’s work also included overseeing this process, which is conducted with the support of an external facilitator every two years. CSR Materiality Matrix The results, which inform future reporting and strategy, confrmed three core priority ethical and sustainability areas for the Group during 2018 and 2019: 1) Health and safety 2) Human rights 3) Anti-bribery and corruption The assessment reinforced the importance of G4S’ ethics, culture and values, as well as employee standards and behaviour in preventing issues and poor performance across the Group’s core priorities and other CSR matters. Further information can be found at g4s.com/csr. Integrated CSR reporting The Group’s approach to corporate and social responsibility is now frmly embedded in the Group’s business processes, from employee recruitment and supplier management to bidding and contract delivery. As a result, during the year the CSR Committee considered whether the CSR approach and activities should continue to be reported on a standalone basis in a separate report or whether it was more appropriate to integrate CSR activities fully with the company’s annual report and accounts. It was decided that a fully-integrated report was more representative of the Group’s approach. Committee performance The assessment of the committee’s performance, conducted as part of the overall board review process with assistance from Lintstock, concluded that the committee continued to provide good oversight and challenge over the Group’s CSR strategy. For 2018, the committee will review the scope of its remit and activities, and continue to support the communication of the Group’s values and whistleblowing arrangement. In addition, informed by the result of the materiality assessment, the committee will continue to focus its work on issues that are material for the Group. Ethics Environment Economic Geopolitical Employment H G H I S R E D L O H E K A T S O T E C N A T R O P M I Climate Change Environmental Management LOW Human rights Health, safety and protection of employees and people under G4S’ care Ethics & values Anti-bribery & corruption Labour relations Governance & compliance Valuing & developing employees Employee standards & behaviours Employee recruitment & screening Data protection & information security Secure & stable communities Diversity & inclusion Government relationships Risk management Customer trust & delivery Promoting industry standards Economic & tax contribution Technology & innovation Responsible supply chain IMPACT ON G4S HIGH Integrated Report and Accounts 2017 G4S plc 83 Governance Corporate governance report continued RISK COMMITTEE REPORT Paul Spence Risk Committee Chairman “The creation of sustainable value for our stakeholders requires effective risk management. The Risk Committee’s oversight of the Group’s risk management framework seeks to balance a robust approach to risk management, in particular risk mitigation, with the need to encourage and support the entrepreneurial spirit that drives growth”. Committee membership during 2017 Paul Spence (Chairman) Ashley Almanza John Connolly Tim Weller Member since January 2013 May 2013 January 2013 April 2013 Steve Mogford joined the Risk Committee on 1 January 2018. Other regular attendees include the group director of risk and internal audit. There were four scheduled meetings held during the year ended 31 December 2017. Members’ attendance at committee meetings is shown on page 74. Main activities of the Risk Committee during the year (%) In depth review of speciÿc high risk contracts/projects (30%) Risk Governance/Internal (30%) Control Contract Risk Management (25%) Committee governance and reporting (15%) Responsibilities Formed in 2013, the Risk Committee advises the board on the Group’s overall risk appetite, reviews and approves the Group’s risk management strategy, advises the Audit Committee and the board on risk exposures and reviews the level of risk within the Group. The Risk Committee also assesses the effectiveness of the Group’s risk management systems and reports thereon to the Audit Committee. The committee’s composition ensures that a broad set of skills and experience comes together to look at how the Group manages risk in the business. Further details can be found in the committee’s terms of reference available at g4s.com/investors. 84 G4S plc Integrated Report and Accounts 2017 Risk governance As part of its continued focus on risk governance, the committee reviewed and discussed proposed amendments to Group risk management policies. The committee also reviewed both the process and results of control self-assessments (CSAs) completed by business units across the Group on a regular basis. The CSAs, which cover many of the control standards addressing the Group’s high inherent risks, are seen as a positive way in which to ensure that key controls specifed by the Group to reduce such risks are embedded and compliance enhanced. During the process, regional functional leaders review and challenge the results of the business units. The internal audit function also performs tests to identify and correct any potential discrepancy between the results of CSAs and its fndings. The committee also reviewed the Group’s risk appetite and recommended its approval by the board. The committee also reported to the Audit Committee to confrm that it was satisfed that the Group’s risk management processes were appropriate. Principal risks During the year, the Risk Committee received regular updates on the progress of and in mitigating the Group’s principal risks set out on pages 62 to 65. Presentations on information security, laws and regulations, cash losses and culture and values covering the inherent risk, mitigations in place and management of the residual risk, were also received. Further details of the signifcant risks and uncertainties facing the business are set out on pages 60 to 65. Major contracts and projects Contract-risk management continues to remain a key area of focus for the company and the committee, which undertakes a review of a major contract at each of its meetings. In addition, the committee has particular oversight for the project developing lean-order-to-cash processes through the development and implementation of a standard IT system for the manned-security operations, Project Javelin. The committee receives regular reports on this project and oversaw the launch of the pilot project in Ireland in the last quarter of 2017. Further information about this project is set out on page 29. Committee performance The committee’s performance is assessed every year. In 2017, the result of the assessment performed by Lintstock showed that the committee continued to be effective and to provide valuable oversight of the risk management framework. In 2018, the committee will continue its focus on major contracts and projects as well as principal residual risks. The committee also plans to increase its focus on operational risk and to reinforce its oversight of technology and innovation as well as cyber-risk. The Audit committee report THE AUDIT COMMITTEE John Ramsay Audit Committee Chairman “As announced in December 2017, I joined the board on 1 January 2018 and succeeded Paul Spence as chairman of the Audit Committee from the same date. Paul, who remains a member of the committee, was very supportive during the transition process and I am very grateful for his continued support. During the year, the Audit Committee’s work continued to focus on enhancing the Group’s control environment, the quality of our group fnancial reporting and the effectiveness of the external and internal audit processes.” Committee membership during 2017 Paul Spence (Chairman) John Daly Winnie Fok Steve Mogford Ian Springett Member since January 2013 May 2015 January 2017a May 2016 January 2017b a. Winnie Fok was previously a member of the committee between October 2010 and December 2012. She stepped down from the Audit Committee on 1 January 2018. b. Due to continued ill health, Ian Springett retired from the Audit Committee and the board on 20 June 2017. On 1 January 2018, John Ramsay joined the board and took over the role of chair of the Audit Committee. Regular attendees include the chief fnancial offcer, the group fnancial controller, the company secretary, the group director of risk and internal audit and representatives of the Group’s external auditor. The chief executive offcer also attends meetings from time to time when invited by the chairman. During 2017, the chairman of the board, a chartered accountant who spent his executive career with Deloitte, also attended most meetings. There were four scheduled meetings held during the year ended 31 December 2017. Members’ attendance is shown on page 74. Main activities of the Audit Committee during the year (%) Effectiveness of ÿnancial controls and risk management procedures (30%) Financial reporting (30%) Internal audit (20%) External audit and non-audit services (15%) Whistleblowing / fraud allegations (5%) Committee membership As reported previously, Ian Springett was appointed to the board and as chair of the Audit Committee with effect from 1 January 2017. Unfortunately, in January 2017 Ian had to take an extended leave of absence in order to undergo treatment for a medical condition. Accordingly with effect from 20 January 2017, Paul Spence was appointed as chairman of the Audit Committee and Winnie Fok became a member. Paul was already a member of the committee and Winnie brought an accounting and audit background. The board was satisfed that Paul and Winnie together with the other members of the committee brought signifcant and relevant experience gained at senior- management level and that the committee’s composition met the requirements of DTR7.1 during the year. Their skills and experience are set out on pages 68 and 69. However the Audit Committee did not have a member with recent fnancial experience. Mindful of the need to ensure continued application of main principle C.1 of the code, additional steps were taken, including further support and training provided to the chair as well as the promotion of greater interaction with the external auditor. In June, due to continued ill health Mr Springett stepped down from the Audit Committee and the board. Following a search for a new non-executive director qualifed to act as chairman of the committee, John Ramsay was appointed to the board and as chair of the Audit Committee on 1 January 2018. Responsibilities The committee ensures that there is effective governance of the Group’s fnancial reporting and internal controls to safeguard the integrity of its fnancial statements and the adequacy of related disclosures, and assists the board in relation to its consideration of whether or not the annual report of the Group is fair, balanced and understandable. The committee also has oversight of the performance of both the internal audit function and the external auditor. During the year, the terms of reference of the Audit Committee were reviewed, following which a minor amendment was made. The terms are available at g4s.com/investors. The committee has an annual agenda, which includes standing items that the committee considers regularly, as well as specifc matters that require the committee’s attention. At the end of each meeting, a private session is held by the Audit Committee with representatives of the Group’s external auditor or with the Group director of risk and internal audit, without members of the executive management team being present. After each meeting, the chairman of the committee reports to the board on the matters which have been discussed. Integrated Report and Accounts 2017 G4S plc 85 Governance The Audit committee report continued Signifcant judgments and issues considered by the Audit Committee The primary judgments and issues considered by the committee in the 2017 fnancial statements, and how these were addressed, were: ONEROUS CONTRACT PROVISIONS Description The Group delivers certain long-term outsourcing services that are complex in nature. Some of those contracts may evolve to become loss-making, such that net unavoidable losses are expected over their life. This requires determining the net present value of estimated future losses in order to calculate an appropriate onerous contract provision. The identifcation and measurement of such provisions require signifcant judgment, given the extended time periods often involved and the number of variables that are not all within the Group’s control. In particular, judgment is required in assessing the future expected revenue and costs, including: determining the expected impact of any proft improvement plans (PIPs), the level of any related lifecycle funds and the estimated costs for the remaining life of the contract, and an appropriate discount rate to apply to material future cash fows. Details of the outcome of the assessment of contract provisions are set out in the Chief Financial Offcer’s Review on page 37. Action taken The committee reviewed in respect of each onerous contract, the critical assumptions provided by management and enquired about the judgments made, the robustness of the assumptions, the sensitivities to changes in the assumptions and the disclosure provided in relation to the key material judgments. The committee also reviewed the disclosure provided in relation to these contracts, and in particular in relation to a dispute with a subcontractor in respect of one of these onerous contracts. Conclusion The Audit Committee was satisfed that the level of provisions and the related disclosures as at 31 December 2017 were appropriate. COMPLIANCE WITH FOREIGN-OWNERSHIP RESTRICTIONS AND CONSOLIDATION OF UNDERTAKINGS Description In markets where foreign ownership restrictions (FORs) apply, the Group seeks to ensure that it complies with foreign ownership laws and regulations and meets the relevant accounting standards (IFRS10). Professional advisors are typically retained to establish and maintain contractual ownership structures, which comply with local laws and regulations relating to foreign ownership. In addition, the board reviewed the monitoring process in place for key markets, discussed relevant changes in law and regulations, their potential impact on the Group, and, where relevant, reviewed mitigation plans. Action taken The committee reviewed the Group’s portfolio of investments in countries where FORs apply. When restrictions apply to direct share ownership, the Group also exercises infuence or control through arrangements, including shareholder agreements. FORs can limit the Group’s ability to do business or invest in certain markets and could result in a loss of management control. The committee also received specifc reports in relation to a number of countries. Conclusion The committee was satisfed with the Group’s processes and approach to foreign ownership and consolidation of undertakings. Consolidation of any of these entities would be at risk if the Group’s ability to enforce its rights of control were to be undermined by FORs. This will remain an area of focus to ensure that the committee remains abreast of changes in laws, regulations and standards. 86 G4S plc Integrated Report and Accounts 2017 ALTERNATIVE PERFORMANCE MEASURES Description The Group uses Adjusted PBITA as a consistent internal and external reporting measure of its fnancial performance, given that management views it as being more representative of the normal course of business and more comparable period to period. Adjusted PBITA excludes strategic restructuring costs, amortisation of acquisition-related intangible assets and specifc and other separately disclosed items which the Group believes should be disclosed separately by virtue of their size, nature or incidence (see page 35 for further details). Judgment is required when defning those items to be disclosed separately and when applying the classifcation criteria to each period’s results. Further details on separately disclosed items are set out in note 8. Action taken The Audit Committee reviewed and challenged, in light of the guidance issued by the FRC in December 2013, October 2016 and November 2017, and the results of the FRC review of the 2016 Integrated Report and Accounts, the enhanced disclosures prepared by management in the 2017 Integrated Report and Accounts (pages 35 and 36) in relation to alternative GOODWILL IMPAIRMENT TESTING Description The total value of the Group’s goodwill as at 31 December 2017 was £1.9bn, a signifcant proportion of which was generated by the merger of the security services businesses of Group 4 Falck and Securicor in 2004, which was accounted for as an acquisition of Securicor by Group 4 Falck. The Group tests tangible and intangible assets, including goodwill, for impairment on an annual basis or more frequently if there are indications that an impairment may be needed. The impairment analysis consists of the estimation of the recoverable amount of goodwill supported by the Group’s cash generating units, which requires signifcant judgment, primarily in relation to the achievability of long-term business plans and future cash fows. Such achievability is dependent on circumstances both within and outside management’s control, in relation to the discount rates adjusted to refect risks specifc to individual assets used, and in relation to the macro-economic assumptions and related modelling assumptions underlying the valuation process. As a result of the annual review of the carrying value of goodwill, no impairment charge to goodwill was required (see notes 4 and 18 to the consolidated fnancial statements). The full methodology and results of the Group’s impairment testing, including an analysis of the sensitivity of goodwill to the key assumptions, are provided in note 18. performance measures (APMs) and specifc items. The committee observed that the Group’s accounting policies were being applied consistently from year to year, and considered whether specifc items were being identifed in line with Group policies and that these items included both debits and credits as appropriate. The committee also reviewed information from management to satisfy itself that changes in estimates related to items that were classifed as specifc items were treated equally and consistently as specifc items, in particular for both increases and decreases of provisions. Conclusion The committee was satisfed that the Group’s defnition of APMs, and in particular in relation to specifc and other separately disclosed items, had been applied correctly and that the designation of specifc items was subject to objective and balanced criteria. The committee noted the enhanced disclosure and explanation on APMs and considered that these give a meaningful and balanced view of the operations of the Group. Action taken The Audit Committee reviewed the methodology and results of the impairment tests prepared by management. The Audit Committee reviewed the assumptions used in relation to long-term growth, the resulting headroom and the sensitivities applied by management. In addition, these results were considered against alternative valuation bases such as reference to transactions for similar assets in similar locations, both within the Group and external to the Group. For those businesses that are expected to be sold as part of the strategic portfolio management programme, the Audit Committee reviewed the recoverable value on the basis of expected sale price less costs to sell. Finally, the Audit Committee considered the adequacy of the disclosures provided, particularly in respect of cash generating units where changes in key assumptions could give rise to an impairment. Conclusion The committee was satisfed with the carrying value of goodwill and related disclosures as at 31 December 2017. Integrated Report and Accounts 2017 G4S plc 87 Governance The Audit committee report continued TAXATION Description The Group operates in around 90 countries and is therefore subject to numerous reviews by individual tax authorities in the ordinary course of business. In some countries, tax legislation is not consistently applied and under some complex contractual structures, the responsibility for tax arising is not always clear. Judgments and estimates are required to determine the appropriate amount of tax to provide for and any required disclosure around contingent tax liabilities at each period end. Provisions for tax liabilities are estimated for existing matters under dispute with local tax authorities, as well as for matters which it is considered may be disputed by them, where it is probable that a future liability will arise. In some instances, tax reviews may result in claims being raised by tax authorities. Any claims are handled by the local legal entity in the frst instance. More complex cases are reviewed by the Group tax function and provisions, where necessary, are made based on the best estimate of the likely outcome. The Group recognises deferred tax assets in respect of temporary timing differences, mainly in relation to pension arrangements, fxed assets and carried forward losses. At 31 December 2017, total deferred tax assets were £240m (2016: £285m). Recognising such assets requires an assessment of their likely recovery through utilisation, which includes an assessment of the taxable profts expected to be made in each of the relevant jurisdictions in the future. Deferred tax assets can be affected by changes in legislation and in tax rates. LAWS AND REGULATIONS Description The Group operates in many jurisdictions globally, with complex and diverse regulatory frameworks. Due to such operations, the Group faces many associated risks, including increasing litigation and class actions; bribery and corruption; obtaining operating licences; complying with local tax regulations; changes to and application of employment and employee remuneration legislation; complying with human rights legislation; and new or changed restrictions on foreign ownership. Furthermore, the Group may face new or changing regulations which may require modifcation of its processes and staff training. Not being compliant with applicable laws and regulations can have far-reaching consequences, including higher costs from claims and litigation; inability to operate in certain jurisdictions; loss of management control; and damage to the Group’s reputation. Action taken The Audit Committee reviewed the Group’s tax strategy, including the tax report and tax risk management processes and the board approved the tax policy, which complies with the UK Confederation of British Industry’s seven tax principles. The committee also reviewed information prepared by management in relation to existing or potential tax exposures, the adequacy of the provisions recorded, their treatment and disclosure in the fnancial statements and emerging matters arising from the OECD’s Base Erosion and Proft Shifting framework. The committee reviewed information prepared by management supporting the recoverability of deferred tax assets, considered the period of time under which these assets would be recovered and made enquiries of the external auditor on the appropriateness of the Group’s tax position. The committee reviewed the impact of the US tax reform and in particular to the recognition and re-measurement of US deferred tax assets, and reviewed the disclosure provided in this area. Conclusion The committee was satisfed with the Group’s approach to tax, with the assessment of recoverability of deferred tax assets and with the accounting treatment and disclosure of tax exposures. The committee was satisfed that the disclosure provided in connection with the US tax reform was clear and appropriate Action taken During the year the committee received a report from the Group General Counsel, analysing signifcant areas of exposure to claims and areas where in particular labour laws and regulations are complex and there is therefore an inherent risk to the judgment made when applying those laws and regulations. For the most material items, the committee was provided with regular updates throughout the year. Conclusion The committee was satisfed that the provisions booked at 31 December 2017 were appropriate. The committee was satisfed that the disclosure for the judgments made in relation to contingent liabilities was clear and appropriate. 88 G4S plc Integrated Report and Accounts 2017   RISK OF ACCOUNTING ERRORS AND MANAGEMENT OVERRIDE OF INTERNAL CONTROLS Description The Group operates in around 90 countries and has around 600 legal entities, with a signifcant number of local fnancial systems and processes. This leads to an inherently-diverse set of processes and controls that rely on local capabilities for implementation and execution of the controls. As set out on page 61, the Group has adopted a three-lines-of-defence model to control and manage risks across the Group. regular updates on the overall control environment of the Group, including results of internal audits, training and up-skilling of capabilities across the Group, as well as the regular reports from the external auditor and the output of the whistleblowing process. The committee confrmed in particular that controls had been strengthened to minimise the risk of re-occurrence of control failures that required the restatement of the 2014 annual results and balance sheet in the 2015 Integrated Report and Accounts. The committee also considered progress made to reduce reliance on manual controls, by developing and integrating fnancial and operational systems across the Group. Over the course of the last four years the Group has made signifcant investment in strengthening capability in fnance, internal audit and risk, and has introduced additional internal controls and enhanced Group oversight to mitigate these risks. These include monthly reviews of the quality of earnings, a comprehensive internal audit plan and a regular cycle of reviews of local business unit or country balance sheets and controls. Action taken The committee oversaw the progress made over embedding minimum fnancial controls and received Viability statement At the March 2018 meeting, the committee reviewed a paper prepared by management which examined the longer-term solvency and viability of the Group. The committee tested the underlying assumptions and analysis performed by management, reviewed assurance work carried out and considered the appropriateness of the timeframe of the assessment. The committee was satisfed that the three-year period covered by the viability statement remains appropriate in that it aligns with the Group’s regular business planning period, over which management has a reasonable level of confdence in its projections refecting the life cycle of the majority of the Group’s contracts, and takes account of the limited visibility on material bidding opportunities in the pipeline beyond that period. The committee also reviewed and challenged the outcome of the stress- testing of projections by management. The committee recommended to the board that the directors confrm that they have a reasonable expectation that the Group will be able to continue in operation and meet its liabilities as they fall due over the three-year period of the assessment, as set out on page 92. Fair, balanced and understandable One of the key compliance requirements of a group’s fnancial statements is for the annual report, taken as a whole, to be fair, balanced and understandable. Guidelines on Alternative Performance Measures (APMs) were issued by the European Securities and Conclusion The committee acknowledged the progress made in relation to the strengthening of controls and the plans in place to reduce the number of systems and reliance on manual controls across the Group, but noted that, although good progress has been made to date, signifcant work remains to be done. Markets Authority (ESMA) and have been applicable since July 2016. In addition, the FRC issued a “Frequently Asked Questions” guidance document and published the results of its thematic review on this matter in November 2017. The committee considered each of the above in assessing whether the Group’s annual report was fair, balanced and understandable. The committee reviewed a paper setting out the approach taken by management in the preparation of the annual report to ensure it met the requirements of the FRC’s Code and the ESMA guidance, including the reasons for and clear explanation of the non-GAAP measures used by the Group in reporting its results for the year. The paper described the process and procedures followed and detailed the steps taken in each of the sections of the annual report to ensure that the information presented was complete and accurate. This paper also described the review processes carried out internally to ensure that the annual report is fair, balanced and understandable. In addition, an external verifcation exercise was carried out to confrm that the information contained in the annual report is supported either by factual evidence, or by confrmation from management where such information is a statement of belief or intent. The committee was satisfed with the work performed and advised the board that the annual report, taken as a whole, presents a fair, balanced and understandable view of the business and its performance for the year under review. Integrated Report and Accounts 2017 G4S plc 89 Governance The Audit committee report continued Internal control Since 2013, the Group has had a heightened focus on improving systems of internal control and risk management for fnancial reporting. The main features of these control systems include clearly-defned reporting lines and authorisation procedures, a comprehensive budgeting and monthly reporting system, written policies and procedures and the use of a single global consolidation system for internal management reporting, budgeting and planning as well as for external reporting. The system is designed to ensure the integrity of fnancial reporting and the committee’s responsibility is to ensure that these internal controls remain effective. The committee does this primarily through receiving reports from management, from the internal audit function and from the external auditor. The committee reviewed progress on the strengthening of internal controls, and on plans to continue progress, which included a targeted audit plan for 2017 from Group Internal Audit for those areas where issues have been identifed. The committee also considered the plans being implemented by management to reduce reliance on manual controls, through the gradual implementation and integration of new fnancial systems. Further details on internal controls are set out on page 61. The Audit Committee confrmed to the board that although it is satisfed that the Group’s risk management and internal control processes and procedures are appropriate and effective, the need for continued focus on enhancing the internal control environment remains. Internal audit During 2017, the internal audit function focused on assessing the effectiveness of a broader set of mandated controls including Minimum Financial Controls, HR Core Standards, Driver and Firearms Controls, Human Rights and Anti-Bribery and Corruption, with the goal of focusing local management on the most material control issues specifc to their local environment. The Group fnance function and Regional Audit Committees also provided support to assist in driving improvements where appropriate. The internal audit function continued to provide support and guidance to business units to improve awareness of and compliance with Minimum Financial Controls. In 2018, internal audits will continue to test the operational effectiveness of the Group’s standards and controls. Precise coverage in each country will be determined through risk assessment. External audit Following an audit tender process during 2014 PricewaterhouseCoopers LLP (PwC) was appointed as the Group’s new external auditor for the 2015 fnancial year. PwC was subsequently re-appointed for the 2016 fnancial year and at the 2017 AGM to hold offce until the next AGM. Richard Hughes has been lead audit partner since the beginning of 2015. During the year, the committee reviewed PwC’s Group audit plan including the scope to be undertaken as well as their reports on external audit fndings, with particular focus on the areas set out above. The committee also had private sessions with the external auditor both during the year and at the end of a number of Audit Committee meetings, and approved the fee for the external audit. The committee also considered and approved the representation letter to be issued to the auditor. In addition, in March 2017, the committee reviewed the report of the FRC on its review of PwC’s audit of the 2015 Integrated Report and Accounts. Non-audit services To ensure that the independence of the audit is not compromised, the committee has put a policy in place covering the non-audit services that can be provided by the external auditor, the relevant approval process for certain services, and detailing those services which the auditor is prohibited from providing. In essence, the external auditor is prohibited from providing services that could create a confict of interest, result in the audit frm auditing its own work, or result in the performance of management functions. Examples of non-permitted services are actuarial services, book- keeping services, internal audit outsourcing services and legal services. The committee has pre-approved certain services which can be provided by the auditor subject to specifed fee limits, above which further approval is required. All other services would require prior approval by the committee. Every year, the Audit Committee reviews its policy on the provision of non-audit services by the external auditor. The auditor, PwC, has written to the Audit Committee confrming that, in its opinion, it was independent for the period through to 8 March 2018. Details of the fees paid for audit services, audit-related services and non-audit services can be found in note 10 to the consolidated fnancial statements. Effectiveness of the external auditor A combination of formal and informal processes is used in the assessment of the effectiveness of the external audit process. A formal questionnaire is completed at the end of the audit by members of the Audit Committee, by the Group fnance department and by the fnance directors of signifcant operations across the Group, and the results of those questionnaires are reviewed by the Audit Committee. The assessment of the external audit for 2017 concluded that it remained effective and that the external auditor is independent. FRC review of the 2016 Integrated Report and Accounts During the year, the Group received a letter from the FRC confrming that the Annual Report for the year ended 31 December 2016 had been subject to a limited review by its Conduct Committee, which is responsible for reviewing and investigating the annual accounts, directors’ and strategic reports of UK public companies. 90 G4S plc Integrated Report and Accounts 2017 The key areas of focus were in relation to the use of alternative performance measures and compliance with the ESMA Guidelines and the commentary provided on IFRS measures in the strategic report. As a result of on-going discussions with the FRC as part of its enquiry, we have considered the labelling of the alternative performance measures used and provided enhanced disclosure and explanations on page 44. We have also provided further and clearer narrative on fnancial performance based on statutory measures, on pages 38 to 43. Committee performance The assessment of the committee’s performance, conducted with assistance from Lintstock, concluded that the committee had performed well during 2017, in particular in reviewing the quality of the Group’s fnancial reporting. In 2018, the committee will support the induction of its new chair, review internal and external audit coverage in light of the changing shape of the Group and in conjunction with the CSR Committee, refne the whistleblowing process further. CMA Order Compliance The G4S Group audit was put out to tender in 2014, following which PwC were appointed with effect from 2015. The committee confrms that the company has complied with the Audit Services for Large Companies (Mandatory Use of Competitive Tender Processes and Audit Committee Responsibilities) Order 2004. John Ramsay Audit Committee Chairman Corporate governance report RISK MANAGEMENT AND INTERNAL CONTROL The directors acknowledge their responsibility for the Group’s systems of risk management and internal control and for reviewing their effectiveness each year. The main features of these control systems include clearly-defned reporting lines and authorisation procedures, a comprehensive budgeting and monthly reporting system, written policies and procedures and the use of a single global consolidation system for internal management reporting, budgeting and planning as well as external reporting. While the Audit Committee has primary responsibility on the board’s behalf, a separate committee of the board, the Risk Committee, was set up in 2013 as part of the Group s heightened focus on improving systems of internal control and risk management. ’ The board, through the Risk Committee, has carried out a robust assessment of the principal risks facing the company and of how those risks might affect the prospects of the company. The principal risks and their possible impact on the company and the mitigations taken, are set out on pages 62 to 65.Through the Audit Committee, the board conducted a review of the effectiveness of the systems of internal control during the year. The systems are 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 enterprise risk management governance model, described on page 61 sets out some of the key features of the Group’s risk-management process which was in place throughout the year under review. During the year, the Risk Committee reviewed the Group’s risk appetite, which was considered and approved by the board. Further information on the work of the Risk Committee in relation to the risk management framework, including the Group’s risk appetite, can be found in the report of the Risk Committee on page 84. Whilst further improvement has been made in the effective performance of internal controls during the year, given the number of countries in which the Group operates and the variety of systems used there is still opportunity for improvement in the operational effectiveness of mandated controls and this will continue to be a focus during 2018. The Audit Committee has confrmed that, although it is satisfed that the Group’s risk management and internal control processes are appropriate and effective, the need for continued focus on enhancing the internal control environment remains. Further information on the work of the Audit Committee in this respect can be found in the Audit Committee report on page 85. The board has reviewed the Group’s risk management and internal control systems for the year to 31 December 2017 by considering reports from the Audit Committee and the Risk Committee and has also taken account of events since 31 December 2017. Integrated Report and Accounts 2017 G4S plc 91 Governance Corporate governance report continued FAIR BALANCED AND UNDERSTANDABLE The preparation of the Integrated Report and Accounts is co-ordinated by the fnance, investor relations and company secretariat teams with group-wide support and input from other areas of the business. The board has separately considered the disclosures in the Integrated Report and Accounts and has concluded that they are fair, balanced and understandable. Comprehensive reviews were undertaken at regular intervals throughout the process by senior management and other contributing personnel within the Group. The process was reviewed by the Audit Committee and the board has reviewed a paper setting out the governance relating to the preparation of the report prepared by management. VIABILITY STATEMENT In accordance with provision C.2.2 of the UK Corporate Governance Code 2016, the directors have assessed the viability of the Group over a three year period, aligned with that of the Group’s rolling planning cycle, taking into account the Group’s current position and the potential impact of the principal risks documented on pages 62 to 65. Extension of viability testing beyond three years is seen by the Group as being of limited value because of the following factors: • The majority of the Group’s contracts are less than three years in duration; • The correlation of demand for security services with the global economy; and The statement required to be given by the directors by Code provision C.1.1 can be found on page 119. capital needs of the business, as well as the principal residual risks. The vast majority of the Group’s risks exist at an individual country level and are individually immaterial. The principal residual risks described on pages 62 to 65 are an aggregate view of individual risks captured in country, region and Group functional risk registers. These wide-ranging risks are highly unlikely to crystallise simultaneously and it is therefore unlikely that such risks would have a material impact on the Group’s fnancial position. Nevertheless, the Group has sensitised its three-year fnancial projections for the following risks: • The impact of the Group’s on-going productivity a) Potential loss of certain of the Group’s top programme. customers; b) Potential adverse changes in foreign ownership legislation resulting in cessation of material business lines; c) Potential claims from major contracts resulting in material settlement payments; and d) Litigation or Class Action claims resulting in material legal costs and settlement payments. The directors consider that this stress-test assessment of the Group’s prospects is reasonable in the circumstances. The directors have also considered the debt maturities in 2019 and 2020 as indicated on page 31 under the stress test scenarios and concluded that the Group would be able to meet its maturities as they fall due with the existing facilities currently in place, without the need to access the fnancial markets. Based on this assessment, the directors have a reasonable expectation that the Group will be able to continue in operation and meet its liabilities as they fall due over the three fnancial years to 31 December 2020. The Group’s prospects are assessed primarily through its bottom-up strategic planning process. The overall strategy for the Group was refreshed comprehensively in November 2013 and the board has monitored progress closely against this strategy as well as the risks to its success. The 2017 process commenced in June with each country and business unit updating its rolling three-year strategic plan and considering the risks to achievement of that plan. These plans were reviewed and refned by regional management and then by the Group Executive Committee before being reviewed by the board in October 2017. The key assumptions in the fnancial forecasts, refecting the overall strategy, include: • A continued demand for security services, as set out on page 8 of the strategic report; • An ability to continue to drive through our productivity programmes and to fex the cost base, as set out on pages 28 to 29; and • Continuing to deliver good operating cash fow performance as set out on pages 30 and 31. The output of this plan is used as the baseline for stress-testing covenant and headroom analysis. This analysis includes sensitivity analysis to changes in trading conditions affecting proft growth and the 92 G4S plc Integrated Report and Accounts 2017 Directors’ remuneration report THE REMUNERATION COMMITTEE John Daly Remuneration Committee Chairman “We believe our remuneration framework is aligned with the Group’s strategic objectives and promotes the interests of our shareholders and the long-term success of the organisation, by rewarding the creation of sustainable value, with particular focus on our customers, people and values.” Committee membership during 2017 John Daly (Chairman) Winnie Fok Clare Spottiswoode Barbara Thoralfsson Member since June 2015 (chair since May 2016) October 2010 June 2010 July 2016 There were three scheduled meetings and one additional meeting held during the year ended 31 December 2017. Members’ attendance at committee meetings is shown on page 74 The committee consists entirely of independent non-executive directors and the committee membership during 2017 is set out in the table above. Biographies of the members of the committee are set out on pages 68 and 69. As announced previously, at the 2018 AGM, Clare Spottiswoode will retire from the board. I would like to thank Clare for her valuable support and her contributions to the work of the committee. Main activities of the Remuneration Committee during the year (%) Performance and Incentives Governance Reporting 35% 30% 15% Executives’ base pay /Chairman fee 10% Below board level 10% Responsibilities The Remuneration Committee is responsible for overseeing all elements of the remuneration of the executive directors, other members of the Group Executive Committee and the chairman of the board. It also agrees with the board the framework and policy for the remuneration of other senior managers of the Group and reviews and recommends to the board the remuneration of the company secretary. In determining remuneration policy, the committee takes into account a variety of legal and regulatory requirements and the relevant provisions of the UK Corporate Governance Code. The committee also determines policy on the duration, notice period and termination payments under the contracts with the executive directors, with a view to recognising service to the company whilst ensuring that failure is not rewarded and that the duty to mitigate loss is recognised. The committee approves the design and determines the measures and formulae for performance-related pay schemes operated by the company. It approves the eligibility of executive directors and other Group Executive Committee members for annual bonuses and benefts under long-term incentive plans and assesses performance against the objectives of those plans. No directors are involved in determining their own remuneration. The committee’s terms of reference are available on the Company’s website at g4s.com/investors. Our remuneration approach We seek to attract and retain the best people whilst ensuring that the remuneration policy and practice drive behaviours that are in the long- term interests of the company and its shareholders. Fixed pay • base pay • retirement benefts • other benefts Short-term incentives • annual bonus plan (one year) with deferred element (three years) Long-term incentives • long term incentive plan (three years) Integrated Report and Accounts 2017 G4S plc 93 Governance During 2017, the committee undertook a further review of our current remuneration practices taking account of the overall approach and structure of employee reward across the Group, developments in remuneration for executives in the global market as well as views of the investor community. The committee together with its advisor is developing a package of measures, in relation to which consultation with major shareholders will take place during the latter part of 2018, with a view to fnalising an up-to-date policy for submission to shareholders’ approval at our AGM in 2019. Key areas where changes are being considered include the introduction of a two-year holding period post vesting of shares for awards to the Group executive committee under our long-term incentive plan and an increase in the shareholding requirements. The level of company pension contributions for future executive appointments is also under review. Our stakeholders The committee considers shareholders’ views via consultation and wider stakeholders’ views through reviews of regular reports from the committee’s advisor on market and governance developments. During the year, the committee also reviewed the analysis and results of the UK gender pay gap reporting requirements. It is also aware of institutional investors’ views, including the Investment Associations’ Principles of Remuneration published in November 2017 and intends to consider the implications of the revised UK Corporate Governance Code once it is fnalised and published later in the year. Governance With a view to refocusing the work of the committee and updating some of the committee’s duties such as its reporting obligations, the committee reviewed and approved for recommendation to the board, a number of amendments to its terms of reference. The committee’s revised terms of reference are available on the company’s website at g4s.com/investors. UK Code Compliance The company had in place malus and clawback before their introduction became a feature of the revised UK Corporate Governance Code. These are explained on page 111. The committee is also conscious of the Code’s requirement that executive directors’ remuneration should be designed to promote the long-term success of the company – and that performance-related elements of remuneration should be transparent, stretching and applied rigorously. Directors’ remuneration report continued Business context and performance In 2017, management delivered another year of proftable growth and good cash generation, enabling continued investment in growth, technology and productivity programmes, while continuing to strengthen the balance sheet. Our leadership team continues to demonstrate commitment to the long-term success of the business and I am pleased to report that they produced core business revenue growth of 3.2%, Adjusted PBITA increase of 4.2%, Adjusted EPS growth of 5.9% and a reduction in net debt to Adjusted EBITDA of 2.4x from 2.8x at the end of 2016. Further details are set out in the chief executive offcer’s introduction to the Strategic Review on pages 4 to 7. 2017 Remuneration outcomes Pay review – As reported last year, the CEO’s salary was increased by 1.5% effective from 1 January 2017 and that of the CFO, who was appointed in October 2016, remained the same. The increase awarded to the executive directors was in line with the increase applicable to Group employees and most managers based in the UK. Annual Bonus – The Group’s fnancial performance, together with individual performance against strategic objectives, supports a high level of annual bonus pay-out for the executive directors. Recognising the impact of trading conditions in the Middle East & India during 2017, the executive directors recommended a reduction equivalent to 10% of base pay be applied to their bonus payments. The Remuneration Committee commended this initiative and approved the proposal, which resulted in payments, after adjustment, of 79.5% of maximum opportunity for the CEO and 69.5% of maximum opportunity for the CFO. Long term incentive plan – In line with our commitment to ensure that our remuneration framework aligns with our strategy and promotes the long-term success of G4S, a signifcant part of performance-related reward is delivered through shares. Given the growth in earnings and strong operating cash-fow over the three years from 2015 to 2017, awards that were granted in 2015 vested at a level of 62%. Further information on the levels of executive remuneration earned in 2017, including performance against the relevant targets, is given on pages 96 to 98. Key areas of focus in 2017 Remuneration Policy and approach During 2016, the committee carried out a thorough review of our remuneration policy and found that the policy approved by shareholders in 2014 continued to operate effectively. Therefore, no substantive changes were made to the Directors’ Remuneration Policy submitted for shareholders’ approval at our AGM last May. The policy received a high level of support with 97.26% of favourable votes, for which I am grateful. 94 G4S plc Integrated Report and Accounts 2017 Details of the process for board and committee performance evaluations are set out on page 67. The review concluded that the committee continues to be effective and to perform well. It also highlighted the committee’s awareness of its key role, as the Group’s new organisational structures bed in and delivery of the strategic objectives gains momentum, in continuing to focus on ensuring that the Group’s remuneration practices enable the Group to attract, retain and reward the high calibre individuals and talent it needs to deliver long-term sustainable success. Voting on remuneration The annual report on remuneration will be put to an advisory vote at this year’s AGM, and we look forward to receiving shareholders’ support once again this year. I will be available to answer questions and listen to the views of our shareholders at the forthcoming AGM. John Daly Remuneration Committee Chairman 8 March 2018 Implementation of remuneration in 2018 Pay review For 2018, the CEO and CFO’s base pay has been increased by 2%. This pay review took account of market salary trends as well as salary increases elsewhere in the Group. The increase awarded to the executive directors was in line with the increase applicable to Group employees and most managers based in the UK. Incentives The bonus opportunity and LTIP award levels remain unchanged in 2018, both of which are subject to caps as set out in the Remuneration Policy on pages 107 to 115. In relation to bonus, the committee seeks to set targets that support the overarching strategy, refecting the business context for the relevant period. Targets are also intended to be stretching whilst remaining achievable and are compatible with the Group’s risk appetite. The committee is confdent that the targets set meet these criteria. The long-term incentive plan introduced in 2014 received overwhelming support from shareholders and will continue to operate in 2018. The committee’s performance Consistent with our practice every year, a formal review of the committee’s performance was carried out at the end of 2017. Remuneration policy The company’s remuneration policy for directors is set out on pages 107 to 115 of this report and on the company’s website at g4s.com. It was approved by shareholders at the company’s annual general meeting held on 25 May 2017 with 97.26% of all votes cast in favour. The long term incentive plan referred to in the policy was approved at the 2014 annual general meeting with 96.88% of all votes cast in favour. The remuneration policy came into effect on 26 May 2017 and will continue to apply for up to three fnancial years unless a new or revised policy is approved by shareholders in the meantime. Integrated Report and Accounts 2017 G4S plc 95 Governance Directors’ remuneration report continued ANNUAL REPORT ON REMUNERATION SINGLE TOTAL FIGURE OF REMUNERATION (AUDITED INFORMATION) Executive directors £ Base pay Benefts 2017 2016 2017 2016 Annual Bonus 2017 2016 LTIP Pension related benefts Total 2017 2016 2017 2016 2017 2016 Ashley Almanza Tim Weller 643,750 172,179 939,755 925,867 110,112 109,985 1,120,168 1,347,136 1,441,515 2,175,179 234,939 231,467 3,846,489 4,789,634 24,429 1,655,763 369,572 670,774 166,945 182,787 n/a 128,750 29,702 6,019 Notes: 1. The 2016 base pay fgure for Mr Weller includes £122,145 received between the date of his appointment as an executive director on 24 October 2016 until the end of the year, as well as fees in an amount of £50,034 for his role as a non-executive director of the company. 2. Benefts include car allowance, business-related travel, healthcare, disability and life assurance. Beneft values include the cost of certain travel, overnight accommodation, meals and memberships which HMRC treats as a taxable beneft and on which the company has paid, or will in due course pay, as it does not consider such expenses to be benefts in the ordinary tax sense. The grossed-up amounts for 2017 are £71,706 (2016: £61,544) for Ashley Almanza. Beneft values also include local travel costs of £10,420 (2016: £17,384) for Ashley Almanza who bears the tax himself, and contain other business costs which HMRC deems to be benefts. 3. Any bonus due above 50% of the individual’s maximum bonus entitlement is awarded as deferred shares, which vest after a period of three years unless the individual ceases employment prior to the third anniversary and qualifes as a good leaver, in which case release of such deferred shares occurs shortly after termination of employment. 2017 bonus fgures are adjusted fgures, following the exercise of the committee’s discretion to reduce bonus pay-outs, as recommended by the executive directors. Further information regarding 2017 bonus performance and resulting pay-outs is set out on page 97 and 98. 4. In addition, for 2017, Ashley Almanza received a fee of $88,500 from Noble Corporation from his non-executive directorship referred to on page 112, and retained such remuneration (2016: $95,000 and $316,674 of fee and shares respectively). For 2016, Mr Almanza also received £37,618 from Schroders plc before stepping down from its board in April 2016. Mr Weller received and retained £17,000 from the Carbon Trust for his non-executive directorship during the year under review (2016: £3,214). 5. Values in the LTIP column relate to the 2015 LTIP due to vest on 20 March 2018. Since the share price on the date of vesting is unknown at the date of this report, the fgures provided are estimates calculated using the average market value over the last quarter of the year under review, i.e. 266.59p per share. Further information regarding performance and vesting of the 2015 LTIP is set out on page 99. Non-executive directors The following table shows a single total fgure of remuneration in respect of qualifying services for the 2017 fnancial year for each non-executive director, together with the comparative fgures for 2016. Aggregate non-executive directors’ emoluments are shown in the last column of the table. £ Base fee SID John Connolly John Daly Winnie Fok Steve Mogford Paul Spence Ian Springett Clare Spottiswoode Barbara Thoralfsson 2017 2016 375,000 370,000 61,750 61,750 61,750 61,750 36,733 61,750 61,750 61,750 n/a 28,816 61,750 61,750 30,875 61,750 2017 n/a n/a n/a 15,000 n/a n/a n/a n/a Chair of Committee 2016 n/a 11,005 n/a n/a 18,500 n/a 18,500 n/a 2017 n/a 18,500 n/a n/a 37,500 4,750 18,500 n/a 2016 n/a n/a n/a 8,923 n/a n/a n/a n/a 2017 4,770 3,259 15,243 1,531 16,452 0 2,315 24,101 2016 Total Total 2016 2017 99,279 379,770 469,279 75,780 83,509 3,025 70,448 76,993 8,698 45,941 78,281 285 88,971 8,721 115,702 33,566 n/a 81,649 82,565 32,033 85,851 n/a 1,399 1,158 Benefts Notes: The above fees were pro-rated where the appointments or retirements were part way through the year. 1. Beneft values include the cost of overnight accommodation, travel and meals, which HMRC treats as taxable benefts and on which the company has paid, or will in due course pay, tax as it does not consider such expenses to be benefts in the ordinary tax sense. 2. For 2016, beneft values for Mr Connolly include the grossed-up costs for security measures, as well as the installation of a security system at his home, of £97,506. 3. John Daly took over as chair of the Remuneration Committee on 27 May 2016. 4. 2017 benefts fgures for Winnie Fok include professional fees in relation to tax and social security compliance. 5. Steve Mogford was appointed as a non-executive director on 27 May 2016 and is the Senior Independent Director. 6. In addition to his role as chair of the Risk Committee, during 2017 Mr Spence also chaired the Audit Committee. 7. Fees for Ian Springett cover the period of his appointment to the board, between 1 January and 20 June 2017. In addition, for his role as chair of the Audit Committee, fees were paid during the frst quarter of the year. 8. For Barbara Thoralfsson, 2016 fgures cover the period from the date of her appointment to the board on 1 July 2016. 2017 fgures include professional fees in relation to tax and social security compliance. 96 G4S plc Integrated Report and Accounts 2017 2017 Annual bonus During the fnancial year ended 31 December 2017, the performance measures relating to the annual bonus scheme rules were consistent with the Remuneration Policy, with 85% of the bonus for Ashley Almanza and 70% for Mr Weller being based on achievement of challenging fnancial performance measures. The fnancial performance measures were based on budgeted Group earnings (excluding specifc and other separately disclosed items) and budgeted Group operating cash fow before capital expenditure. For threshold performance, 35% of maximum entitlement would pay out with on-target performance resulting in a payment of 60% of maximum entitlement, with 100% only being earned in the event of achievement of a stretch performance signifcantly in excess of budget. The element of bonus determined for each fnancial performance measure is calculated by interpolating actual achievement against the range between the minimum i.e. entry threshold and the maximum target to achieve maximum performance. The remaining 15% of the bonus for Mr Almanza and 30% for Mr Weller was linked to objectives relating to non-fnancial performance. These consisted of personal objectives or related to the organisation and were linked to specifc elements of the Group’s strategy for which the particular director had responsibility. Each executive director has a number of strategic performance measures linked to areas that the committee has agreed for the year. The committee reviews the progress in each area and then makes an assessment as to whether the executive has performed in accordance with expectations. The maximum bonus potential remained unchanged from 2016 at 150% of base pay for both Messrs Almanza and Weller. Bonuses are paid in cash up to 50% of maximum entitlement. Where the bonus amount is in excess of 50% of the maximum bonus potential, the amount which exceeds 50% is delivered in the form of a deferred share award which vests after a period of three years. The tables below show how pay was linked to performance in 2017 and set out details of each of the fnancial measures, the targets in respect of these measures and the actual outcomes: 2017 annual bonus – Performance conditions and outcomes Ashley Almanza Financial measures Group Earnings Group OCF Total Weighting (% of maximum bonus) 50% 35% 85% Threshold to earn bonus £251.1m £486.9m n/a Target £258.9m £501.9m n/a To achieve full vesting £266.7m £517.0m n/a Achievement £267.9m £506.8m n/a Score achieved (% of total for each measure) 50% 25.5% 75.5% Personal objectives Mr Almanza was able to earn up to 15% of the maximum bonus potential for achieving personal objectives. These were designed to align with the strategic priorities for 2017 (see pages 32 and 33) and were set out in the 2016 Directors' Remuneration report. Mr Almanza’s 2017 personal objectives consisted of improving health and safety performance, updating the growth and innovation strategy, continuing to strengthen the global leadership team and achieving substantial completion of the strategic portfolio programme. Personal Objective Health and safety Achievement Clear and visible focus and leadership on safety has resulted in signifcant performance improvement in 2017 with 25 work related fatalities, a reduction from 47 in 2016. This demonstrates the results of a culture change programme incorporating leadership behaviour, capability building and performance management. Performance Rating As a result of the signifcant improvements and progress in these areas the assessment against non-fnancial objectives for the Group CEO was agreed as 11 out of 15 points. Global leadership team With effect from 1 January 2018, the group-wide management of our core business has been reorganised. This resulted in new appointments for fve of the Group Executive Committee, including a new external hire. The new organisation will enable the further strengthening of strategic, commercial and operational focus in each of the core service lines. The Group made clear progress growing new technology services in both Cash Solutions and Secure Solutions The Group has substantially completed the strategic portfolio programme established a few years ago. This has improved proftability and raised over £500 million in gross proceeds. Growth and Innovation Portfolio programme Integrated Report and Accounts 2017 G4S plc 97 Governance Directors’ remuneration report continued Tim Weller Financial measures Group Earnings Group OCF Total Weighting (% of maximum bonus) 35% 35% 70% Threshold to earn bonus £251.1m £486.9m n/a Target £258.9m £501.9m n/a To achieve full vesting £266.7m £517.0m n/a Achievement £267.9m £506.8m n/a Score achieved (% of total for each measure) 35% 25.5% 60.5% Personal objectives Mr Weller was able to earn up to 30% of the maximum bonus potential for achieving personal objectives. The personal objectives for the CFO role were set at the beginning of the year to align with the strategic priorities for 2017. These were set out in the 2016 Directors Remuneration report and focused on three key areas, namely organisational effciency and fnance functions, delivery of integrated IT systems and procurement effciency. Performance Rating As a result of the improvements and progress in these areas the assessment against non-fnancial objectives for the Group CFO was agreed as 16 out of 30 points. Personal Objective Organisation effciency Integrated IT systems Procurement effciency Achievement There has been continued focus on effciency across the Group, with particular focus on the fnance function, and steps taken to embed streamlined reporting and management information as well as de-layering have resulted in signifcant effciency improvements. The pilot of the Javelin IT-enabled operating model was launched in Ireland in 2017 and the enhanced version of Javelin encompassing all of the lessons learned will be deployed into Ireland before roll-out to the UK commences later this year. Procurement programmes continued to operate across the Group with a category focused approach across all regions. Key areas of improvement included continued supplier base rationalisation, demand management and implementation of new procurement tools providing more effcient and controlled procurement. The table below sets out the annual bonus awards which were made to executive directors in respect of the fnancial year ended 31 December 2017, based on the performance described on the previous pages. As mentioned earlier in the report, the executive directors suggested their bonus pay-outs be reduced by an amount equivalent to 10% of their base pay. The Remuneration Committee, which commended their initiative, was fully supportive and used its discretion to reduce the awards accordingly. The annual bonus awards set out below are shown after adjustment: Ashley Almanza Tim Weller Ashley Almanza Tim Weller 2017 annual bonus £1,120,168 £670,774 2017 annual bonus (% of salary) 119% 104% 2017 annual bonus deferred (% of salary) 44.2% 29.2% Cash £704,816 £482,813 Deferred shares £415,352 £187,961 98 G4S plc Integrated Report and Accounts 2017 Long term incentive plan (LTIP) The 2017 and 2016 values shown in the fourth column of the single-fgure table relate to the LTIP awards made in March 2015 and July 2014 respectively. The performance measures and targets of these awards are set out below: Performance measures and targets for the LTIP awards 40% of each award granted 30% of each award granted 30% of each award granted Average annual growth in EPS period ending on 31 December in the third year Less than 5% pa Nil 5% pa (15% over 3 years) + 5 to 12% pa 25% Proportion of allocation vesting Pro-rata between 25% and 100% 100% Greater than + 12% pa (36% over 3 years) Ranking against the bespoke comparator group by reference to TSR Below median Median Proportion of allocation vesting Nil 25% Average operating cash fow <105% 105% Proportion of allocation vesting Nil 25% Between median and upper quartile Upper quartile Pro-rata between 25% and 100% 100% Between 105% and 125% 125% Pro-rata between 25% and 100% 100% The table below illustrates the company’s performance against the 2014 award targets and the resulting pay-out as shown in the 2016 values in the fourth column of the single fgure table: Measure Average annual growth in EPS Relative TSR Average OCF Total vesting Performance Increase of 15.3% pa Ranked between 43rd and 44th in peer group 129% Vesting (% of element) 100% 0% 100% 70% of maximum The table below illustrates the company’s performance against the 2015 award targets and the estimated pay-out as shown in the 2017 values in the fourth column of the single fgure table: Measure Average annual growth in EPS Relative TSR Average OCF Total vesting Performance Increase of 10% pa Ranked between 41st and 42nd in peer group 125% Vesting (% of element) 80% 0% 100% 62% of maximum Vesting under the 2015 LTIP was 62% of maximum of the award. Maximum performance was achieved for the average OCF component and 80% of the portion allocated to average annual EPS growth vested. Dividend payments to shareholders were maintained throughout the performance period, however relative TSR performance was affected by share price fuctuations so did not result in any pay-out for this measure. Total pension entitlements (audited information) None of the executive directors have any prospective entitlement to a Group defned beneft pension nor is either a member of the Group’s pension plan, which is a defned contribution group personal pension plan available to all UK employees. Instead the CEO and CFO receive cash allowances of 25% and 20% of their base pay, respectively. Integrated Report and Accounts 2017 G4S plc 99 Governance Directors’ remuneration report continued SCHEME INTERESTS AWARDED DURING THE FINANCIAL YEAR (AUDITED INFORMATION) Awards under the LTIP approved by the shareholders at the company’s AGM in June 2014 were made in March 2017 consistent with the company’s normal grant policy. In June 2017, in accordance with the terms of his contract of employment, Mr Weller was granted a conditional award over 100,000 ordinary shares of 25 pence each in the company following the forfeiture of his 2016 bonus from his previous employer. The deemed date of grant for this award is March 2016 and the vesting of such award will be subject to the achievement of performance conditions measured over a three-year period beginning in the deemed year of grant, i.e. 2016. Details of the awards made to the executive directors are summarised in the table below and further details are given in the table on directors’ shareholdings and interests on page 101: Director Award type Number of shares Ashley Almanza Conditional shares 795,862 Tim Weller Conditional shares 436,144 Tim Weller Conditional shares 100,000 Notes: Face EPS,TSR and AOCF % vesting at threshold 2,349,385 value (£) Performance condition Performance period 01/01/2017 – 31/12/2019 01/01/2017 – 31/12/2019 01/01/2016 – 31/12/2018 40% EPS/30% TSR/30% AOCF 40% EPS/30% TSR/30% AOCF 40% EPS/30% TSR/30% AOCF 183,830 1,287,497 25% 25% 25% 1. The face-value calculation for all awards deemed granted in March 2017 was based on a share price of £2.952 which represents the average closing share price during the three business days following the announcement of the company’s 2016 fnancial results. 2. Awards of conditional shares under the 2017 LTIP were granted in accordance with the Directors' Remuneration Policy. As a result, conditional share awards representing 250% of base pay and 200% of base pay were granted to Messrs Almanza and Weller respectively. 3. The face-value calculation for the 100,000 share award for Mr Weller, deemed granted in March 2016, was based on a share price of £1.8383 which represents the average closing share price during the three business days following the announcement of the company's 2015 fnancial results. 4. Further details of performance conditions are set out in the table below. Performance measures for long-term incentives awarded in 2017 The bespoke comparator group consists of companies constituent of the FTSE 100 index corrected to exclude fnancial institutions and companies in the extractive sector, and include competitor companies which are outside that index. The company’s current policy is to use market-purchased shares to satisfy LTIP awards. Participants in the LTIP will receive a further share award with a value equivalent to the dividends which would have been paid in respect of LTIP awards vesting at the end of the performance period. The company calculates whether the EPS performance target has been achieved by reference to the Group’s audited accounts, which provide an accessible and objective measure of the Group’s earnings per share. The average OCF performance target is calculated by reference to the relevant defnition set out in the LTIP rules approved by shareholders. The committee may alter the terms of the EPS measure if it feels that it is no longer a fair measure and is no longer incentivising. TSR ranking will be verifed externally. 40% of each award granted 30% of each award granted 30% of each award granted Average annual growth in EPS period ending on 31 December in the third year Less than 5% pa Nil 5% pa (15% over 3 years) + 5 to 12% pa 25% Proportion of allocation vesting Pro-rata between 25% and 100% 100% Greater than + 12% pa (36% over 3 years) Ranking against the bespoke comparator group by reference to TSR Below median Median Proportion of allocation vesting Nil 25% Average operating cash fow <105% 105% Proportion of allocation vesting Nil 25% Between median Pro-rata and upper quartile Upper quartile between 25% and 100% 100% Between 105% and 125% 125% Pro-rata between 25% and 100% 100% 100 G4S plc Integrated Report and Accounts 2017 Statement of directors’ shareholdings and share interest (audited information) The executive directors are required to build up a minimum shareholding in G4S, as explained in the remuneration policy. Shares in the table below are valued at the year-end price, which was 267p per share at 31 December 2017. 2017 907,678 53,663 2016 466,777 37,570 Share ownership requirements (% of salary) 200% 150% Shareholding requirements achieved at 31/12/17 258% 22% Number of Deferred shares held as at 31/12/17 588,035 n/a Total shares under LTIP awards subject to performance at 31/12/17 2,843,603 1,430,880 Ashley Almanza Tim Weller Notes: 1. Includes any shares owned by persons closely associated with the directors. 2. Deferred share awards and LTIP awards do not include the further shares with a value equivalent to the dividends which are paid in respect of shares received. The number of shares is gross and will be subject to tax when they are released. 3. 4. In relation to Mr Almanza, the total shares under LTIP awards subject to performance column consists of an award of 788,627 conditional shares under the LTIP 2015, as well as an award of 1,259,114 conditional shares under the LTIP 2016 and an award of 795,862 conditional shares granted under the LTIP 2017. In relation to Mr Weller, the total shares under LTIP awards subject to performance column includes awards made in accordance with Mr Weller’s remuneration arrangement upon becoming CFO on 24 October 2016. Further details of such arrangements are set out on page 90 of the Integrated Reports and Accounts 2016 and resulted in awards of shares granted in 2016, as follows: an award of 350,000 conditional shares granted on 8 November 2016, 100,000 of which were deemed granted in March 2015 and 250,000 of which were deemed granted in March 2016 following his relinquishing 2014 and 2015 performance share plan awards from his previous employer and an award of 544,736 conditional shares granted on 22 November 2016 under the company’s LTIP on a pro-rata basis, with a vesting period of 36 months and a deemed date of grant of March 2016 relative to his start date as CFO on 24 October 2016. In addition, in March 2017, Mr Weller received an award of 436,144 conditional shares under the LTIP 2017 and an award of 100,000 shares on equivalent terms to the G4S 2016 LTIP was granted on 9 June 2017 as compensation for the forfeiture of Mr Weller’s annual bonus from his previous employer. 5. In addition to the above, each of the directors has a deemed interest in the total number of shares held by the company’s employee beneft trust. As at 31 December 2017, the trustees of the employee beneft trust held 4,362,068 shares (2016: 4,844,243 shares). 6. On 14 March 2018, Mr Almanza will receive, with respect to the 2017 annual bonus scheme, shares to the value of £415,352 for deferral to March 2021. Mr Weller will receive, with respect to the 2017 annual bonus scheme, shares to the value of £187,961 for deferral to March 2021. On 16 March 2018, Mr Almanza will receive 246,022 shares (before selling suffcient shares to pay the withholding taxes) relating to the deferred shares granted under the 2014 annual bonus scheme in March 2015. On 20 March 2018, Mr Almanza will receive an estimated 540,725 shares (before selling suffcient shares to pay the withholding taxes) relating to the 2015 LTIP granted in March 2015. Mr Weller will receive an estimated 68,565 shares (before selling suffcient shares to pay the withholding taxes) relating to the award of 100,000 conditional shares under the 2015 LTIP granted to him as compensation for the forfeiture of his 2014 Petrofac Performance Share Plan. The shareholdings for non-executive directors are shown below. John Connolly John Daly Winnie Fok Steve Mogford Paul Spence Clare Spottiswoode Ian Springett Barbara Thoralfson As at 31.12.2017 As at 31.12.2016 309,642 30,000 20,000 0 20,000 4,681 n/a – 336,642 30,000 30,000 10,000 20,000 4,681 n/a – There are no requirements for the non-executive directors to hold shares nor for any former directors to hold shares once they have left the company. Mr Ramsay who joined the board on 1 January 2018 holds 38,000 shares in G4S. Integrated Report and Accounts 2017 G4S plc 101 Governance Directors’ remuneration report continued PAYMENTS TO PAST DIRECTORS (AUDITED INFORMATION) Grahame Gibson Grahame Gibson, who stepped down as a director of the company on 4 June 2015, ceased to be an employee on 20 October 2015. Details of payments for loss of offce in prior years are set out on page 87 of the company’s integrated report and accounts 2015 available at g4s.com. Awards made to Mr Gibson under the company’s long term incentive plans were pro-rated to 20 October 2015. As disclosed in last year’s report, the award made in 2014 vested on 20 March 2017, when Mr Gibson received 187,092 shares. The last remaining award under the 2015 LTIP was also subject to performance, which was tested at the normal vesting dates. Such award is due to vest on 20 March 2018 and Mr Gibson will receive an estimated 56,729 shares (before selling suffcient shares to pay withholding taxes). Himanshu Raja Himanshu Raja stepped down from the board of the company and his role as chief fnancial offcer on 1 October 2016. He ceased to be an employee on the same date. Details of payments for loss of offce in 2016 are set out on page 95 of the company’s Integrated Report and Accounts 2016 available at g4s.com. In April 2017, he received the sum of £349,322 as second instalment of the payment in lieu of his 12 month notice period that he was entitled to contractually. Awards made to Mr Raja under the company’s long term incentive plan were pro-rated to 1 October 2016. All such awards remain subject to performance, to be tested at the normal vesting dates. On 20 March 2017, Mr Raja received 344,499 shares following the vesting of the LTIP award made in 2014. On 20 March 2018, Mr Raja will receive an estimated 151,889 shares (before selling suffcient shares to pay withholding taxes) following the vesting of the LTIP award made in 2015. The last remaining award under the 2016 LTIP remains subject to performance, which will be tested at the normal vesting date in March 2019. PERFORMANCE GRAPH AND TABLE The line graph below shows the ten-year annual Total Shareholder Return (TSR) performance against the FTSE 100 index. 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 Group and the fact that the company is itself a member of the FTSE100. 2008 – 2017 Total Shareholder Return 250 200 150 100 50 0 08 09 10 11 12 13 14 15 16 17 G4S FTSE 100 index 102 G4S plc Integrated Report and Accounts 2017 CEO’s pay in last ten fnancial years Year 2008 Nick Buckles 2009 Nick Buckles 2010 Nick Buckles 2011 Nick Buckles 2012 Nick Buckles 2013 Nick Buckles 2013 Ashley Almanza 2014 Ashley Almanza 2015 Ashley Almanza 2016 Ashley Almanza 2017 Ashley Almanza 2,376 3,248 2,823 1,542 1,186 514 1,459 2,521 2,738 4,790 3,846 83% 74% 53% 0% 0% 0% 72% 98% 70% 97% 79.5% 100% 100% 58% 14% 0% 0% n/a n/a 27% 70% 62% Incumbent CEO’s total single fgure of annual remuneration (£’000) Bonus % of maximum awarded PSP % of maximum vesting Notes: 1. Nick Buckles stepped down as CEO on 31 May 2013 and Ashley Almanza took over as CEO from 1 June 2013. 2. After July 2011, the CEO’s total single fgure of annual remuneration included payment in lieu of pension. This was 40% of base pay for Nick Buckles and is 25% of base pay for Ashley Almanza. Prior to July 2011, a notional sum equal to 40% of relevant base pay has been included. 3. The value of shares that vested in the relevant year under the PSP (or a notional value in the case of shares vested but unexercised) has been included in the prior year’s CEO’s total fgures, since that is the most relevant year for measurement of performance. 4. The fgures before 2013 did not include taxable expenses. 5. Bonus % of maximum awarded fgure for 2017 is the adjusted fgure after a reduction equivalent to 10% of base pay was applied, as recommended by the executive directors and approved by the Remuneration Committee. PERCENTAGE CHANGE IN CEO’S REMUNERATION The table below shows how the percentage change in the CEO’s salary, benefts and bonus between 2016 and 2017 compared with the percentage change in the average of each of those components of pay for UK-based G4S employees. The Remuneration Committee has chosen all employees in the UK who were in employment during the two-year period – 2016 and 2017 – as the group which should provide the most appropriate comparator, as the Group CEO is based in the UK. CEO Average change for all other UK employees Notes: Percentage change in remuneration between 2016 and 2017 Salary 1.5% 3.1% Benefts 0.1% See note below Bonus -16.8% See note below 1. The core beneft composition and the underlying employee entitlements remain unchanged over the two-year period, with changes linked to increases in premium rates and costs of procurement. 2. Information on bonuses is not readily available for all other UK employees. RELATIVE IMPORTANCE OF SPEND ON PAY The table below illustrates the relative importance of spend on pay compared with other disbursements from proft. Dividends paid Total employee costs There were no share buy-backs effected in either year. 2017 £145m £5,363m 2016 £145m £5,240m Change – +2.3% Integrated Report and Accounts 2017 G4S plc 103 Governance Directors’ remuneration report continued STATEMENT OF IMPLEMENTATION OF REMUNERATION POLICY IN 2018 Decisions were taken on the basis of the directors’ remuneration policy approved at the company’s 2017 AGM set out on pages 107 to 115. Executive directors’ remuneration Base pay For 2018, at the annual pay review, it was decided to increase Messrs Almanza and Weller’s base pay by 2% from £939,755 to £958,550 and £643,750 to £656,625 respectively. These changes took effect from 1 January 2018. Annual Bonus Scheme The annual bonus for the 2018 fnancial year will operate on the same basis as that for 2017 and will be consistent with the existing remuneration policy. The maximum bonus opportunity remains at 150% of base pay for both Ashley Almanza and Tim Weller. The fnancial measures of group earnings and operating cash fow remain and revenue will also be included in the fnancial measures for 2018. These have been selected as they support the company’s key strategic objectives. As for last year, the fnancial measures are allocated weightings of 85% for Ashley Almanza. They have increased to 80% for Tim Weller. The non-fnancial measures will therefore account for up to 15% and 20% of the maximum bonus opportunity for Messrs Almanza and Weller respectively. These non-fnancial measures are based on the Group’s strategy and core values and include the following key areas: Ashley Almanza Mr Almanza’s personal objectives for 2018 cover three key areas, namely strategy, productivity and organisation and are as follows: • Strategy – Continue to develop the Group’s use of technology in its products and services. • Productivity – Develop and initiate the next phase of the Group productivity programme. • Organisation – Embed new organisation to ensure new teams operate effectively. Tim Weller For 2018, Mr Weller’s personal objectives cover productivity and IT. • Productivity – Contribute to Group programme with effciency improvements in key support functions. • IT – Deliver lean process IT project. Details of the performance measures and targets are deemed to be commercially sensitive since they relate to the 2018 fnancial year. To the extent that they are no longer commercially sensitive, targets and performance levels against them will be disclosed in the company’s 2018 integrated report and accounts. The proposed target levels for 2018 have been set to be challenging and align with the Group’s strategic priorities and business plan. In reviewing the targets, the committee took into account a number of factors, including for example the fact that in relation to group earnings, the minimum target that needs to be met in order for any bonus to be payable must be at least equal to the earnings in 2017. The committee considered the proposed targets relating to non-fnancial measures and concluded that these were also demanding. Long Term Incentive Plan The level of awards due to be granted in the 2018 fnancial year under the LTIP approved by shareholders at the 2014 AGM will be consistent with the existing remuneration policy. As for 2017, the committee considers that a combination of earnings per share growth, total shareholder return and average cash fow targets are the most appropriate performance measures for the 2018 awards, as they provide a robust method of assessing the company’s performance, both in terms of underlying fnancial performance and returns to shareholders. Awards granted under the LTIP during the 2018 fnancial year are subject to the performance conditions listed in the table on page 105. 104 G4S plc Integrated Report and Accounts 2017 Performance measures for long-term incentives awarded in 2018 40% of each award granted 30% of each award granted 30% of each award granted Average annual growth in EPS period ending on 31 December in the third year Less than 5% pa Nil 5% pa (15% over 3 years) + 5 to 12% pa 25% Proportion of allocation vesting Pro-rata between 25% and 100% 100% Greater than + 12% pa (36% over 3 years) Ranking against the bespoke comparator group by reference to TSR Below median Median Proportion of allocation vesting Nil 25% Average operating cash fow <105% 105% Proportion of allocation vesting Nil 25% Between median and upper quartile Upper quartile Pro-rata between 25% and 100% 100% Between 105% and 125% 125% Pro-rata between 25% and 100% 100% The company’s current policy is to use market-purchased shares to satisfy LTIP awards. Participants in the LTIP will receive a further share award with a value equivalent to the dividends which would have been paid in respect of LTIP awards vesting at the end of the performance period. The company calculates whether the EPS performance targets have been achieved by reference to the Group’s audited accounts, which provide an accessible and objective measure of the Group’s earnings per share. Adjustments to EPS will be made in respect of: • Constant exchange rates – in line with previous years, these will be normalised to the rates in the base year • Acquisitions – earnings will be added to the EPS base at the level used in the acquisition business case • Disposals – earnings will be removed from the EPS base at the business plan rate • Share buy-back – the company will only execute buy-backs if the investment is economically accretive and it is in the interest of the company. The adjusted EPS for the purposes of calculating performance against the LTIP target shall be further adjusted by: (a) increasing the average number of shares in issue during the performance year by the number of shares bought back during the past three years (b)decreasing the net interest cost in the performance year in respect of the interest charge on the cash cost of any share buy-backs during the past three years. Interest will be calculated at the Group’s average costs of funds for the year. The Remuneration Committee will apply discretion in the event of impairment. If the impairment is not a result of management failure, then it will not impact the pay-out. The Remuneration Committee may alter the terms of the EPS measure if it feels that it is no longer a fair measure and is no longer incentivising. Operating cash fow is a measure taken before capital expenditure and investments – to ensure that management is not incentivised to under-invest in growth opportunities – and before pension defcit repayment. Operating cash fow is expressed as EBITDA +/- working capital and provisions movement as a percentage of EBITDA. Average operating cash fow is the average over three years. TSR ranking will be verifed externally. Integrated Report and Accounts 2017 G4S plc 105 Governance Directors’ remuneration report continued Non-executive directors’ remuneration The fees payable to the non-executive directors other than the chairman are set by the executive directors who receive input from the chairman. The fees payable to the non-executive chairman are set by the Remuneration Committee. In both cases, fees are reviewed annually. Fees were last increased in July 2016 for the chairman and July 2015 for non-executive directors. In July 2017, it was decided to postpone the exercise to the end of the year, so that it would take place at the same time as the pay review for executive directors and employees in general. The review carried out at the end of 2017 received input from the Remuneration Committee’s advisor, Deloitte. As a result of the review, the Remuneration Committee considered and approved a proposed increase of the chairman’s fee, in line with the increase applicable to group employees based in the UK, of 2% from January 2018. The review also resulted in a proposed increase to the basic fee for non-executive directors of 2.8%, from £61,750 to £63,500. Such increase was within the range of market practice in the FTSE 100 and in line with increases for other employees over the same period. Consistent with market median for companies ranked 31 – 100 in the FTSE index and in recognition of the increased demands of the role, the fee for the chair of the Audit Committee increased from £19,000 to £20,000. There was no proposed increase to the fees for the role of Senior Independent Director or other committee chairs. All increases took effect from 1 January 2018. The table below, sets out the fees for the non-executive chairman and other non-executive directors applicable for 2018 as well as the percentage increase, where relevant, applied following the annual fee review. Annual fee Chairman Basic fee SID Chair of Audit Committee Other chairs 2018 in £ 382,500 63,500 15,000 20,000 18,500 Increase on prior year in % 2 2.83 No change 5.26 No change ADVISORS TO THE REMUNERATION COMMITTEE Deloitte was appointed by the Remuneration Committee as its advisor in 2014. Such appointment is reviewed every year and was confrmed in August 2017. The committee received advice from Deloitte on executive and senior management remuneration matters throughout the year under review. The committee has satisfed itself as to the independence of Deloitte. Deloitte is a member of the Remuneration Consultants Group and operates voluntarily under its code of conduct in the UK. Advisor Deloitte Appointment 2014 Fees for services Services provided to Remuneration Committee to Rem Co Advice on executive £45,900 remuneration Other services provided to Company Advice on controls, tax advice on expatriate and share plans, and other consulting services. These services were provided by different parts of Deloitte. Fees for services to the Remuneration Committee are at an agreed rate based on time involved and paid as incurred The group chief executive, Ashley Almanza, provided guidance to the committee on remuneration packages for senior executives within the Group. Further guidance was received from the Group’s HR director, Jenni Myles, and the director of compensation and benefts, Sok Wah Lee. Neither the group chief executive nor the group HR director participated in discussions regarding their own remuneration. The committee is satisfed that the advice it received during the year was objective and independent based on the experience of its members generally. Information about who are the members of the Remuneration Committee and their attendance at meetings of the committee during the year under review can be found on pages 74 and 93. STATEMENT OF VOTING AT GENERAL MEETING A resolution to approve the Directors’ Remuneration Policy as set out in the company’s annual report for the year ended 31 December 2016 was passed at the company’s annual general meeting held on 25 May 2017. In addition, a resolution was passed to approve the Directors’ Remuneration Report (other than the part containing the Directors’ Remuneration Policy) for the year ended 31 December 2016. The results of the votes on these resolutions are set out in the table below: Resolution Directors’ Remuneration Policy – 2017 AGM Directors’ Remuneration Report – 2017 AGM For 97.26% 97.05% Against 2.74% 2.95% Withheld 131,465 118,840 106 G4S plc Integrated Report and Accounts 2017 DIRECTORS’ REMUNERATION POLICY Remuneration policy for executive directors BASE PAY Purpose and link to strategy Base pay is set at competitive levels in order to recruit and retain high calibre executives with the skills required in order to manage a company of the size and global footprint of G4S. The level of pay will refect a number of factors including individual experience, expertise and role. Operation Reviewed annually and fxed for 12 months commencing 1 January. Interim salary reviews may be carried out following signifcant changes in role, scope or responsibility or at any other time at the committee’s discretion. The fnal salary decision may also be infuenced by role, experience, individual and company performance, internal relativities and increases for Group employees. Maximum opportunity Actual base pay for each executive director is disclosed each year in the Directors’ remuneration report. In determining salary increases, the committee considers market salary levels including those of appropriate comparator companies. Ordinarily, annual salary increases would be no more than the average annual increase across the Group. However, in exceptional circumstances a higher level of increase may be awarded, for example: • following a signifcant change to the nature or scale of the business; • following a signifcant change to the nature or scope of the role; or • for a new appointment, where the base pay may initially be set below the market level and increased over time, as experience develops and with reference to the individual’s performance in the frst few years in the role. Where exceptional increases are made we will fully disclose and explain the rationale for such increases. Performance measures and clawback None, although individual performance may have a bearing on salary increases. BENEFITS Purpose and link to strategy As with base salary, a suitable range of benefts is made available in order to recruit and retain high calibre executives. Operation Executives are entitled to a number of benefts comprising paid holiday, healthcare for themselves and their family and life insurance of up to four times base salary, car allowance, business related transport, limited fnancial advice from time to time and expatriate benefts where relevant. A relocation allowance refecting reasonable costs actually incurred will be paid. Other benefts may be granted at the discretion of the Remuneration Committee. Reasonable business expenses in line with G4S’ expenses policy (e.g. travel, accommodation and subsistence) will be reimbursed and in some instances the associated tax will be borne by the company. Maximum opportunity Maximum benefts per director per annum: • holidays – 30 days • car allowance – £20,000 • business related local transport – £40,000 • for fnancial advice, expatriate benefts and relocation expenses, the expense will refect the cost of the provision of benefts from time to time but will be kept under review by the committee • other benefts granted at the discretion of the committee up to 3% of base pay per annum per director • reasonable business expenses are not subject to a maximum, since these are not a beneft to the director Any allowance in relation to relocation will provide for the reimbursement of reasonable costs incurred. Performance measures and clawback None. Integrated Report and Accounts 2017 G4S plc 107 Governance Directors’ remuneration report continued Directors’ remuneration policy – continued ANNUAL BONUS Purpose and link to strategy Rewards the achievement of annual fnancial and strategic business targets and delivery of personal objectives. Performance measures and clawback Typically, executive directors’ bonus measures are weighted so that: Deferred element encourages long-term shareholding and discourages excessive risk taking. Operation Awarded annually based on performance in the year. Targets are set annually and relate to the Group and/or the business managed by the executive. Bonus outcome is determined by the committee after the year end, based on annual performance against targets. Bonuses are paid in cash, but executives are required to defer any bonus payable in excess of 50% of their maximum bonus entitlement into shares. Deferral is for a minimum period of three years. Dividends or equivalents accrue during the deferral period on deferred shares. Bonuses are not pensionable. Maximum opportunity Maximum opportunity of 150% of base pay per annum for the CEO and the CFO. 125% of base pay per annum for any other executive director. • between 70% and 85% of the bonus is based on achievement of challenging fnancial performance measures (e.g. proft before tax and amortisation, organic growth, cash-fow measures, etc.), with each measure operating independently of the others; and the remainder is linked to personal and/or non- fnancial measures, which are strategic or operational in nature. Each year, the committee may use its discretion to vary the exact number of measures, as well as their relative weightings, and this will be disclosed in the annual remuneration report. As a result of the number of factors taken into account in determining bonus, there is no minimum pay-out level. For illustrative purposes, in the event that only threshold has been achieved, pay-out would be 35% of maximum, rising to full pay-out should achievement of a stretch performance level be achieved for all measures assuming the non-fnancial performance measures were satisfed. The deferred element of the bonus is not subject to any further performance measures but is subject to clawback in certain circumstances. The non-deferred part of the bonus, which is settled in cash, is also subject to clawback (see separate section on page 111). LONG TERM INCENTIVE PLAN Purpose and link to strategy Incentivises executives to achieve the company’s long-term fnancial goals, as well as focus on value creation, whilst aligning the interests of executives with those of shareholders. Operation Executive directors are granted awards on an annual basis, which vest over a period of at least three years subject to continued service and the achievement of a number of key performance measures. The Remuneration Committee reviews the quantum of awards to be made to each executive each year to ensure that they remain appropriate. Dividends or equivalents accrue during the vesting period on awards that vest. The award is settled by the transfer of market- purchased shares to the executive directors. All the released shares (after tax) must be retained until the minimum shareholding requirement is met. Currently, the minimum shareholding requirement is 200% of base salary for the CEO and 150% for the other executive directors. 108 G4S plc Integrated Report and Accounts 2017 Maximum opportunity Maximum opportunity of 250% of base pay per annum for the CEO. Maximum opportunity of 200% of base pay per annum for other executive directors. Performance measures and clawback Awards vest based on performance over a period of at least three fnancial years commencing with the fnancial year in which the award is made. Performance will be measured based on a combination of earnings per share growth, total shareholder return against a comparator group and average operating cash fow. For awards made in 2017, these were in the proportion of 40%, 30% and 30% respectively. However, the committee retains the fexibility to amend these proportions, provided that no single measure will be a signifcantly greater proportion than the others. At threshold, 25% of the relevant portion vests. This increases on a straight-line basis up to 100% for performance in line with maximum. Targets are set out on page 99. Awards are subject to clawback in certain circumstances (see below on page 111). RETIREMENT BENEFITS Purpose and link to strategy As with base salary and other benefts, making available a suitable retirement benefts package aids the recruitment and retention of high calibre executives, allowing such executives to provide for their retirement. Operation G4S operates a defned contribution Group-wide personal pension plan in the UK in which executives may participate. Alternatively, G4S may provide a cash allowance in lieu of a contribution into such plan. The current executive directors receive cash allowances. The CEO receives 25% of base pay as a cash allowance; the CFO and other executive directors receive 20% of base pay. Remuneration policy for non-executive directors CHAIRMAN’S FEE Purpose To attract and retain a high calibre chairman by offering a market-competitive fee, which also refects the responsibilities and time commitment. There are no performance-related elements. Operation The chairman’s fee is disclosed each year in the Directors’ remuneration report. The fees are reviewed annually by the committee. The annual fee is an all-inclusive consolidated amount. The committee retains the discretion to review the chairman’s fee at any other time if appropriate. The chairman’s fee is reviewed against other companies of a similar size. The level of award is kept under review by the committee and is intended to be broadly market comparable for the roles. Maximum opportunity Maximum opportunity of up to 25% of base pay for the CEO and 20% for other executive directors. Performance measures None. Maximum opportunity Ordinarily, any increase in the chairman’s fee would be in line with other increases for similar roles in other companies. Fees payable to the chairman and other non-executive directors in aggregate per annum shall not exceed the maximum specifed in the company’s articles of association for the relevant year. NON-EXECUTIVE DIRECTORS’ FEES (EXCLUDING THE CHAIRMAN) Purpose To attract and retain high calibre non-executive directors (NEDs) by offering market-competitive fees which should refect the responsibilities and time commitment. There are no performance-related elements. Operation NED fees including any additional fee for any additional role listed below are disclosed each year in the Directors’ remuneration report. With the exception of the chairman, the fees for NEDs are structured by composition build-up consisting of: • a base fee • an additional fee for chairing a committee • an additional fee for the role of senior independent director The NED fees are reviewed annually by the executive directors. The board retains the discretion to review the NED fees at other times, as appropriate, to refect any changes in responsibilities or commitment. The basic fee covers committee membership and each NED is expected to participate in one or more board committees. All the fees are reviewed against other companies of a similar size. Maximum opportunity Ordinarily, any increase in the NEDs’ fees would be in line with other increases for similar roles in other companies. Fees payable to non-executive directors (including the chairman) in aggregate per annum shall not exceed the maximum specifed in the company’s articles of association for the relevant year. Integrated Report and Accounts 2017 G4S plc 109 Governance Directors’ remuneration report continued Directors’ remuneration policy – continued Remuneration policy for non-executive directors BENEFITS Purpose Benefts may be provided from time to time in connection with the chairman and other NEDs performing their roles, such as business travel, subsistence and entertainment, accommodation and professional fees for tax and social security compliance, and other ancillary benefts. Operation Reasonable business expenses in line with G4S expenses policy (e.g. travel, accommodation and subsistence) will be reimbursed and in some instances the associated tax will be borne by the company. Maximum opportunity Reasonable business expenses are not subject to a maximum, since these are not a beneft to the director. Benefts and expenses will refect the actual cost of provision. Notes to the directors’ remuneration policy 1. Performance measures Annual Bonus Plan – The actual performance measures and targets are set by the Remuneration Committee at the beginning of each year. The performance measures used for our annual bonus plan have been selected to refect the Group’s key performance indicators. The committee aims to ensure that the measures appropriately encourage the executive directors to focus on the company’s strategic priorities, whilst the targets are set to be stretching but achievable. The aim is to strike an appropriate balance between incentivising annual fnancial and strategic business targets, and each executive director’s key role-specifc objectives for the year. Long Term Incentive Plan – In choosing the performance measures for the Long Term Incentive Plan, the committee aims to fnd a balance of measures which refect the company’s long-term fnancial goals as well as incentivise executives to create sustainable, long-term value for shareholders. Legacy plans – The committee reserves the right to make any remuneration payments and/or payments for loss of offce (including exercising any discretions available to it in connection with such payments) notwithstanding that they are not in line with the policy set out above where the terms of the payment were agreed (i) before 5 June 2014 (the date the company’s frst shareholder-approved directors’ remuneration policy came into effect); (ii) before the policy set out above came into effect, provided that the terms of the payment were consistent with the shareholder-approved directors’ remuneration policy in force at the time they were agreed; or (iii) at a time when the relevant individual was not a director of the company and, in the opinion of the committee, the payment was not in consideration for the individual becoming a director of the company. For these purposes, payments may include the committee satisfying awards of variable remuneration. In cases where all or part of the variable remuneration award was in the form of shares, the payment terms are those agreed at the time the award was granted. Details of the vesting of the awards will be published in the annual remuneration report each year. The non-executive directors do not participate in any incentive schemes nor do they receive any benefts other than those referred to in the above table. 110 G4S plc Integrated Report and Accounts 2017 2. Malus and claw-back mechanisms Since 2010, any cash and/or shares awarded under the annual bonus plans and the previous Performance Share Plan may be subject to clawback. The Long Term Incentive Plan and the annual bonus plan may be subject to malus or clawback from the executive director concerned if the Remuneration Committee so determines and, in the case of misstatement of accounts, where the Audit Committee concurs. The time period in which the clawback can be operated depends on the reason for the overpayment as set out in the table below. The amount to be clawed back directly from the executive director will be the overpaid amount, but the Remuneration Committee retains the discretion to claw back the “net” (i.e. post-tax) amount of the award received by the executive director. Malus and claw-back Material misstatement of group fnancial accounts Misconduct Fraud Annual Bonus Plan (including deferred elements) Since 2015 plan up to 2 years after the payment of the cash element up to 6 years after the payment of the cash element unlimited Principles and approach to recruitment and internal promotion of directors When hiring a new executive director, or promoting to the board from within the Group, the committee will offer a package that is suffcient to retain and motivate and, if relevant, attract the right talent whilst at all times aiming to pay no more than is necessary. Ordinarily, remuneration for a new executive director will be in line with the policy set out in the table summarised above. However, discretion may be required for exceptional circumstances such as dealing with remuneration relinquished in a previous job. The maximum level of on-going variable pay that may be awarded to new executive directors on recruitment or on promotion to the board shall be limited to 400% of base salary as set out in the policy above (calculated at the date of grant, excluding any buy-out awards – see below). Remuneration and any buy-out arrangements will be announced as far as possible at the time a new executive director or chairman is appointed, or in the following Directors’ remuneration report. When determining the remuneration of a newly- appointed executive director, the Remuneration Committee will apply the following principles: The on-going remuneration package to be designed in accordance with the policy above. • New executive directors will participate in the annual bonus scheme and Long Term Incentive Plan on the same basis as existing executive directors. • The Remuneration Committee has discretion to grant one-off cash or share-based awards to executive directors where it determines that such an award is necessary to secure the recruitment of that Long term incentive plan (LTIP) PSP (previous) up to 2 years after vesting (except where due to fraud or reckless behaviour when it shall be 6 years after vesting) Current LTIP up to 2 years after vesting up to 6 years after vesting unlimited executive director and where it is in the best interests of the company to do so. Such awards would only be made as compensation for remuneration relinquished under a previous employment (i.e. buy-out arrangements) and would be intended to mirror forfeited awards as far as possible by refecting the value, nature, time horizons and performance measures attached. In such circumstances, the company will disclose a full explanation of the detail and rationale for such one-off awards. • In certain circumstances, it may be necessary to buy out long notice periods of previous employment. • With regard to internal promotions, any commitments made before promotion and unconnected with the individual’s promotion may continue to be honoured even if they would not otherwise be consistent with the policy prevailing when the commitment is fulflled. • For external and internal appointments, the Remuneration Committee may agree that the company will meet certain relocation expenses (including legal fees), as set out in the policy. • In determining the approach for all relevant elements, the Remuneration Committee will consider a number of factors, including (but not limited to) external market practice, current arrangements for existing executive directors and other internal relativities. Integrated Report and Accounts 2017 G4S plc 111 Governance Directors’ remuneration report continued Service contracts Shareholders are entitled to inspect a copy of executive directors’ service contracts at the company’s head offce and at the AGM. Executive directors’ service contracts all have the following features: • Contracts are drafted in line with best practice at the time the executive directors were appointed. • Terminable on 12 months’ notice by either party. Specifc provisions for Ashley Almanza and Tim Weller’s contracts (dated 2013 and 2016 respectively) include: • Messrs Almanza and Weller are each allowed to hold one external non-executive appointment and retain the fees paid to them for such appointments. Mr Almanza is a non-executive director of Noble Corporation and Mr Weller is a non-executive director of the Carbon Trust. • Mitigation obligations on termination payments are explicitly included in the executive directors’ contracts. Notice payments for Ashley Almanza and Tim Weller are payable monthly. Non-executive directors’ letters of appointment: • Appointment is subject to the provisions of the articles of association of the company, as amended from time to time regarding appointment, retirement, fees, expenses, disqualifcation and removal of directors. • All continuing non-executive directors are required to stand for re-election by the shareholders at least once every three years, although they have agreed to submit themselves for re-election annually in accordance with the UK Corporate Governance Code. • Initial period of appointment is two years. • All reasonably-incurred expenses will be met. • Fees are normally reviewed annually. Loss-of-offce payment The duration of the notice period in the executive directors’ contracts is 12 months. The Remuneration Committee would consider the application of mitigation obligations in relation to any termination payments. The contracts do not provide for the payment of a guaranteed bonus in the event of termination. Neither Ashley Almanza nor Tim Weller will be eligible for bonus accrual during any period of garden leave. In relation to Mr Almanza, the value of the termination payment would cover the balance of any salary and associated benefts payments due to be paid for the remaining notice period, the value of which will be determined by the Remuneration Committee. In relation to Mr Weller, the value of the termination payment would amount to the balance of any salary due to be paid for the remaining notice period multiplied by 1.25 to refect the value of contractual benefts during such period. The Remuneration Committee would also retain the discretion to make appropriate payments necessary to fnalise any settlement agreement, but in exercising such discretion the Remuneration Committee would remain mindful to ensure that there was no reward for failure. The fees for outplacement services and reasonable legal fees in connection with advice on a settlement agreement may be met by the company. 112 G4S plc Integrated Report and Accounts 2017 The table below illustrates how each component of pay would be calculated under different circumstances: Plan Annual bonus (cash element) Automatic “good leaver” categories All leavers other than voluntary resignation and summary dismissal. Annual bonus (deferred share element) Long Term Incentive Plan • Injury, disability or ill health • Redundancy • Retirement • Death • Termination without cause • Change of control or sale of employing company or business • Any other circumstances at the discretion of the Remuneration Committee • Injury, disability or ill health • Redundancy • Retirement • Death • Change of control or sale of employing company or business • Any other circumstances at the discretion of the Remuneration Committee Treatment for “good leavers” Executive directors may receive a bonus to be paid on the normal payment date and in accordance with the agreed performance measures but reduced pro-rata to refect the time employed. Deferred shares may be released if the executive director ceases employment prior to the third anniversary as a result of one of the good leaver reasons. Treatment for other leavers Bonus opportunity will lapse. Deferred share awards will lapse. Awards will lapse. Awards will vest on the relevant vesting date on a time- apportioned basis, unless the Remuneration Committee determines otherwise, and subject to the achievement of performance measures at the relevant vesting date. The vesting date for such awards will normally be the original vesting date, unless otherwise determined by the Remuneration Committee. As directors may leave employment for a wide range of reasons, the committee retains discretion to approve payments where the reason for leaving does not fall precisely within the prescribed “good leaver” category. The committee will take account of the director’s performance in offce and the circumstances of their exit. The committee will seek to balance the interests of shareholders, the departing director and the remaining directors. Any awards subject to performance conditions would be assessed at the end of the relevant period and be subject to time apportionment. Corporate Action If the company is subject to a change in control, the Long Term Incentive Plan provides that awards will vest subject to the performance targets having been satisfed up to the date of the change of control and, unless the committee determines otherwise, time pro-rating. On a variation of share capital, other reorganisation of the company, or a demerger of a substantial part of the Group’s business, the committee may make such adjustment to awards as it may determine to be appropriate. Integrated Report and Accounts 2017 G4S plc 113 Governance Directors’ remuneration report continued Illustrations of application of remuneration policy Ashley Almanza, Chief Executive Offcer (£000) Tim Weller, Chief Financial Offcer (£000) 6000 5000 4000 3000 2000 1000 0 £5,142 47% £2,410 25% 28% £1,308 100% 21% 54% 25% 3500 3000 2500 2000 1500 1000 500 0 £3,116 42% £1,491 32% 22% 23% 55% £818 100% 26% m u m n M i i l d o h s e r h T e c n a m r o f r e p m u m x a M i e c n a m r o f r e p Fixed pay Annual bonus LTIP m u m n M i i l d o h s e r h T e c n a m r o f r e p m u m x a M i e c n a m r o f r e p Fixed pay Annual bonus LTIP CEO £958,550 £110,000 £239,638 £1,308,188 CFO £656,625 £30,000 £131,325 £817,950 2018 Base pay Benefts Pension Total Fixed Pay The benefts fgures include taxable business expenses and associated tax and NIC payable by the company. The bar charts above set out the effect of the executive directors’ remuneration policy as it will apply in 2018 and based on the assumptions set out below: Fixed pay Minimum Consists of total fxed pay including base salary, benefts and pension benefts Threshold Maximum • Base salary – salary effective as at 1 January 2018 • Benefts – amount received by the Executive Directors respectively in 2017 including business expenses classifed by HMRC as benefts but which the company does not consider to be benefts in the ordinary sense • Retirement benefts – 25% of salary for Ashley Almanza, 20% of salary for Tim Weller Annual bonus No payout Long-term incentives No vesting 35% of the maximum payout (i.e. 52.5% of salary for Ashley Almanza and Tim Weller) 100% of the maximum payout (i.e. 150% of salary for Ashley Almanza and Tim Weller) 25% vesting under the LTIP (i.e. 62.5% of salary for Ashley Almanza and 50% of salary for Tim Weller) 100% of the maximum payout (i.e. 250% of salary for Ashley Almanza and 200% of salary for Tim Weller) 114 G4S plc Integrated Report and Accounts 2017 Statement of consideration of employment conditions elsewhere in the Group The structure of the executive directors’ pay policy is generally in line with the policy for remuneration of the senior management within the Group, although the levels of award will be different. The performance measures that apply in the variable element of the remuneration will refect the relevant areas of responsibilities. There may be one-off awards for retaining scarce and critical individuals below board level. Remuneration of employees globally will depend on local regulation and practice, taking any collective bargaining agreements into account, where they exist. Elements of remuneration Fixed Variable Benefts Pay Pensions Annual bonus Long term incentive plan Car or car allowance Life/Income protection insurance Private Healthcare Availability Available to all employees worldwide Available to most employees in developed markets Available to all senior managers worldwide Available to some senior managers worldwide Available to all senior managers worldwide Available to most employees in developed markets Available to all senior managers in markets where it is commonly provided Across the Group the company seeks to pay competitively, taking into account external benchmarking and internal moderation at each level to ensure that remuneration is in line with market practice. When determining base salary increases for executive directors, the Remuneration Committee pays particular attention to the data at senior manager level. At G4S, the committee does not normally consult directly with employees as part of the process of determining the remuneration policy and pay decisions for executive directors and has not therefore done so in setting this remuneration policy. However, employee surveys are carried out biennially which help determine employees’ views of their own pay and benefts, as well as those of colleagues in general. Statement of consideration of shareholder views We are committed to on-going engagement on key remuneration issues and seek our major shareholders’ views prior to proposing any major change in policy. This provides us with valuable feedback and we take into consideration these views and seek to refect them in our policy. The chairman of the Remuneration Committee will be available to answer any questions and listen to the views of our shareholders at the forthcoming annual general meeting. John Daly Remuneration Committee Chairman 8 March 2018 Integrated Report and Accounts 2017 G4S plc 115 Governance Directors’ report This is the report of the directors of the board of G4S plc for the year ended 31 December 2017. 1. The company G4S plc is a parent company incorporated in England and Wales with company number 4992207. It trades primarily through its subsidiaries and joint ventures in numerous jurisdictions. A list of those subsidiaries and joint ventures is set out on pages 187 to 201. G4S plc has its primary listing on the London Stock Exchange and has a secondary listing on the NASDAQ OMX exchange in Copenhagen. 2. Reporting obligations In compliance with relevant listing rules and also with DTR4.1.5.R and DTR4.1.8R, the Integrated Report and Accounts 2017 contain the consolidated results for the year, shown in the Consolidated income statement on page 132, a management statement contained in the strategic report and in the Directors’ report and responsibility statements on pages 116 to 119. Details of the development and performance of the Group’s business during the year, its position at the year end, future developments, principal risks and uncertainties, prospects of the Group and other information which fulfls the requirements of a management report, are all contained on pages 4 to 65 of the strategic report and are incorporated by reference in this Directors’ report. The Corporate governance report, the Audit Committee report and the Directors’ remuneration report set out on pages 85 to 115 and the Chief Financial Offcer’s review on pages 37 to 50 are also incorporated in this report by reference. The Group’s fnancial risk management objectives and policies in relation to its use of fnancial instruments and its exposure to price, credit, liquidity and cash fow risk, to the extent material, are set out in note 31 to the consolidated fnancial statements on pages 168 to 172 which is also incorporated by reference in this Directors’ report. None of the matters required to be disclosed by LR 9.8.4C R apply to the company other than shareholder waiver of dividends which is referred to in section 4 of this Directors’ report. 3. Dividends The directors propose the following dividend for the year: • Interim dividend of 3.59p (DKK 0.2948) per share paid on 13 October 2017 • Final dividend of 6.11p (DKK 0.5097) per share payable on 15 June 2018 Shareholders on the Danish VP register will receive their dividends in Danish kroner. Shareholders who hold their shares through CREST or in certifcated form will receive their dividends in sterling unless they prefer to receive Danish kroner by way of a cheque payable in the UK, in which case they should apply in writing to the Registrars by no later than 3 May 2018. 4. Capital The issued share capital of G4S plc at 31 December 2017 is as set out on page 182 (note 35 to the consolidated fnancial statements) and consisted of 1,551,594,436 ordinary shares of 25 pence each. The number of shares in issue as at 8 March 2018 remains unchanged. In general there are no restrictions on the holder’s ability to transfer their shares or exercise their voting rights, other than in situations where the company is legally entitled to impose such restrictions (usually where amounts remain unpaid on the shares after request, or the holder is otherwise in default of an obligation to the company). The company is not aware of any agreements between its shareholders that may restrict the transfer of their shares or the exercise of the voting rights attaching to them except in relation to the G4S Employee Beneft Trust (“the Trust”) which has been established to facilitate certain employee share plans. 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. At 31 December 2017 the directors had authority in accordance with a resolution passed at the company’s annual general meeting held on 25 May 2017 to make market purchases of up to 155,159,000 of the company’s shares. The company does not hold any treasury shares as such. However, the 4,362,068 shares held within the Trust and referred to on page 182 (note 36 to the consolidated fnancial 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. 5. Signifcant agreements – change of control The company is party to a £1,000,000,000 multi- currency revolving credit facility agreement which requires prompt notifcation of a change of control event following which funds committed but unutilised could be cancelled and repayment of outstanding funds utilised would need to be made within 45 days. The company entered into two US Private Placement Note Purchase Agreements (the “USPP Agreements”), on 1 March 2007 and 15 July 2008 respectively. The frst USPP Agreement is for $550,000,000 and series C-D senior notes representing $250,000,000 remain outstanding and mature between 1 March 2019 and 1 March 2022. The second USPP Agreement is for $513,500,000 and £69,000,000 and series D-F senior notes representing $298,500,000 and £44,000,000 remain outstanding and mature between 15 July 2018 and 15 July 2020. Under the terms of both USPP Agreements, the company is required to offer the note holders the right to purchase the notes at par value together with interest thereon upon a change of control. 116 G4S plc Integrated Report and Accounts 2017 Under the terms of the £2,500,000,000 Euro Medium Term Note Programme the company issued four tranches of Medium Term Notes (MTNs), issued to various institutions on 13 May 2009 (£350,000,000), 6 December 2012 (€500,000,000), 9 November 2016 (€500,000,000) and 2 June 2017 (€500,000,000). In the event of a change of control, a put option comes into force, according to which holders of any MTN may require the company to redeem the MTNs at par if the MTNs carry a sub-investment grade credit rating in the period immediately prior to the change of control, or in certain circumstances where the MTNs are downgraded to sub-investment as a result of the change of control. We do not employ forced, bonded or child labour. We appoint people based on their skills and capabilities and not any personal characteristics which are discriminatory or illegal in the countries in which we work. Our aim is to develop and grow so removing barriers to employment helps us ensure we tap into the widest talent pool and are able to harness all the skills and abilities people have. If, during the course of their employment individuals become disabled and unable to meet the job requirements we seek to retrain or retain their talents by making reasonable adjustments wherever possible. Further information on our approach to diversity and inclusion can be found on page 16. The Group’s UK pension scheme trust deed contains provisions which apply if a takeover event occurs. Following such an event, the appointment and removal of trustees becomes subject to unanimous trustee agreement and the trustees acquire the unilateral power to set the employer contribution rates in certain sections of the scheme. 6. Post balance sheet events There have been no signifcant events from 31 December 2017 to the date of this report. 7. 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 proft and loss during the year amounted to £4m (2016:£4m). 8. Employees Asking for, listening to and acting on the feedback from our people enables us to address their concerns and capture their ideas for improvements. They are closest to our operations and to the needs of our customers in a constantly changing marketplace. We value the feedback from our biennial global and management surveys and take time in between to address the issues raised. The high response rate helps identify underlying problems and provides a strong mandate for action. In addition to the surveys we encourage dialogue with our employees directly and also seek feedback from our networks with union representatives at a global, European and local level. These networks provide early warning signs of any issues and are an additional avenue for communication and for sharing updates on business performance. More information on employee communication and consultation can be found on pages 16 and 17. Our managers are invited to participate in webinars which coincide with announcements of our fnancial results and are encouraged to cascade the information shared with their teams. In 2017, we also introduced new on-line newsletters for our senior managers containing information on contract wins, projects and market developments. The newsletters showcase examples of security innovations and help businesses struggling with similar challenges to become early adopters building on new ideas rather than recreating them. 9. Political donations Each year the company’s shareholders have passed a resolution on a precautionary basis to allow the company and its subsidiaries to make political donations or incur political expenditure not exceeding £50,000. However, the board confrms that the Group’s policy is not to make any fnancial contribution to political parties and that the company and its subsidiaries have made no contributions during the year to political parties carrying on activities, or to candidates seeking election within the EU, or anywhere else in the world. 10. Greenhouse gas emissions Alongside the risks faced by people and infrastructure from climate change are the challenges presented by global economic conditions. Managing fuel costs and the impact of “carbon taxes” through programmes to improve the Group’s energy effciency and reduce its environmental impacts are important to the continued effectiveness and sustainability of the Group’s business. We follow WBCSD* and WRI** Greenhouse Gas Protocol to measure our Scope 1 and 2 emissions – vehicle feet, fuel, refrigerants and electricity usage for G4S businesses over which the Group has fnancial and operational control. In addition the Group has measured Scope 3 emissions from employee business air travel. The businesses that reported data in the 2017 GHG measurement represent 90% of the Group’s operations, across a 12 month period. This level of measurement, including each of the Group’s main service types, allows reliable calculation of the total GHG emissions for 100% of the Group. The G4S total carbon footprint during 2017, extrapolated to 100% of the business equates to some 501,467 t/CO2e. These CO2e emissions, including emissions generated by services which our customers have outsourced to G4S, have decreased by 2.5% since 2016 – against a 3.2% revenue growth in our core businesses during the same period, refecting the efforts made to increase the energy effciency of our business. In 2018, we will continue to implement energy effciency strategies with the aim of reducing carbon intensity by at least 3.5% per annum. * World Business Council for Sustainable Development ** World Resources Institute For further details, please visit g4s.com/env Integrated Report and Accounts 2017 G4S plc 117 Governance Directors’ report continued GHG emissions (t/CO2e) (Based on 90% measurement) Vehicles (inc. refrigerants) Total buildings (inc. refrigerants) Including electricity emissions of Air travel Carbon intensity Tonnes CO2e per £m turnover 2016 256,081 139,831 114,243 15,261 2017 261,398 139,728 103,915 20,368 2016 68.1 2017 62.9 11. Substantial holdings The company had been notifed under DTR 5 of the following interests in the ordinary capital of G4S plc: As at 31.12.2017 Invesco BlackRock, Inc. Mondrian Investment Partners Limited Harris Associates LP Between 1.1.2018 and 8.3.2018 Invesco Blackrock, Inc. 202,498,965 (13.05%) 93,462,222 (6.02%) 78,613,679 (5.07%) 79,355,377 (5.11%) 201,499,651 (12.98%) 98,401,235 (6.34%) 12. Auditor A resolution to re-appoint PricewaterhouseCoopers LLP, chartered accountants, as auditor to the company for 2018, and for their remuneration to be fxed by the Audit Committee, will be submitted to the annual general meeting. 13. Directors The directors, biographical details of whom are contained on pages 68 and 69, held offce throughout the year, apart from Ian Springett who retired from the board on 20 June 2017 and John Ramsay, who was appointed to the board on 1 January 2018. In accordance with the code provisions on re-election of directors in the UK Corporate Governance Code, each of the directors continuing in offce will offer themselves for re-election. The board believes that the directors standing for re-election 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 (or elected) at the annual general meeting. The contracts of service of the executive directors have no unexpired term since they are not for a fxed term. They 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 beneft 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 defned by section 234 of the Companies Act 2006 and have been in effect since 14 June 2010 for Ms Spottiswoode, 1 October 2010 for Ms Fok, 8 June 2012 for Mr Connolly, 1 January 2013 for Mr Spence,1 April 2013 for Mr Weller,1 May 2013 for Mr Almanza, 5 June 2015 for Mr Daly, 27 May 2016 for Mr Mogford, 1 July 2016 for Ms Thoralfsson, 1 January 2017 for Mr Springett and 1 January 2018 for Mr Ramsay. Copies of the forms of indemnity are available on the company’s website. In addition, indemnities have been granted by the company in favour of certain of the directors of some of the Group’s subsidiaries in the USA, Greece, India, the UAE and the Philippines. The company has maintained a directors’ and offcers’ liability insurance policy throughout the year under review. Details of directors’ interests (including the interests of their connected persons) in the share capital of G4S plc are set out on page 101, and the directors’ remuneration is set out on page 96. The directors who held offce at the date of approval of this Directors’ report confrm 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 or she ought to have taken as a director to make himself or herself 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 signifcant to the business of the Group during the fnancial year. By order of the board Celine Barroche Company Secretary 8 March 2018 118 G4S plc Integrated Report and Accounts 2017 Directors’ responsibilities Statement of directors’ responsibilities in respect of the annual report and the fnancial statements The directors are responsible for preparing the annual report and the Group and parent company fnancial statements in accordance with applicable law and regulations. Company law requires the directors to prepare group and parent company fnancial statements for each fnancial year. Under that law they are required to prepare the group fnancial statements in accordance with IFRSs as adopted by the EU and applicable law and have elected to prepare the parent company fnancial statements in accordance with UK Accounting Standards. Under company law the directors must not approve the fnancial statements unless they are satisfed that they give a true and fair view of the state of affairs of the Group and parent company and of their proft or loss for that period. In preparing each of the group and parent company fnancial 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 fnancial statements, state whether they have been prepared in accordance with IFRSs as adopted by the EU; • for the parent company fnancial statements, state whether applicable UK Accounting Standards have been followed, subject to any material departures disclosed and explained in the parent company fnancial statements; and • prepare the fnancial statements on the going concern basis unless it is inappropriate to presume that the Group and the parent company will continue in business. The directors are responsible for keeping adequate accounting records that are suffcient to show and explain the parent company’s transactions and disclose with reasonable accuracy at any time the fnancial position of the parent company and enable them to ensure that its fnancial statements comply with the Companies Act 2006. They have general responsibility for taking such steps as are reasonably open to them to safeguard the assets of the Group and to prevent and detect fraud and other irregularities. Under applicable law and regulations, the directors are also responsible for preparing a strategic report, Directors’ report, Directors’ remuneration report and Corporate governance statement that comply with that law and those regulations. The directors are responsible for the maintenance and integrity of the corporate and fnancial information included on the company’s website. Legislation in the UK governing the preparation and dissemination of fnancial statements may differ from legislation in other jurisdictions. Directors’ responsibility statement Each of the directors, the names of whom are set out on pages 68 and 69 of this Integrated Report and Accounts, confrm that, to the best of his or her knowledge: • the fnancial statements in this Integrated Report and Accounts have been prepared in accordance with the applicable accounting standards and give a true and fair view of the assets, liabilities, fnancial position and results of the company and the Group; and • the management report required by DTR4.1.8R (contained in the strategic report and the Directors’ report) includes a fair review of the development and performance of the business and the position of the company and the Group taken as a whole, together with a description of the principal risks and uncertainties they face. The strategic report from the inside front cover to page 65 includes information on the Group structure, the performance of the business and the principal risks and uncertainties it faces. The fnancial statements on pages 132 to 210 include information on the Group and the company’s fnancial results, fnancial outlook, cash fow and net debt and balance sheet positions. Notes 22, 26, 27, 30 and 31 to the consolidated fnancial statements include information on the Group’s investments, cash and cash equivalents, borrowings, derivatives, fnancial risk management objectives, hedging policies and exposure to interest, foreign exchange, credit, liquidity and market risks. Pages 132 to 201 contain information on the performance of the Group, its fnancial position, cash fows, net debt position and borrowing facilities. Further information, including fnancial risk management policies, exposures to market and credit risk and hedging activities, is given in note 31 to the fnancial statements. After making enquiries, the directors have a reasonable expectation that the Group has adequate resources to continue in operational existence for the foreseeable future. For this reason the directors consider it appropriate to adopt the going concern basis in preparing the fnancial statements. Directors are also required to provide a broader assessment of viability over a longer period, which can be found on page 92 of the Integrated Report and Accounts. The directors consider that the Integrated Report and Accounts, taken as a whole, is fair, balanced and understandable and provides the information necessary for shareholders to assess the company’s performance and position, business model and strategy. The statement of directors’ responsibilities and the strategic report are approved by a duly authorised committee of the board of directors on 8 March 2018 and signed on its behalf by Tim Weller, Chief Financial Offcer. Tim Weller Chief Financial Offcer 8 March 2018 Integrated Report and Accounts 2017 G4S plc 119 Governance Independent auditors’ report to the members of G4S plc REPORT ON THE AUDIT OF THE FINANCIAL STATEMENTS Opinion In our opinion: • G4S plc’s Group fnancial statements and parent company fnancial statements (the “fnancial statements”) give a true and fair view of the state of the Group’s and of the parent company’s affairs at 31 December 2017 and of the Group’s proft and cash fows for the year then ended; • the Group fnancial statements have been properly prepared in accordance with International Financial Reporting Standard (“IFRSs”) as adopted by the European Union; • the parent company fnancial statements have been properly prepared in accordance with United Kingdom Generally Accepted Accounting Practice (United Kingdom Accounting Standards, comprising FRS 101 “Reduced Disclosure Framework”, and applicable law); and • the fnancial statements have been prepared in accordance with the requirements of the Companies Act 2006 and, as regards the Group fnancial statements, Article 4 of the IAS Regulation. We have audited the fnancial statements, included within the Integrated Report and Accounts (the “Annual Report”), which comprise: • the consolidated statement of fnancial position at 31 December 2017; • the parent company statement of fnancial position at 31 December 2017; • the consolidated income statement for the year then ended; • the consolidated statement of comprehensive income for the year then ended; • the consolidated statement of cash fows for the year then ended; • the consolidated statement of changes in equity for the year then ended; • the parent company statement of changes in equity for the year then ended; and • the notes to the fnancial statements, which include a description of the signifcant accounting policies. Our opinion is consistent with our reporting to the Audit Committee. Basis for opinion We conducted our audit in accordance with International Standards on Auditing (UK) (“ISAs (UK)”) and applicable law. Our responsibilities under ISAs (UK) are further described in the auditors’ responsibilities for the audit of the fnancial statements section of our report. We believe that the audit evidence we have obtained is suffcient and appropriate to provide a basis for our opinion. Independence We remained independent of the Group in accordance with the ethical requirements that are relevant to our audit of the fnancial statements in the UK, which includes the FRC’s Ethical Standard, as applicable to listed public interest entities and we have fulflled our other ethical responsibilities in accordance with these requirements. To the best of our knowledge and belief, we declare that non-audit services prohibited by the FRC’s Ethical Standard were not provided to the Group or to the parent company. Other than those disclosed in note 10 to the fnancial statements, we have provided no non-audit services to the Group or to the parent company in the period from 1 January 2017 to 31 December 2017. Our audit approach Context G4S is an integrated security company specialising in the provision of security and related services to customers in around 90 countries, which in 2017 was organised into seven geographical regions. Overview Materiality • Overall Group materiality: £20m (2016: £15m), which represents approximately 5% of adjusted proft before tax, being proft before tax after adding back certain items that are separately reported on the face of the consolidated income statement including specifc items, restructuring costs and proft on disposal. • Overall parent company materiality: £15m (2016: £13.5m), which represents approximately 1% of net assets. Audit scope • Our audit included full scope audits of the Group’s seven geographical regions. The regional audits were supported by full scope audits at 73 country components with specifed audit procedures performed at a further 16 country components. • Taken together, the components at which either full scope audit work or specifed audit procedures were performed accounted for 76% of consolidated revenue, 78% of consolidated proft before tax and 73% of consolidated adjusted proft before tax. 120 G4S plc Integrated Report and Accounts 2017 As in all of our audits, we also addressed the risk of management override of internal controls, including evaluating whether there was evidence of bias by management that represented a risk of material misstatement due to fraud and the risk of fraud in revenue recognition. Procedures designed to address these risks included testing of material journal entries and post-close adjustments, testing and evaluating management’s key accounting estimates for reasonableness and consistency, undertaking cut-off procedures to check proper cut-off of revenue and testing the occurrence and accuracy of revenue transactions. In addition, we incorporate an element of unpredictability into our audit work each year. Key audit matters Key audit matters are those matters that, in the auditors’ professional judgment, were of most signifcance in the audit of the fnancial statements of the current period and include the most signifcant assessed risks of material misstatement (whether or not due to fraud) identifed by the auditors, including those which had the greatest effect on: the overall audit strategy; the allocation of resources in the audit; and directing the efforts of the engagement team. We have also set out how we tailored our audit to address these specifc areas in order to provide an opinion on the fnancial statements as a whole. These matters, and any comments we make on the results of our procedures thereon, were addressed in the context of our audit of the fnancial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters. This is not a complete list of all risks identifed by our audit. Areas of focus • Onerous contract provisioning • Goodwill impairment • Uncertain tax positions and deferred tax assets • Compliance with payroll laws and regulations • Income statement presentation • Control environment The scope of our audit As part of designing our audit, we determined materiality and assessed the risks of material misstatement in the fnancial statements. In particular, we looked at where the directors made subjective judgments, for example in respect of signifcant accounting estimates that involved making assumptions and considering future events that are inherently uncertain. We gained an understanding of the legal and regulatory framework applicable to the Group and to the industry in which it operates and considered the risk of acts by the Group which were contrary to applicable laws and regulations, including fraud. We designed audit procedures at the Group and component levels to respond to this risk, recognising that the risk of not detecting a material misstatement due to fraud is higher than the risk of not detecting one resulting from error, as fraud may involve deliberate concealment by, for example, forgery or intentional misrepresentations or through collusion. We designed audit procedures that focused on the risk of non-compliance related to, but not limited to, compliance with payroll, foreign ownership and tax laws and regulations. Our tests included, but were not limited to, the review of the fnancial statement disclosures to underlying supporting documentation, review of correspondence with legal advisors, enquiries of management, review of signifcant component auditors’ work and review of Internal Audit reports in so far as they related to the fnancial statements. There are inherent limitations in the audit procedures described above and the further removed non-compliance with laws and regulations is from the events and transactions refected in the fnancial statements, the less likely we would become aware of it. We found payroll compliance and tax to be key audit matters and these are discussed further below. Integrated Report and Accounts 2017 G4S plc 121 Financial report Independent auditors’ report to the members of G4S plc continued Key audit matter Onerous contract provisioning Refer to Audit Committee report on page 85 and to note 33 of the Group fnancial statements. Certain of the Group’s contracts are onerous and long-term in nature. These contracts can be complex and incorporate penalty and key performance indicator (“KPI”) clauses in the event of non-compliance. The Group is therefore required to make operational and fnancial assumptions to estimate future losses over periods that can extend beyond 20 years. Variability of contract penalties, underlying delivery costs and customer and subcontractor claims or disputes can put additional pressure on margins and on future contract proftability, giving rise to onerous contract provisions. The prediction of future events over extended periods contains inherent risk and the outcome of customer and sub-contractor claims is uncertain and involves a high degree of management judgment. The Group’s onerous contract provisions at 31 December 2017 are £62m (2016: £69m) and the income statement charge for onerous contracts in 2017 amounts to £19m (2016: £6m). How our audit addressed the key audit matter Our global approach to testing complex contracts starts with an evaluation of management’s process to identify and quantify onerous and at-risk contracts. Management focuses on the top 25 contracts by region and on contracts with margins of less than 3%. We performed scanning analytics on contract margins and investigated unusual or unexpected trends to check inclusion of all relevant contracts in management’s assessment. Our sampling of contracts focused our testing on higher risk and larger contracts and enabled us to form an independent view as to whether management’s process had identifed all onerous and at-risk contracts. For each contract in our sample, we obtained and read the key contractual terms and tested that the revenue recognised in the period was in accordance with the contractual terms and was supported by evidence of service delivery. We read and understood the contract penalty clauses and evaluated the completeness of penalties through discussions with contract managers and reading minutes of meetings between G4S and the customer, and customer correspondence. We assessed each of the key assumptions used in management’s forecasts to identify and quantify onerous contract provisions. Where possible, we obtained third party evidence to corroborate management’s assumptions and assessed the appropriateness of the Group’s forecasts based on past performance. The Group’s policy is to include the benefts of performance improvement plans only where there is evidence of plans being achievable. We critically challenged these benefts based on observable benefts achieved to date and the extent to which these plans are within the Group’s direct control. We assessed the appropriateness of the discount rate used to present value the obligation and checked that the rate appropriately refected the risk in the underlying cash fows. We also assessed the recoverability of dedicated contract assets where the contract was identifed as onerous. Having examined management’s analysis, including accounting papers prepared to support key contract judgments and onerous contract provisions, our procedures focused on the Facilities Management and Care & Justice businesses in the UK and specifcally on the Compass contract and on a legacy PFI contract which is long-term in nature. Both contracts are sensitive to changes in assumptions and have given rise to changes in provisioning levels at year-end. For these contracts, we performed our own independent sensitivity analysis and we have undertaken additional analysis on key assumptions to which management’s provisioning judgments are more sensitive. We also held discussions with in-house and external legal counsel and read appropriate documentation to evaluate contractual claims and disputes with customers and subcontractors. We obtained and evaluated evidence to support decisions and rationale for provisions held or the decision not to record provisions, including correspondence with external legal counsel. We also considered external information sources to assess and evaluate the alternate possible scenarios. We considered the level of provisioning to be acceptable in the context of the Group fnancial statements taken as a whole. However, we noted that the assumptions and judgments that are required to formulate the provisions mean that the range of possible outcomes is broad. We are satisfed with the Group’s related disclosures of these onerous contracts in light of the underlying assumptions and accounting judgments made. 122 G4S plc Integrated Report and Accounts 2017 Key audit matter Goodwill impairment Refer to Audit Committee report on page 85 and to note 18 of the Group fnancial statements. The Group has £1.9bn of goodwill at 31 December 2017 (2016: £2.0bn). No impairment charge has been recorded in 2017 (2016: £9m). Management determines the recoverable amount of a cash generating unit (“CGU”) as the higher of value in use (“VIU”) or fair value less cost of disposal (“FVLCD”). The carrying value of goodwill is contingent on future cash fows and there is risk if these cash fows do not meet the Group’s expectations that the assets will be impaired. The impairment reviews performed by the Group contain a number of signifcant judgments and estimates including revenue growth, proft margins, cash conversion and long-term growth and discount rates. Changes in these assumptions can have a signifcant impact on the headroom available in the impairment calculations. How our audit addressed the key audit matter We assessed the mathematical accuracy of management’s cash fow model and agreed the underlying forecasts to board approved budgets and assessed how these budgets were compiled. With the support of our valuations experts, we assessed the terminal growth rates and discount rates applied by management to third party information and confrmed whether they fell within a reasonable range of external market data. Where they did not, we applied our independent view of a more appropriate rate to management’s forecast. We considered the reliability of management’s forecasting for revenue, proft and cash conversion by comparing budgeted results to actual performance over a period of three years, which we considered appropriate. Where we identifed signifcant shortfalls against budget in prior years, this informed our determination of sensitivities to apply as we formed our independent view about reasonable downside scenarios. Where the recoverable amount has been assessed with reference to a valuation multiple, we assessed the appropriateness of the multiple by comparison to recent business disposals and to other third party information, with the support of our valuations experts. We challenged management as to the appropriateness of the level of aggregation of each CGU and the independence of cash fows from other assets. We performed our own risk assessment by considering historical performance, forecasting accuracy and modelled headroom to highlight the CGUs with either a lower headroom or which are more sensitive to changes in key assumptions. We also considered the valuation multiple implied by management’s estimate. For those CGUs with low headroom, we performed our own sensitivity analysis to understand the impact of changes in the assumptions on the available headroom. We critically assessed management’s forecast by comparing growth forecast to actual growth to date and to IMF projections. The recoverable amounts of a number of CGUs including Brazil Secure Solutions, Risk Management and UK Cash Solutions were found to be sensitive to reasonably possible changes in assumptions and we satisfed ourselves that this risk was appropriately highlighted in the disclosures in note 18. As a result of our work, we determined that it was appropriate that no impairment charge was recognised in the context of the Group fnancial statements taken as a whole and that adequate disclosure has been made. Integrated Report and Accounts 2017 G4S plc 123 Financial report Independent auditors’ report to the members of G4S plc continued How our audit addressed the key audit matter With the assistance of our local and international tax specialists, we evaluated and challenged management’s judgments in respect of estimates of tax exposures and contingencies in order to assess the adequacy of the Group’s tax provisions. In understanding and evaluating management’s judgments, we considered the status of recent and current tax authority audits and enquiries, judgmental positions taken in tax returns and current year estimates and developments in the tax environment. Where appropriate, we also read appropriate documentation to understand the legal positions reached. From the evidence obtained, we considered the level of provisioning to be acceptable in the context of the Group fnancial statements taken as a whole. However, we noted that the assumptions and judgments that are required to formulate the provisions mean that there is a broad range of possible outcomes. In respect of the recoverability of deferred tax assets, we evaluated management’s assessment of how these assets will be realised and whether there will be suffcient taxable profts in future periods to support their recognition. We evaluated the directors’ future cash fow forecasts and the process by which they were prepared, ensuring consistency of cash fows with those used for the purpose of goodwill impairment testing. Based on our procedures, future cash fow forecasts supported the recoverability of the deferred tax assets recognised. We have reviewed the Group’s impact assessment as a result of US tax reform, deploying our US tax specialists. We have discussed with management the key judgments made in evaluating how the legislation applies to the Group and compared these judgments with our independent expectations based on our knowledge of the Group’s tax affairs. We have also verifed the mathematical accuracy of the deferred tax re-measurement calculations. We are satisfed that the Group has appropriately accounted for the impact of US tax reform in the context of the Group fnancial statements taken as a whole. Key audit matter Uncertain tax positions and deferred tax assets Refer to Audit Committee report on page 85 and to notes 13 and 34 of the Group fnancial statements. The Group operates in a complex multinational tax environment and is subject to a range of tax risks during the normal course of business including transaction related tax matters and transfer pricing arrangements. Where the amount of tax payable is uncertain, the Group establishes provisions based on management’s judgment of the probable amount of the future liability. At 31 December 2017, the Group has recognised provisions of £42m related to uncertain tax positions (2016: £37m). In addition, the Group has recognised £240m of deferred tax assets at 31 December 2017 (2016: £285m). The recognition of deferred tax assets involves judgment by management regarding the likelihood of the realisation of these assets. The expectation that these assets will be realised is dependent on a number of factors, including whether there will be suffcient taxable profts in future periods to support utilisation of these assets. There have been a number of changes in tax law in 2017, especially in the US that have resulted in a signifcant impact on the Group’s deferred tax balances. The most signifcant change has been the US Tax Cuts and Jobs Act which was substantively enacted before 31 December 2017. The Group has needed to consider the impact of this new tax law on both its current and deferred taxes. Certain of the changes introduced by the Act are complex and there are number of areas of uncertainty relating to both the manner in which the law will apply and to the accounting in certain areas. 124 G4S plc Integrated Report and Accounts 2017 How our audit addressed the key audit matter We met with the directors, management and in-house legal counsel and held discussions with the Group’s external legal advisors to assess the probable outcomes in relation to ongoing claims and exposures in countries and areas where legal requirements are open to interpretation. We evaluated and challenged management’s judgments in order to assess the adequacy of the Group’s provisions and disclosures. In understanding and evaluating management’s judgments, we considered the status and basis of employee and regulatory claims, settlement history and the views of internal and external legal counsel regarding the interpretation and application of local payroll laws and regulations. Where appropriate, we also read relevant documentation and correspondence to understand the legal positions reached. From the evidence obtained, we are satisfed with the Group’s provisioning decisions at 31 December 2017 in the context of the Group fnancial statements taken as a whole and with the adequacy of the contingent liability disclosures given the status, materiality and likely outcome of employee and regulatory claims and exposures in countries and areas where legal requirements are open to interpretation. We substantiated the nature and quantum of individual items to appropriate corroborating evidence. We considered whether the designation of individual items as specifc was consistent with the Group’s accounting policy and treatment in prior years. Furthermore, we considered whether amounts included as specifc items related to current year trading and might be more appropriately refected in the underlying results. We considered whether the Group has taken a balanced approach to this area, checking that exceptional one-off items of income are treated consistently with one-off items of cost. We tested management’s process for identifying and tracking the current year reversal of any prior year specifc items, or utilisation of or adjustment to related provisions, to identify whether these have been appropriately presented in the current year income statement. Based on our procedures, we were satisfed that the treatment and classifcation of these items were consistent year-on-year and with the Group’s policies. Key audit matter Compliance with payroll laws and regulations Refer to Audit Committee report on page 85 and to note 33 of the Group fnancial statements. The Group employs over 570,000 employees across six continents. There are a number of ongoing employee and regulatory claims in relation to the interpretation and potential risks relative to the application of local payroll laws and regulations in a number of countries. Interpreting and complying with payroll laws and regulations is complex. There is inherent judgment associated both with assessing and quantifying probable outcomes in relation to ongoing claims and with determining any exposure (and the need for provision) in areas where legal requirements are open to interpretation. In addition, possible outcomes need to be considered for disclosure as contingent liabilities. Unexpected adverse outcomes could materially impact the Group’s fnancial performance and position. Income statement presentation Refer to Audit Committee report on page 85 and to note 3(b) of the Group fnancial statements. The Group has historically reported specifc and other items (including restructuring costs) which are disclosed separately on the face of the income statement and which are excluded from management’s reporting of the underlying results of the business. Consistent with the Group’s defnition of proft before interest, tax and amortisation (“Adjusted PBITA”), the following items have continued to be disclosed separately on the face of the income statement in 2017: net specifc items £34m (2016: £13m); restructuring costs £20m (2016: £12m); and net proft on disposal and closure of subsidiaries £74m (2016: £7m). The treatment of specifc and other separately disclosed items is explained in the Group accounting policy in note 3(b). We focused on this area because the classifcation of items as specifc or separate disclosure of items of income or expenditure on the face of the income statement requires judgment and because certain of these items are excluded from the calculation of elements of executive remuneration in line with the Group’s remuneration policy. Consistency in the identifcation and presentation of these items is important to ensure comparability of year-on- year reporting in the Annual Report. Integrated Report and Accounts 2017 G4S plc 125 Financial report Independent auditors’ report to the members of G4S plc continued Key audit matter Control environment The geographical span and decentralised structure of the Group, coupled with the current disparate systems landscape and evolving control environment, means that there is an increased risk of errors remaining undetected and aggregating to cause a material misstatement to the Group fnancial statements. Progress has been made by the Group in 2017 to strengthen the controls framework through the embedding of the Minimum Financial Controls (“MFC”) framework. However, as the framework is still in its early stages, the operation and formalisation of these controls is at different levels of maturity across the organisation. How our audit addressed the key audit matter In recognition of the Group’s scale and decentralised structure and aligning to the Group’s regional management structure, we continued to deploy teams in each of the Group’s regions to lead our interactions with regional management, to coordinate the audit work performed at a country component level and to audit and report on the aggregated fnancial information of that region. Given that the operation and formalisation of MFC controls are at different levels of maturity across the organisation, we did not seek to test or rely on these controls for our 2017 audit. We therefore instructed our component teams not to rely on fnancial controls at the local business level but to perform a substantive audit focused on transaction testing and on the integrity of the year-end balance sheet. With the support of our regional teams, we determined the entities to be included in our Group audit scope based on those locations with signifcant risk and those which contribute a signifcant amount to material line items in the Group fnancial statements. We applied a reduction to our overall materiality to set a performance materiality benchmark that we used to determine the nature, timing and extent of our detailed audit procedures. Our performance materiality benchmark for the Group audit of £12.5m refects the Group’s evolving control environment, the risk of multiple misstatements resulting in a material misstatement and the history of past audit adjustments. Wherever we identifed audit adjustments or control matters which could be pervasive across the Group, we instructed our regional and country component teams to assess whether similar errors had arisen elsewhere. While we did identify audit differences across the Group, management corrected the more signifcant items meaning that the uncorrected items reported to the Audit Committee were considered to be immaterial for adjustment, both individually and in aggregate. 126 G4S plc Integrated Report and Accounts 2017 How we tailored the audit scope We tailored the scope of our audit to ensure that we performed enough work to be able to give an opinion on the fnancial statements as a whole, taking into account the structure of the Group and the parent company, the accounting processes and controls and the industry in which they operate. In 2017, the Group was structured into seven geographical regions being Africa, Asia Pacifc, Europe, Latin America, Middle East & India, North America and the UK & Ireland (“UK&I”). Corporate head offce entities are managed at a Group level. Each geographical region (“regional component”) is an aggregation of a number of country-based components along with the Group’s interests in joint ventures (together the “country components”). Each geographical region has a separate management team which coordinates the businesses within that region. The Group’s accounting processes are structured around a local fnance function in each of the country components. In addition, fnance shared service centres in the UK, North America and India support certain of the Group’s businesses. The country components report to the regions and to the Group through an integrated consolidation system. In performing our audit, we determined that we needed to conduct audit work over the complete fnancial information of each of the regional components. We therefore deployed regional component audit teams in each of the seven regions to lead our interactions with regional management, to coordinate the audit work performed on country components and to audit and report on the aggregated fnancial information of that region. In addition to the seven regional components, specifc audit procedures over central functions, the Group consolidation, head offce entities and areas of judgment (including taxation, goodwill and intangible assets impairment, treasury and post-retirement benefts) were directly led by the Group audit team. Recognising that not every country component in each regional component is included in our Group audit scope, we considered as part of our Group audit oversight responsibility what audit coverage had been obtained in aggregate by our regional component teams by reference to country components at which audit work had been undertaken. Beneath the regional component layer, the Group fnancial statements are an aggregation of approximately 700 reporting units, each of which is considered to be a country component. We identifed 73 country component units that, in our view, required a full scope audit due to their size or risk characteristics. Specifc audit procedures over signifcant balances and transactions were performed at a further 16 country component units to give appropriate coverage of all material balances. Where the work was performed by regional and country component audit teams, we determined the level of involvement we needed to have in the audit work at those components. As a result, six of the seven regions were visited by senior members of the Group audit team as a supplement to the regular dialogue between our Group and regional teams and the issuance of instructions to direct their work. Regional teams visited a further 10 country components performing oversight procedures under our instruction. For those components in Group audit scope where a site visit was not undertaken, our Group and our regional component audit teams’ involvement included regular dialogue with our country component teams, review of component auditor work papers and participation in certain component audit clearance meetings for the more signifcant country components. Taken together, the components and functions where we performed either full scope audit work or specifed audit procedures accounted for 76% of consolidated revenue, 78% of consolidated proft before tax and 73% of consolidated adjusted proft before tax. This was before considering the contribution to our audit evidence from performing audit work at the regional and Group levels, including disaggregated analytical review procedures and our evaluation of entity level controls, which covered a signifcant portion of the Group’s smaller and lower risk components that were not directly included in our Group audit scope. Materiality The scope of our audit was infuenced by our application of materiality. We set certain quantitative thresholds for materiality. These, together with qualitative considerations, helped us to determine the scope of our audit and the nature, timing and extent of our audit procedures on the individual fnancial statement line items and disclosures and in evaluating the effect of misstatements, both individually and in aggregate on the fnancial statements as a whole. Based on our professional judgment, we determined materiality for the fnancial statements as a whole as follows: Integrated Report and Accounts 2017 G4S plc 127 Financial report Independent auditors’ report to the members of G4S plc continued Overall materiality How we determined it Rationale for benchmark applied Group fnancial statements £20m (2016: £15m). 5% of adjusted proft before tax, being proft before tax after adding back certain items that are separately reported on the face of the consolidated income statement including specifc items, restructuring costs and proft on disposal. The Group’s principal measure of earnings is proft before interest, tax and amortisation adjusted for a number of items of income and expenditure (“Adjusted PBITA”). Management uses this measure as it believes that it refects the underlying performance of the Group. We took this measure into account in determining our materiality, except that we did not adjust proft before tax to add back amortisation of acquisition-related intangible assets and fnance income and expense as in our view these are recurring items which do not introduce volatility to the Group’s earnings. Parent company fnancial statements £15m (2016: £13.5m). 1% of net assets. The parent company holds the Group’s investments and performs treasury functions on behalf of the Group. Therefore, the entity is not in itself proft-oriented. The strength of the balance sheet is the key measure of fnancial health that is important to shareholders since the primary concern for the parent company is the payment of dividends and servicing of debt. For each component in the scope of our Group audit, we allocated a materiality that is less than our overall Group audit materiality. The range of overall materiality allocated to each regional component was between £5m and £15m and by each region to each country component was between £0.01m and £14m. Certain components were audited to a local statutory audit materiality level that was also less than our overall Group audit materiality. We agreed with the Audit Committee that we would report to them misstatements identifed during our audit above £1m (Group audit) (2016: £1m) and £750,000 (parent company audit) (2016: £675,000) as well as misstatements below those amounts that, in our view, warranted reporting for qualitative reasons. Going concern In accordance with ISAs (UK) we report as follows: Reporting obligation We are required to report if we have anything material to add or draw attention to in respect of the directors’ statement in the fnancial statements about whether the directors considered it appropriate to adopt the going concern basis of accounting in preparing the fnancial statements and the directors’ identifcation of any material uncertainties to the Group’s and the parent company’s ability to continue as a going concern over a period of at least twelve months from the date of approval of the fnancial statements. We are required to report if the directors’ statement relating to Going Concern in accordance with Listing Rule 9.8.6R(3) is materially inconsistent with our knowledge obtained in the audit. Outcome We have nothing material to add or to draw attention to. However, because not all future events or conditions can be predicted, this statement is not a guarantee as to the Group’s and parent company’s ability to continue as a going concern. We have nothing to report. Reporting on other information The other information comprises all of the information in the Annual Report other than the fnancial statements and our auditors’ report thereon. The directors are responsible for the other information. Our opinion on the fnancial statements does not cover the other information and, accordingly, we do not express an audit opinion or, except to the extent otherwise explicitly stated in this report, any form of assurance thereon. In connection with our audit of the fnancial statements, our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the fnancial statements or our knowledge obtained in the audit, or otherwise appears to be materially misstated. If we identify an apparent material inconsistency or material misstatement, we are required to perform procedures to conclude whether there is a material misstatement of the fnancial statements or a material misstatement of the other information. If, based on the work we have performed, we conclude that there is a material misstatement of this other information, we are required to report that fact. We have nothing to report based on these responsibilities. With respect to the Strategic Report, Directors’ Report and Corporate Governance Statement, we also considered whether the disclosures required by the UK Companies Act 2006 have been included. Based on the responsibilities described above and our work undertaken in the course of the audit, the Companies Act 2006, (CA06), ISAs (UK) and the Listing Rules of the Financial Conduct Authority (FCA) require us also to report certain opinions and matters as described below (required by ISAs (UK) unless otherwise stated). 128 G4S plc Integrated Report and Accounts 2017 Strategic Report and Directors’ Report In our opinion, based on the work undertaken in the course of the audit, the information given in the Strategic Report and Directors’ Report for the year ended 31 December 2017 is consistent with the fnancial statements and has been prepared in accordance with applicable legal requirements. (CA06) In light of the knowledge and understanding of the Group and parent company and their environment obtained in the course of the audit, we did not identify any material misstatements in the Strategic Report and Directors’ Report. (CA06) Corporate Governance Statement In our opinion, based on the work undertaken in the course of the audit, the information given in the Corporate Governance Statement (in the corporate governance report) about internal controls and risk management systems in relation to fnancial reporting processes and about share capital structures in compliance with rules 7.2.5 and 7.2.6 of the Disclosure Guidance and Transparency Rules sourcebook of the FCA (“DTR”) is consistent with the fnancial statements and has been prepared in accordance with applicable legal requirements. (CA06) In light of the knowledge and understanding of the Group and parent company and their environment obtained in the course of the audit, we did not identify any material misstatements in this information. (CA06) In our opinion, based on the work undertaken in the course of the audit, the information given in the Corporate Governance Statement (in the corporate governance report) with respect to the parent company’s corporate governance code and practices and about its administrative, management and supervisory bodies and their committees complies with rules 7.2.2, 7.2.3 and 7.2.7 of the DTR. (CA06) We have nothing to report arising from our responsibility to report if a corporate governance statement has not been prepared by the parent company. (CA06) The directors’ assessment of the prospects of the Group and of the principal risks that would threaten the solvency or liquidity of the Group We have nothing material to add or draw attention to regarding: • The directors’ confrmation on page 91 of the Annual Report that they have carried out a robust assessment of the principal risks facing the Group, including those that would threaten its business model, future performance, solvency or liquidity; • The disclosures in the Annual Report that describe those risks and explain how they are being managed or mitigated; and • The directors’ explanation on page 92 of the Annual Report as to how they have assessed the prospects of the Group, over what period they have done so and why they consider that period to be appropriate and their statement as to whether they have a reasonable expectation that the Group will be able to continue in operation and meet its liabilities as they fall due over the period of their assessment, including any related disclosures drawing attention to any necessary qualifcations or assumptions. We have nothing to report having performed a review of the directors’ statement that they have carried out a robust assessment of the principal risks facing the Group and statement in relation to the longer-term viability of the Group. Our review was substantially less in scope than an audit and only consisted of: making inquiries and considering the directors’ process supporting their statements; checking that the statements are in alignment with the relevant provisions of the UK Corporate Governance Code (the “Code”); and considering whether the statements are consistent with the knowledge and understanding of the Group and parent company and their environment obtained in the course of the audit. (Listing Rules) Other Code Provisions We have nothing to report in respect of our responsibility to report when: • The statement given by the directors, on page 119, that they consider the Annual Report taken as a whole to be fair, balanced and understandable and provides the information necessary for the members to assess the Group’s and parent company’s position and performance, business model and strategy is materially inconsistent with our knowledge of the Group and parent company obtained in the course of performing our audit; • The section of the Annual Report on page 85 describing the work of the Audit Committee does not appropriately address matters communicated by us to the Audit Committee; and • The directors’ statement relating to the parent company’s compliance with the Code does not properly disclose a departure from a relevant provision of the Code specifed, under the Listing Rules, for review by the auditors. Directors’ Remuneration In our opinion, the part of the Directors’ Remuneration Report to be audited has been properly prepared in accordance with the Companies Act 2006. (CA06) Integrated Report and Accounts 2017 G4S plc 129 Financial report Independent auditors’ report to the members of G4S plc continued Responsibilities for the fnancial statements and the audit Responsibilities of the directors for the fnancial statements As explained more fully in the directors’ responsibilities set out on page 119, the directors are responsible for the preparation of the fnancial statements in accordance with the applicable framework and for being satisfed that they give a true and fair view. The directors are also responsible for such internal control as they determine is necessary to enable the preparation of fnancial statements that are free from material misstatement, whether due to fraud or error. In preparing the fnancial statements, the directors are responsible for assessing the Group’s and the parent company’s ability to continue as a going concern, disclosing as applicable matters related to going concern and using the going concern basis of accounting unless the directors either intend to liquidate the Group or the parent company or to cease operations or have no realistic alternative but to do so. Auditors’ responsibilities for the audit of the fnancial statements Our objectives are to obtain reasonable assurance about whether the fnancial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditors’ report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with ISAs (UK) will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to infuence the economic decisions of users taken on the basis of these fnancial statements. A further description of our responsibilities for the audit of the fnancial statements is located on the FRC’s website at: www.frc.org.uk/auditorsresponsibilities. This description forms part of our auditors’ report. Use of this report This report, including the opinions, has been prepared for and only for the parent company’s members as a body in accordance with Chapter 3 of Part 16 of the Companies Act 2006 and for no other purpose. We do not, in giving these opinions, accept or assume responsibility for any other purpose or to any other person to whom this report is shown or into whose hands it may come save where expressly agreed by our prior consent in writing. 130 G4S plc Integrated Report and Accounts 2017 OTHER REQUIRED REPORTING Companies Act 2006 exception reporting Under the Companies Act 2006, we are required to report to you if, in our opinion: • we have not received all the information and explanations we require for our audit; or • adequate accounting records have not been kept by the parent company, or returns adequate for our audit have not been received from branches not visited by us; or • certain disclosures of directors’ remuneration specifed by law are not made; or • the parent company fnancial statements and the part of the Directors’ Remuneration Report to be audited are not in agreement with the accounting records and returns. We have no exceptions to report arising from this responsibility. Appointment Following the recommendation of the Audit Committee, we were appointed by the members on 4 June 2015 to audit the fnancial statements for the year ended 31 December 2015 and subsequent fnancial periods. The period of total uninterrupted engagement is three years, covering the years ended 31 December 2015 to 31 December 2017. Richard Hughes (Senior Statutory Auditor) for and on behalf of PricewaterhouseCoopers LLP Chartered Accountants and Statutory Auditors London 8 March 2018 Integrated Report and Accounts 2017 G4S plc 131 Financial report Consolidated income statement For the year ended 31 December 2017 Continuin operations Revenue Operating profit before joint ventures, specific items and other separately disclosed items Share of post-tax profit from joint ventures djusted profit before interest, tax and amortisation ( djusted PBIT ) – – charges credits Specific items Specific items Restructuring costs rofit on disposal/closure of subsidiaries/businesses Goodwill impairment Amortisation of acquisition-related intangible assets Operatin profit Finance income Finance expense Profit before tax Tax Profit from continuin operations after tax Loss from discontinued operations Profit for the year ttributable to: Equity holders of the parent Non-controlling interests Profit for the year Notes 2017 £m 2016 £m 5, 6 7,828 7,590 20 6 8 8 8 8 8, 18 8 6, 8 12 12 13 7 482 9 491 (34) – (20) 74 – (10) 501 16 (131) 386 (128) 258 (6) 252 236 16 252 452 9 461 (21) 8 (12) 7 (9) (32) 402 33 (139) 296 (76) 220 (3) 217 198 19 217 Earnin s per share attributable to equity shareholders of the parent 15 Basic and diluted – from continuing operations Basic and diluted – from continuing and discontinued operations 15.6p 15.2p 13.0p 12.8p 132 G4S plc Integrated Report and Accounts 2017 Consolidated statement of comprehensive income For the year ended 31 December 2017 Profit for the year Other comprehensive income Items that will not be re-classified to profit or loss: Re-measurements relating to defined retirement benefit schemes Tax on items that will not be re-classified to profit or loss Items that are or may be re-classified subsequently to profit or loss: 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 Tax on items that are or may be re-classified subsequently to profit or loss Other comprehensive (loss)/income, net of tax Total comprehensive income for the year ttributable to: Equity holders of the parent Non-controlling interests Total comprehensive income for the year Consolidated statement of changes in equity For the year ended 31 December 2017 Notes 2 17 £m 252 2016 £m 217 32 13 13 26 (4) 22 (125) 56 – – (69) (47) (169) 28 (141) 429 (197) (4) 22 250 109 2 5 326 191 14 2 5 305 21 326 t 1 January 2017 Total comprehensive income Dividends paid Transactions with non-controlling interests (“NCI”) Recycling of net investment hedge Recycling of cumulative translation adjustments Own shares awarded Own shares purchased Share-based payments t 31 December 2017 t 1 January 2016 Total comprehensive income Dividends paid Transactions with non-controlling interests (“NCI”) Own shares awarded Share-based payments t 31 December 2016 * See note 36 for an analysis of other reserves. Share capital £m 388 – – – – – – – – 388 388 – – – – – 388 Attributable to equity holders of the parent Other reserves* £m 456 (69) – Retained earnings £m (26 ) 26 (145) Share premium £m 258 – – – – – – – – 258 258 – – – – – 258 (19) – – (11) – 9 (166) (174) 55 (145) (1) (5) 10 (260) – 24 (42) 11 (1 ) – 37 201 250 – – 5 – 456 Total £m 842 191 (145) (19) 24 (42) – (1 ) 9 85 673 305 (145) (1) – 10 842 NCI reserve £m 21 14 (34) 3 – – – – – 4 18 21 (17) (1) – – 21 Total equity £m 863 2 5 (179) (16) 24 (42) – (1 ) 9 854 691 326 (162) (2) – 10 863 Integrated Report and Accounts 2017 G4S plc 133 Financial report Consolidated statement of financial position At 31 December 2017 Consolidated statement of financial position At 31 December 2017 ASSETS Non-current assets ASSETS Goodwill Non-current assets Other acquisition-related intangible assets Goodwill Non-acquisition-related intangible assets Other acquisition-related intangible assets Property, plant and equipment Non-acquisition-related intangible assets Trade and other receivables Property, plant and equipment Investment in joint ventures Trade and other receivables Investments Investment in joint ventures Retirement benefit surplus Investments Deferred tax assets Retirement benefit surplus Deferred tax assets Current assets Inventories Current assets Investments Inventories Trade and other receivables Investments Current tax assets Trade and other receivables Cash and cash equivalents Current tax assets Assets of disposal groups classified as held for sale Cash and cash equivalents Assets of disposal groups classified as held for sale Total assets LIABILITIES Total assets Current liabilities LIABILITIES Bank overdrafts Current liabilities Bank loans Bank overdrafts Loan notes Bank loans Obligations under finance leases Loan notes Trade and other payables Obligations under finance leases Current tax liabilities Trade and other payables Provisions Current tax liabilities Liabilities of disposal groups classified as held for sale Provisions Liabilities of disposal groups classified as held for sale Non-current liabilities Bank loans Non-current liabilities Loan notes Bank loans Obligations under finance leases Loan notes Trade and other payables Obligations under finance leases Retirement benefit obligations Trade and other payables Provisions Retirement benefit obligations Deferred tax liabilities Provisions Deferred tax liabilities Total liabilities Total liabilities Net assets Notes Notes 18 18 18 18 18 19 18 23 19 20 23 22 20 32 22 34 32 6 34 6 21 22 21 23 22 23 26 25 26 25 26, 27 27 26, 27 27 27 28 27 29 28 29 33 25 33 25 27 27 27 28 27 29 28 32 29 33 32 34 33 34 2017 £m 2017 £m 1,914 9 1,914 88 9 395 88 83 395 20 83 20 20 80 20 240 80 2,849 240 2,849 104 42 104 1,416 42 55 1,416 902 55 53 902 2,572 53 5,421 2,572 5,421 (284) (8) (284) (655) (8) (15) (655) (1,262) (15) (79) (1,262) (104) (79) (19) (104) (2,426) (19) (2,426) (5) (1,486) (5) (20) (1,486) (23) (20) (461) (23) (138) (461) (8) (138) (2,141) (8) (4,567) (2,141) (4,567) 854 2016 £m 2016 £m 1,990 18 1,990 86 18 437 86 101 437 19 101 12 19 75 12 285 75 3,023 285 3,023 112 52 112 1,381 52 61 1,381 831 61 151 831 2,588 151 5,611 2,588 5,611 (93) (16) (93) (677) (16) (20) (677) (1,260) (20) (64) (1,260) (116) (64) (58) (116) (2,304) (58) (2,304) (4) (1,715) (4) (37) (1,715) (30) (37) (512) (30) (132) (512) (14) (132) (2,444) (14) (4,748) (2,444) (4,748) 863 35 EQUITY Net assets 863 Share capital 388 EQUITY Share premium 258 Share capital 388 Reserves 196 Share premium 258 Equity attributable to equity holders of the parent 842 Reserves 196 Non-controlling interests 21 Equity attributable to equity holders of the parent 842 Total equity 863 Non-controlling interests 21 The Consolidated statement of financial position at 31 December 2016 has been re-presented – see note 3(a). Total equity 863 The consolidated financial statements were approved by the board of directors and authorised for issue on 8 March 2018. They were The Consolidated statement of financial position at 31 December 2016 has been re-presented – see note 3(a). signed on its behalf by: The consolidated financial statements were approved by the board of directors and authorised for issue on 8 March 2018. They were Ashley Alman a Tim Weller signed on its behalf by: Director Director Tim Weller Ashley Alman a Director Director 854 388 258 388 204 258 850 204 4 850 854 4 854 35 36 36 130 G4S plc Integrated Report and Accounts 2017 134 G4S plc Integrated Report and Accounts 2017 130 G4S plc Integrated Report and Accounts 2017 Consolidated statement of cash flows For the year ended 31 December 2017 Operating profit djustments for non-cash and other items: Goodwill impairment mortisation of acquisition-related intangible assets Net profit on disposal/closure of subsidiaries/businesses Depreciation of property, plant and equipment mortisation of non-acquisition-related intangible assets Share of profit from joint ventures Equity-settled share-based payments Increase/(decrease) in provisions dditional pension contributions Operating cash flow before movements in working capital Decrease/(increase) in inventory Increase in accounts receivable Increase in accounts payable Net cash flow from operating activities of continuing operations Net cash flow from operating activities of discontinued operations Cash generated by operations Tax paid Net cash flow from operating activities Investing activities Purchases of non-current assets Proceeds on disposal of property, plant and equipment Disposal of subsidiaries/businesses Cash, cash equivalents and bank overdrafts in disposed entities cquisition of subsidiaries Interest received Sale of investments Cash flow from equity-accounted investments Net cash flow from investing activities Financing activities Dividends paid to equity shareholders of the parent Dividends paid to non-controlling interests Purchase of own shares Proceeds from new borrowings Repayment of borrowings Net interest received relating to derivative financial instruments Interest paid Repayment of obligations under finance leases Transactions with non-controlling interests Net cash flow from financing activities Net (decrease)/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 net cash held Cash, cash equivalents and bank overdrafts at the end of the year Notes 20 32 17 37 26 201 £m 501 – 10 ( 4) 104 22 (9) 9 18 (40) 541 1 (95) 41 488 – 488 (86) 402 (109) 5 156 (8) (1) 29 3 6 81 (145) (34) (10) 43 (6 2) 29 (136) (23) (16) (5 0) (8 ) 6 2 (14) 5 1 2016 £m 402 9 32 (7) 106 25 (9) 10 (1) (39) 528 (5) (9) 101 615 (9) 606 (84) 522 (116) 9 82 (20) (1) 14 6 8 (18) (145) (17) – 440 (451) 22 (132) (22) (2) (307) 197 388 87 672 Integrated Report and Accounts 2017 G4S plc 135 Financial report Notes to the consolidated financial statements 1. General information G4S plc s a company ncorporated n the Un ted K ngdom. The consol dated f nanc al statements ncorporate the f nanc al statements of the Company and ent t es ( ts subs d ar es) controlled by the Company (collect vely compr s ng “the Group”) and the Group’s nterest n jo nt ventures made up to 31 December each year. The Group operates throughout the world and n a w de range of funct onal currenc es, the most s gn f cant be ng the Euro, the US dollar and Sterl ng. The Group’s f nanc al statements are presented n Sterl ng, as the Group’s pr mary l st ng s n the UK. The address of the reg stered off ce s g ven on page 212. 2. Statement of compliance The consol dated f nanc al statements of the Group have been prepared n accordance w th the Compan es Act 2006, w th Internat onal F nanc al Report ng Standards adopted by the European Un on (IFRSs) and nterpretat ons ssued by the IFRS Interpretat ons Comm ttee (IFRS IC), and the account ng pol c es have been cons stently appl ed. The parent company f nanc al statements have been prepared n – accordance w th FRS 101 Reduced D sclosure Framework, n accordance w th UK Generally Accepted Account ng Pract ce (UK GAAP). These are presented on pages 202 to 210. 3. Si nificant accountin policies (a) Basis of preparation The consol dated f nanc al statements of the Group have been prepared on a go ng concern bas s and us ng the h stor cal cost bas s, except for the revaluat on of certa n non-current assets and f nanc al nstruments. The pr nc pal account ng pol c es adopted are set out below. Judgments made by the d rectors n the appl cat on of those account ng pol c es wh ch have a s gn f cant effect on the f nanc al statements, and est mates w th a s gn f cant r sk of mater al adjustment, are d scussed n note 4. Presentation of the Consolidated statement of financial position The Consol dated statement of f nanc al pos t on as at 31 December 2016 has been re-presented to show the re-class f cat on of certa n tems w th n cash and cash equ valents of £20m as nvestments and to show the re-class f cat on of certa n nvestments totall ng £12m prev ously presented as current, as non-current. As a consequence of th s change n presentat on, cash and cash equ valents as at 31 December 2016 have decreased from £851m to £831m, current nvestments have ncreased from £44m to £52m and new non-current nvestments of £12m have been presented. (b) Presentation of the Consolidated income statement In order to prov de further clar ty n the Group’s Consol dated ncome statement and segmental analys s, the Group separately d scloses spec f c tems, restructur ng costs, prof ts or losses on d sposal/closure of subs d ar es, amort sat on of acqu s t on-related ntang ble assets and any related expenses and goodw ll mpa rment. Th s s cons stent w th the way that f nanc al performance s measured by management and reported to the Board and ass sts n prov d ng a more mean ngful analys s of the Group’s results. The d rectors bel eve that presentat on of the Group’s results n th s way a ds the understand ng of the Group’s f nanc al performance. Further explanat on about the Group’s rat onale for separately present ng these tems s set out n the Alternat ve Performance Measures sect on of the Strateg c Report on pages 35 and 36. Specific items The Group’s Consol dated ncome statement and segmental analys s note separately dent fy results before spec f c tems. Spec f c tems are those that n management’s judgment need to be d sclosed separately n arr v ng at operat ng prof t by v rtue of the r s ze, nature or nc dence. In determ n ng whether an event or transact on s spec f c, management cons ders quant tat ve as well as qual tat ve factors such as the frequency or pred ctab l ty of occurrence. All tems that are reported as spec f c tems are evaluated and approved by the Group’s Aud t Comm ttee pr or to be ng separately d sclosed. The Group seeks to be balanced when report ng spec f c tems for both deb ts and cred ts, and any reversals of excess prov s ons prev ously created as spec f c tems are class f ed cons stently as spec f c tems. In general, prov s ons recogn sed for future losses on onerous contracts are charged to the Consol dated ncome statement w th n Adjusted PBITA. However, where onerous contract charges are s gn f cant by v rtue of the r s ze, they are separately charged w th n spec f c tems. Such losses are d st nct from “ n-year” losses, wh ch are ut l sed aga nst prov s ons for onerous contract losses. Releases of onerous contract prov s ons or g nally charged as spec f c tems are separately cred ted w th n spec f c tems. Spec f c tems may not be comparable to s m larly-t tled measures used by other compan es. Spec f c tems for the current and pr or years are descr bed n note 8. Other separately disclosed items In order to prov de further clar ty n the Consol dated ncome statement, the Group also d scloses separately certa n strateg c restructur ng costs, prof ts or losses on d sposal or closure of subs d ar es, acqu s t on-related amort sat on and expenses and goodw ll mpa rment. Restructur ng costs that are separately d sclosed reflect the mult -year product v ty programme wh ch s be ng mplemented by the Group. Th s programme s of a strateg c nature and, as such, s mon tored and approved by the Group’s Execut ve Comm ttee. Dur ng 2016 and 2017 act v t es under the programme have focused pr mar ly on transform ng the operat ng model n the UK & Ireland and Europe reg ons. Restructur ng costs that are ncurred n the normal course of bus ness are recorded w th n Adjusted PBITA. Go ng forwards the Group has announced a three-year plan to 2020 to mplement eff c ent organ sat onal des gn and leaner processes, wh ch s l kely to requ re further restructur ng nvestment. Further explanat on about the Group’s rat onale for separately present ng prof ts or losses on d sposal or closure of subs d ar es, amort sat on of acqu s t on-related ntang ble assets and goodw ll mpa rment s set out on page 36. 136 G4S plc Integrated Report and Accounts 2017 (c) Basis of consolidation Subsidiaries Subsidiaries are entities controlled b the Group. Control is achieved where the Group has existing rights that give it the current abilit to direct the activities that affect the Group’s returns and exposure or rights to variable returns from the entit . This can be determined either b the Group’s ownership percentage, or b the terms of an shareholder agreement. In the case of certain investments detailed anal sis of the different contracts in place is required, together with a level of judgment, to ascertain whether there is control under the definition of IFRS 10 – Consolidated financial statements (see note 4). On acquisition, the assets, liabilities and contingent liabilities of the acquired business are measured at their fair values at the date of acquisition. The cost of acquisition is measured as the acquisition date fair value of the assets transferred as consideration to the vendor and does not include transaction costs. An excess of the cost of acquisition over the fair values of the identifiable net assets acquired is recognised as goodwill. An deficienc in the cost of acquisition below the fair values of the identifiable net assets acquired (i.e. discount on acquisition) is credited to the Consolidated income statement in the ear of acquisition. The cost of acquisition includes the present value of deferred and contingent consideration pa able, including that in respect of put options held b non-controlling shareholders, as estimated at the date of acquisition. Subsequent changes to the present value of the estimate of contingent consideration and an difference upon final settlement of such a liabilit are recognised in the Consolidated income statement with respect to contingent consideration and in other comprehensive income with respect to put options. Non-controlling interests are stated at their proportion of the fair values of the assets and liabilities recognised. Profits and losses are applied in the proportion of their respective ownership to the interest of the parent and to the non-controlling interest. The results of subsidiaries acquired or disposed of during the ear are included in the Consolidated income statement from the effective date of control and up to the effective date of disposal, respectivel . Joint ventures A joint venture is a joint arrangement whereb the parties that have joint control have the rights to the net assets of the arrangement. The results and assets and liabilities of joint ventures are incorporated in the Group’s consolidated financial statements using the equit method of accounting. Under the equit method, investments in joint ventures are carried in the Consolidated statement of financial position at cost as adjusted for post-acquisition changes in the Group’s share of the net assets of the joint venture, less an impairment in the value of the investment. The Group’s share of post-tax profits or losses is recognised in the Consolidated income statement. Transactions eliminated on consolidation All intra-group transactions, balances, income and expenses are eliminated on consolidation. Where a Group compan transacts with a joint venture of the Group, profits and losses are eliminated to the extent of the Group’s interest in the relevant joint venture. (d) Foreign c rrencies The financial statements of each of the Group’s businesses are prepared in the functional currenc applicable to that business. Transactions in currencies other than the functional currenc are translated at the rates of exchange prevailing on the dates of the transactions. At each balance sheet date, monetar assets and liabilities which are denominated in other currencies are retranslated at the rates prevailing on that date. Non-monetar 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-monetar items measured at historical cost denominated in other currencies are not retranslated. Gains and losses arising on retranslation are included in the Consolidated 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 rates on the dates of the transactions). Exchange differences arising are recognised in other comprehensive income, together with exchange differences arising on monetar items that are in substance a part of the Group’s net investment in foreign operations, and on borrowings and other currenc instruments designated as hedges of such investments where and to the extent that the hedges are deemed to be effective. On disposal, translation differences are recognised in the Consolidated income statement in the period in which the operation is disposed of. Integrated Report and Accounts 2017 G4S plc 137 Financial report Notes to the consolidated financial statements continued 3. Significant accounting policies continued e) Derivative financial instruments and hedge accounting In accordance with its treasury po icy, the Group on y ho ds or issues derivative financia instruments to manage the Group’s exposure to financia risk, not for trading purposes. Such financia risk inc udes the interest-rate risk on the Group’s variab e-rate borrowings, the fair-va ue risk on the Group’s fixed-rate borrowings, commodity risk in re ation to its diese consumption and foreign-exchange risk on transactions, on the trans ation of the Group’s resu ts and on the trans ation of the Group’s net assets measured in foreign currencies. The Group manages these risks through a range of derivative financia instruments, inc uding interest-rate swaps, fixed-rate agreements, commodity swaps, commodity options, forward-currency contracts and currency swaps. Derivative financia instruments are recognised in the Conso idated statement of financia position at fair va ue as financia assets or financia iabi ities. The gain or oss on re-measurement to fair va ue is recognised immediate y in the Conso idated income statement, un ess the derivatives qua ify for hedge accounting where the treatment of any resu tant gain or oss depends on the nature of the item being hedged as described be ow: Fair-value hedges The change in the fair va ue of both the hedging instrument and the re ated portion of the hedged item that is attributab e to the hedged risk is recognised immediate y in the Conso idated income statement. Cash-flow and net-investment hedges The change in the fair va ue of the portion of the hedging instrument that is determined to be an effective hedge is recognised in equity and subsequent y recyc ed to the Conso idated income statement when the hedged cash f ow or hedged net investment impacts the Conso idated income statement. The ineffective portion of the fair va ue of the hedging instrument is recognised immediate y in the Conso idated income statement. f) Intangible assets Goodwill Business combinations are accounted for by the app ication of the acquisition method. Goodwi arising on conso idation represents the excess of the cost of acquisition over the Group’s interest in the fair va ue of the identifiab e assets, iabi ities and contingent iabi ities at the date of acquisition of a subsidiary or joint venture. No goodwi arises on the acquisition of an additiona interest from a non-contro ing interest in a subsidiary as this is accounted for as an equity transaction. Goodwi is stated at cost, ess any accumu ated impairment osses, and is tested annua y for impairment or more frequent y if there are indications that amounts may be impaired. On disposa of a subsidiary or joint venture, the attributab e amount of goodwi is inc uded in the determination of the profit or oss on disposa . Ac uisition-related intangible assets Intangib e assets on acquisitions that are either separab e or arising from contractua rights are recognised at fair va ue at the date of acquisition. Such acquisition-re ated intangib e assets inc ude trademarks, techno ogy, customer contracts and customer re ationships. The fair va ue of acquisition-re ated intangib e assets is determined by reference to market prices of simi ar assets, where such information is avai ab e, or by the use of appropriate va uation techniques, inc uding the roya ty re ief method and the excess earnings method. Acquisition-re ated intangib e assets are amortised by equa annua insta ments over their expected economic ife. The directors review acquisition-re ated intangib e assets on an on-going basis and, where appropriate, provide for any impairment in va ue. The estimated usefu ives are as fo ows: Trademarks and techno ogy Customer contracts and customer re ationships up to a maximum of five years up to a maximum of ten years Non-ac uisition-related intangible assets Deve opment expenditure represents expenditure incurred in estab ishing new services and products of the Group. Such expenditure is recognised as an intangib e asset on y if the fo owing can be demonstrated: the expenditure creates an identifiab e asset, its cost can be measured re iab y, it is probab e that it wi generate future economic benefits, it is technica y and commercia y feasib e, and the Group has sufficient resources to comp ete deve opment. In a other instances, the cost of such expenditure is taken direct y to the Conso idated income statement. Capita ised deve opment 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 capita ised deve opment expenditure on an on-going basis and, where appropriate, provide for any impairment in va ue. Research expenditure is charged to the Conso idated income statement in the year in which it is incurred. Capita ised computer software is stated at cost, net of amortisation and any provision for impairment. Amortisation is charged on software so as to write off the cost of the assets to their estimated residua va ues by equa annua insta ments over their expected usefu economic ives, up to a maximum of eight years. 138 G4S plc Integrated Report and Accounts 2017 (g) Property, plant and eq ipment Property, plant and e uipment is stated at cost, net of accumulated depreciation and any provision for impairment. Depreciation is provided on all property, plant and e uipment other than freehold land. Depreciation is calculated so as to write off the cost of the assets to their estimated residual values by e ual annual instalments over their expected useful economic lives as follows: Freehold and long leasehold buildings Short leasehold buildings (under 50 years) E uipment and motor vehicles up to 50 years over the life of the lease 2 to 10 years Assets held under finance leases are depreciated over the shorter of their expected useful economic lives and the terms of the relevant lease. Where significant, the residual values and the useful economic lives of property, plant and e uipment are re-assessed annually. (h) Financial instr ments Financial assets and financial liabilities are recognised when the Group becomes a party to the contractual provisions of the instruments. Trade receivables Trade receivables are initially recognised at fair value and are subse uently carried at amortised cost less provision for impairment. Provisions are made where the Group identifies a risk of non-payment, taking into account ageing, previous losses experienced and other local economic and market conditions and are calculated by discounting expected cash flows using the effective interest rate at origination of the receivable. Investments Investments comprise investments in securities which are classified as held-for-trading. Such investments are initially recognised at cost, including transaction costs, and subse uently measured at fair value. Gains and losses arising from changes in fair value are recognised in the Consolidated income statement. Cash and cash equivalents Cash and cash e uivalents comprise cash balances and call deposits. Bank overdrafts that are repayable on demand and that form an integral part of the Group’s cash management are included as a component of cash and cash e uivalents for the purpose of the Consolidated statement of cash flow. 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 Consolidated income statement on an accrual basis using the effective-interest method. Trade ayables Trade payables are not interest-bearing and are stated initially at fair value. Equity instruments E uity instruments issued by the Group are recorded at the value of proceeds received, net of direct issue costs. (i) 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. (j) Impairment The carrying values of the Group’s assets, with the exception of inventories, financial receivables and deferred tax assets, are reviewed on an on-going 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 Consolidated income statement whenever the carrying value of an asset or its cash-generating unit exceeds its recoverable amount. 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. Integrated Report and Accounts 2017 G4S plc 139 Financial report Notes to the consolidated financial statements continued 3. Significant acco nting policies continued (k) Employee benefits Retirement benefit costs Payments to def ned contr but on schemes are charged as an expense as they fall due. Payments made to state-managed ret rement benef t schemes are dealt w th as payments to def ned contr but on schemes where the Group’s obl gat ons under the schemes are equ valent to those ar s ng n a def ned contr but on ret rement benef ts scheme. The ret rement benef t obl gat on recogn sed n the Consol dated statement of f nanc al pos t on represents the present value of the Group’s total def ned benef t obl gat on reduced by the fa r value of the related scheme assets. The total of all of the Group’s nd v dual schemes that are n a net asset pos t on s presented separately n the Consol dated statement of f nanc al pos t on. The value of any net asset recogn sed for a def ned benef t scheme s l m ted to the present value of ava lable refunds and reduct ons n future contr but ons to the scheme. For def ned benef t plans, the cost charged to the Consol dated ncome statement cons sts of current serv ce cost, net nterest cost, and past serv ce cost. The f nance element of the pens on charge s shown n f nance expense and the rema n ng serv ce cost element s charged as a component of employee costs n the Consol dated ncome statement. Actuar al and other re-measurement ga ns and losses are recogn sed mmed ately n full w th n other comprehens ve ncome. Share-based payments The Group ssues equ ty-settled and cash-settled share-based payments to certa n employees. The fa r value of equ ty-settled share- based payments s determ ned at the date of grant and expensed, w th a correspond ng ncrease n equ ty, on a stra ght-l ne bas s over the vest ng per od, based on the Group’s est mate of the shares that w ll eventually vest. The amount expensed s adjusted over the vest ng per od for changes n the est mate of the number of shares that w ll eventually vest, exclud ng changes result ng from any market-related performance cond t ons. Cash-settled share-based payments are recogn sed as a l ab l ty at fa r value at the date of grant. The value of the l ab l ty s re-measured at each report ng date and at the date the l ab l ty s settled. Changes n the l ab l ty are recogn sed d rectly n the Consol dated ncome statement. (l) Provisions and contingent liabilities Prov s ons are recogn sed when a present legal or construct ve obl gat on ex sts for a future l ab l ty n respect of a past event and where the amount of the obl gat on can be est mated rel ably. The amount recogn sed as a prov s on s the Group’s best est mate of the l kely outflows at the end of the report ng per od. In respect of cla ms, onerous customer contracts and l t gat on, the Group prov des for ant c pated costs where an outflow of resources s cons dered probable and a reasonable est mate can be made of the l kely outcome. For all r sks, the ult mate l ab l ty may vary from the amounts prov ded and w ll be dependent upon the eventual outcome of any settlement. Management exerc ses judgment n measur ng the Group’s exposures to cont ngent l ab l t es (see note 33) through assess ng the l kel hood that a potent al cla m or l ab l ty w ll ar se and n quant fy ng the poss ble range of f nanc al outcomes. Where the t me value of money s mater al, prov s ons are stated at the present value of the expected expend ture us ng an appropr ate d scount rate. (m) Restr ct ring costs A restructur ng prov s on s recogn sed when the Group has developed a deta led formal plan for the restructur ng and has ra sed a val d expectat on n those affected that t w ll carry out the restructur ng by start ng to mplement the plan or by announc ng ts ma n features to those affected by t. The measurement of a restructur ng prov s on ncludes only the d rect expend tures ar s ng from the restructur ng, wh ch are those amounts that are both necessar ly enta led by the restructur ng and not assoc ated w th the on-go ng act v t es of the ent ty. The Group d st ngu shes n the Consol dated ncome statement between restructur ng costs that are recurr ng and those that relate to one-off or transformat onal Group programmes that mpact a number of operat ons. Recurr ng restructur ng costs that are ncurred n the normal course of bus ness are recorded as part of the Group’s results w th n adjusted prof t before nterest, tax and amort sat on (Adjusted PBITA). Restructur ng costs that are one-off and nd v dually mater al or relate to programmes l nked to the Group’s w der transformat on, and requ re approval at execut ve level, are d sclosed separately n the Consol dated ncome statement. (n) Reven e recognition The Group’s revenue ar ses from two pr mary sources Secure Solut ons products, ma nly compr s ng manned secur ty and fac l t es management serv ces, and Cash Solut ons, ma nly the prov s on of phys cal cash management serv ces. – W th n Secure Solut ons there are add t onal revenue streams ar s ng from: • Technology serv ces, compr s ng the supply, nstallat on and mon tor ng of alarm systems, and secur ty and bu ld ng systems technology; • Fac l t es management; and • Care & Just ce serv ces. 140 G4S plc Integrated Report and Accounts 2017 Within Cash olutions there is an additional revenue stream arising from Technology services to retailers, comprising the provision of hardware and software for customer cash management and related services. In all of these business areas revenue is measured at the fair value of consideration received or receivable, net of discounts, VAT and other sales-related taxes. Certain low-volume, high-value government contracts, mainly for Care & Justice services and facilities management services, can cover a range of bundled services over a long period of time, that are provided on a time and materials basis. Revenue for this type of contracts is recognised on an accrual basis based on the individual services provided and in accordance with the terms of the contract. Where services provided to customers include more than one particular revenue source, particularly in cash technology services and in the alarms business, such as the supply and installation of equipment together with on-going services and maintenance contracts, the fair value of each revenue source is separately identified and allocated to each element of the arrangement and recognised as the product is sold or the services are delivered. Manned security, cash management, facilities management, other care and justice services and security systems services Revenue is recognised to reflect the period in which the service is provided. Security alarm systems installations Revenue for B2B customers is recognised on completion of the installation, and the attributable costs of the installation are recognised as a cost of sale, given that economic ownership of the asset is transferred to the customer. Revenue for B2C customers is deferred and recognised along with the revenue from the related monitoring service over the term of the contract, given that legal and economic ownership of the assets remains with the Group. ervice and monitoring fees for all alarm system contracts are recognised in the period when the service is provided. Long term contracts These contracts are mainly related to certain long-term construction or alarm or other technology installation projects which span one or more reporting periods and where long-term contract accounting is applied. Where the outcome of a long-term 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 measured either by the proportion that contract costs incurred for work to date bear to the estimated total contract costs, or by the proportion that the sales value of work completed to date bears to the total sales value. 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 and hence recoverable. Where the outcome of a long-term contract cannot be estimated reliably, contract revenue is recognised only 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 probable that total contract costs will exceed total contract revenue, the expected loss is recognised immediately as an expense. (o) Pre-contract and mobili ation co t Pre-contract costs in respect of major outsourcing contracts, incurred after the point at which the Group achieves preferred bidder status (at which point it is considered probable that the contract will be obtained) and before contract mobilisation, are capitalised and expensed over the life of the contract, subject to recoverability criteria. Costs incurred prior to this point are expensed as incurred. Capitalised costs are expensed immediately in the event that preferred bidder status is not followed by the award of the contract, or where these may no longer be expected to be recovered through future profits. Mobilisation costs are those costs incurred after the signing of a contract with a customer, and prior to commencement of delivery of the contract. Costs incurred during this stage are generally only capitalised if the criteria to be capitalised as inventories or as property, plant and equipment are met. In all other cases mobilisation costs are expensed as incurred. (p) Onerou contract Onerous contract provisions are recognised where the unavoidable costs of meeting the obligations under the contract exceed the economic benefits expected to be received under it. Management’s profit-improvement plans to recover the position on loss-making contracts require a level of judgment and are generally taken into account in the calculation of the onerous contract provision only when implementation has commenced and tangible evidence exists of benefits being delivered. The provision is calculated based on discounted cash flows to the end of the contract. In general, provisions recognised for future losses are charged to the Consolidated income statement within Adjusted PBITA. Where onerous contract provisions are material by virtue of their size, they are separately charged within specific items. In-year operating losses from onerous contracts are accounted for as a utilisation of the related provision for future losses. Any excess or shortfall to the initial estimate for onerous contract provisions is credited or charged in the Consolidated income statement consistent with where the charge for the initial provision was recognised. Vacant property provisions are recognised when the Group has committed to a course of action that will result in the property becoming vacant. The provision is calculated based on discounted cash flows to the end of the lease taking into account expected future sub-lease income. Integrated Report and Accounts 2017 G4S plc 141 Financial report Notes to the consolidated financial statements continued 3. Significant acco nting policies continued (q) Interest Interest income is accrued on a time basis by re erence to the principal outstanding and at the e ective interest rate applicable. This is the rate that exactly discounts estimated uture cash receipts through the expected li e o the inancial asset’s net carrying amount. Borrowing costs, also calculated using the e ective-interest method, are recognised as an expense in the Consolidated income statement. (r) Income taxes Tax is recognised in the Consolidated income statement except to the extent that it relates to items recognised in equity, in which case it is recognised through other comprehensive income. The tax expense represents the sum o current tax and de erred tax, and excludes charges or interest on tax and certain penalties on tax settlements, which are reported within inance expenses and administration expenses respectively. Current tax is based on taxable pro it or the year. Taxable pro it di ers rom net pro it as reported in the Consolidated income statement because it excludes items o income or expense that are taxable or deductible in other years and it urther excludes items that are never taxable or deductible. The Group’s liability or current tax is calculated using tax rates that have been enacted or substantively enacted by the balance sheet date. De erred tax is the tax expected to be payable or recoverable on di erences between the carrying amounts o assets and liabilities in the consolidated inancial statements and the corresponding tax bases used in the computation o taxable pro it, and is accounted or using the balance sheet liability method. De erred tax liabilities are generally recognised or all taxable temporary di erences. De erred tax assets are recognised to the extent that it is probable that uture taxable pro its will be available against which deductible temporary di erences can be utilised. De erred tax liabilities are recognised or taxable temporary di erences arising on investments in subsidiaries and interests in joint ventures, except where the Group is able to control the reversal o the temporary di erence and it is probable that the temporary di erence will not reverse in the oreseeable uture. The carrying amount o potential de erred tax assets is re-assessed at each balance sheet date and recognised to the extent that it is probable that su icient taxable pro its will be available to allow those assets to be recovered. De erred tax is measured based on the tax rates that have been enacted or substantively enacted by the end o the reporting period. Tax liabilities or re unds may di er rom those anticipated due to changes in tax legislation, di ering interpretations o tax legislation and uncertainties surrounding the application o tax legislation. In situations where uncertainties exist, provision is made or tax liabilities and assets on the basis o management judgment ollowing consideration o the available relevant in ormation. Further detail on management’s judgments in respect o taxation is provided in note 4. (s) Leasing Leases are classi ied as inance leases when the terms o the lease trans er substantially all o the risks and rewards o ownership to the lessee. On occasion this classi ication requires a level o judgment. All other leases are classi ied as operating leases. Assets held under inance leases are recognised at the inception o the lease at their air value or, i lower, at the present value o the minimum lease payments. The corresponding liability to the lessor is included in the Consolidated statement o inancial position as a inance lease obligation. Lease payments made or received are apportioned between inance charges or income and the reduction o the lease liability or asset so as to produce a constant rate o interest on the outstanding balance o 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. (t) Non-c rrent assets held for sale and discontin ed operations Non-current assets (and disposal groups) classi ied as held or sale are measured at the lower o carrying amount and air value less costs to sell. Non-current assets and disposal groups are classi ied as held or sale i 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 or immediate sale in its present condition. The Group must be committed to the sale, which should be expected to quali y or recognition as a completed sale within one year rom the date o classi ication. A discontinued operation is a component o the Group’s business that represents a separate major line o business or geographical area o operations or is a subsidiary acquired exclusively with a view to resale that has been disposed o , has been abandoned or meets the criteria to be classi ied as held or sale. ( ) Dividend distrib tion Dividends are recognised as distributions to equity holders in the period in which they are paid or approved by the shareholders in general meeting. 142 G4S plc Integrated Report and Accounts 2017 (v) Adoption of new and revi ed accounting tandard and interpretation The Group has not earl -adopted an standard, amendment or interpretation. A number of new standards, amendments to standards and interpretations are not et effective for the ear ended 31 December 2017. The directors are currentl evaluating the impact of these new standards on the group financial statements: • Annual Improvements to IFRS Standards 2014-2016 C cle • • • – IFRS 2 amendments Classification and Measurement of share-based pa ment transactions IFRIC 22 – Foreign currenc transactions and advance consideration IFRIC 23 – Uncertaint over income tax treatments IFRS 15 – Revenue from Contracts with Customers The Group has adopted IFRS 15 – Revenue from Contracts with Customers with effect from 1 Januar 2018, and will prepare its 2018 Interim Results and Integrated Report and Accounts in accordance with the requirements of this new standard, with full retrospective application restating comparatives where appropriate. The majorit of the services which the Group provides are related to Secure Solutions (including securit s stems) and Cash Solutions (including hardware and software s stems). Following a thorough review of the contractual terms of the contracts under which the Group provides these services, and from an assessment of the basis on which customers are invoiced in relation to work performed on a number of material contracts in each of these business categories, it has been concluded that the Group’s right to consideration from the customer corresponds directl with the value to the customer of the Group’s performance completed to date. The Group is therefore allowed to recognise revenue in the amount to which it has the right to invoice, and there will be no significant change in revenue recognition in respect of these services. The Group will appl the practical expedient approach allowed b IFRS 15 in such cases, whereb revenue is recognised in line with amounts invoiced to customers, based on the value of services performed over the duration of the contract. Onl a residual amount of care and justice services have been identified where the practical expedient approach is not applicable, but based on a detailed assessment of the most material of such contracts in relation to IFRS 15 revenue recognition criteria, no material change to current revenue recognition has been identified. In addition to review and assessment of revenue recognition, the Group has assessed the impact of IFRS 15 criteria for capitalisation of contract-acquisition and contract-fulfilment costs b comparison with its existing accounting policies. Certain changes (such as the cessation of capitalisation of pre-contract costs after attainment of preferred supplier status) are required to those existing policies under IFRS 15, but these changes will likewise have no material impact on the Group’s results or Consolidated statement of financial position. As a result of these reviews, management has concluded that, whilst refinements are required to certain of the Group’s existing revenue recognition and contract cost capitalisation policies for compliance with IFRS 15, together with the inclusion of a number of additional disclosures in the Integrated Report and Accounts for 2018 and for subsequent ears, there will be no material change to the Group’s revenue, Adjusted PBITA, profit before tax or profit for the ear, or to its Consolidated statement of financial position, as a consequence of adoption of this new standard. – IFRS Financial Instruments The Group has adopted IFRS 9 Integrated Report and Accounts in accordance with the requirements of this new standard, with restated comparatives where appropriate. Financial Instruments with effect from 1 Januar 2018, and will prepare its 2018 Interim Results and – The new standard is applicable to financial assets and financial liabilities, and covers the classification, measurement, impairment and de-recognition of financial assets and liabilities together with a new hedge accounting model. Management has completed its assessment of the impact of this new accounting standard on its consolidated financial statements, with particular reference to the impact of the expected credit loss model for impairment of financial assets and to the changes in respect of hedge accounting, from which it has been concluded that there will be no material change to the Group’s revenue, Adjusted PBITA, profit before tax or profit for the ear, or to its Consolidated statement of financial position, as a consequence of adoption of IFRS 9, and there will be no change to the Group’s existing hedging strateg . IFRS 16 – Leases The Group continues to assess the impact of adopting IFRS 16 – Leases, which will be effective for the Group’s financial ear ending 31 December 2019. Additional debt will be recognised in the Consolidated statement of financial position, together with additional propert , plant and equipment assets. The impact on the Consolidated income statement is currentl expected to be a small increase in Adjusted PBITA, due to the re-classification of the interest element of operating lease rentals as finance costs. The impact on Profit before tax will be variable over the term of a lease, as interest is charged at the effective rate on the reducing balance of the liabilit over the lease term. Over the course of each lease the cumulative impact on pre-tax profit will be neutral. The impact on the Consolidated statement of cash flows will be an increase in net cash flow from operating activities, equivalent to the increase in Adjusted PBITA, matched b an increase in cash outflow from financing activities due to the re-classification of finance lease interest, with no impact on net cash flow. Integrated Report and Accounts 2017 G4S plc 143 Financial report Notes to the consolidated financial statements continued 4. Accountin estimates, jud ments and assumptions The preparation of financia statements in conformity with adopted IFRSs requires management to make judgments, estimates and assumptions that affect the app ication of the Group’s accounting po icies, which are described in note 3, with respect to the carrying amounts of assets and iabi ities at the date of the financia statements, the disc osure of contingent assets and iabi ities at the date of the financia statements and the reported amounts of income and expenses during the reporting period. Si nificant jud ments Significant judgments are those made by management when app ying its accounting po icies that are considered to have the most significant impact on amounts recognised in the conso idated financia statements. During the year, management reassessed the most significant judgments and determined that those re ating to revenue recognition were no onger considered to be significant. Those judgments that are considered to have the most significant impact on amounts recognised in the conso idated financia statements, apart from those invo ving estimations (which are disc osed separate y be ow), are the fo owing: Compliance with forei n ownership rules and consolidation of subsidiaries The Group has a diverse set of comp ex ownership structures, which are sometimes driven by oca aws and regu ations re ating to foreign ownership. In some instances the Group operates through oca structures with imited direct share ownership of the business but exercises contro through shareho der agreements. Judgment is required in determining whether certain Group entities qua ify for conso idation under IFRS10 – Conso idated Financia Statements, and in some instances professiona and ega advice is sought to support these judgments. Conso idation of any of these entities wou d be at risk if the Group’s abi ity to enforce its rights of contro was successfu y cha enged. These judgments have been app ied in determining how the Group conso idates businesses with an aggregated revenue of c.£800m, Adjusted PBITA of c.£60m and equity shareho ders’ funds of c.£200m. The impact on the Group’s earnings (after tax) of equity accounting rather than fu conso idation wou d not be materia . Classification of leases The c assification of eases as operating or finance eases is based on the criteria set out in IAS 17 – Leases, which defines a series of attributes which, when contained within a ease, may resu t in its c assification as a finance ease. Judgment is required in assessing eases at inception as to whether individua attributes, in aggregate or in iso ation, are such that the substance of the ease is that of a finance ease. Detai s of the Group’s finance eases are disc osed in note 28 and the Group’s operating ease commitments are set out in note 38. Alternative Performance Measures The Group uses Adjusted PBITA as a consistent interna and externa reporting measure of its performance, as management views it as being more representative of the norma course of business and more comparab e period to period. Adjusted PBITA exc udes strategic restructuring costs, amortisation of acquisition-re ated intangib e assets and specific and other separate y disc osed items which the Group be ieves shou d be disc osed separate y by virtue of their size, nature or incidence. Judgment is required when defining those items to be disc osed separate y and when app ying the c assification criteria to each period’s resu ts. Further detai s on separate y disc osed items are set out in note 8. Si nificant estimates and assumptions Significant estimates and associated assumptions are those that have a significant risk of resu ting in a materia adjustment to the carrying amounts of assets and iabi ities within the next financia year. Significant estimates are made taking into account historica experience and various other factors that are be ieved to be reasonab e under the circumstances, inc uding current and expected economic conditions, and, in some cases, actuaria techniques. Estimates and under ying assumptions are reviewed on an on-going basis. Revisions to accounting estimates are recognised in the period in which the estimate is revised and in any future periods affected. The most significant estimates, assumptions and sources of uncertainty in preparing the Group’s 2017 conso idated financia statements are set out be ow: Onerous contracts The Group de ivers certain ong-term services that are comp ex in nature. Some of these contracts may evo ve to become oss-making, such that net unavoidab e osses are expected to be incurred over their ife. Where a contract is expected to be oss-making over its remaining term, the net present va ue of estimated future osses is determined in order to ca cu ate an onerous contract provision. The identification and measurement of such provisions is subject to inherent risk, given the extended time periods often invo ved and the number of variab es which are not a within the Group’s contro . In particu ar, estimation is required in assessing future expected revenue and costs on such contracts, inc uding: • determining the expected impact of any profit improvement p ans where sufficient evidence exists of benefits being de ivered by those p ans; and • determining an appropriate discount rate to app y to materia future cash f ows. The eve of uncertainty in the estimates and assumptions supporting expected future revenues and costs can vary with the comp exity of each contract and with the form of service de ivery. For further detai s of how the Group has app ied judgments and estimates to significant onerous contract provisions refer to note 33 on pages 179 to 181. 144 G4S plc Integrated Report and Accounts 2017 Carrying value of goodwill The Group tests tangi le and intangi le assets, including goodwill, for impairment on an annual asis or more frequently if there are indications that amounts may e impaired. The impairment analysis for such assets is ased principally upon discounted estimated future cash flows from the use and eventual disposal of the assets, requiring assumptions on growth rates and the impact of local economic factors. The full methodology and results of the Group’s impairment testing, including an analysis of the sensitivity of goodwill to the key assumptions, are presented in note 18. Taxa ion The Group operates in many tax jurisdictions including countries where the tax legislation is not consistently applied and under some complex contractual circumstances where the responsi ility for tax arising is not always clear. Judgments and estimates are required to determine the appropriate amount of tax to provide for and any required disclosure around contingent tax lia ilities at each period end. Provisions for tax lia ilities are estimated for existing matters under dispute with local tax authorities, as well as for matters which it is considered may e disputed y them, where it is pro a le that a future lia ility will arise. The tax lia ility provided is management’s est estimate, taking into account external advice, the anticipated position of the relevant tax authorities, and other local factors. In certain cases, and where appropriate, a pro a ility weighting is applied in determining the amount provided. In all cases it is assumed that the local tax authorities have, or will e provided with, full information. Therefore the tax lia ility is not reduced for “detection risk”. Further details a out the range of the potential tax exposure to which the Group is su ject are set out in note 13. The Group has tax losses and other deducti le temporary differences, mainly in the UK and USA, that have the potential to reduce tax payments in future years. Deferred tax assets are only recognised to the extent that their recovery is pro a le, having regard to the projected future taxa le income of these entities and after taking into account specific risk factors that affect the recovery of these assets. The same profit projections are used for these purposes as are used y the usiness, for example in assessing the carrying value of goodwill. Judgment is applied on a case- y-case asis due to the jurisdictional nature of taxation. This analysis is considered afresh at each alance sheet date. Valua ion of re iremen benefi obliga ions The valuation of defined retirement enefit schemes is arrived at using the advice of qualified independent actuaries who use the projected unit credit method for determining the Group’s o ligations. This methodology requires the use of a variety of assumptions and estimates, including the determination of an 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 enefit o ligations, including an analysis of the sensitivity of the calculations to the key assumptions, are presented in note 32. Labour laws and commercial agreemen s The Group is involved in disputes in a num er of countries, mainly related to activities incidental to its operations. Currently there are a num er of such disputes open in relation to the application of local la our law, commercial agreements with customers and su contractors and claims and compliance matters, in some cases in the course of litigation. In addition the interpretation of la our laws and regulations in a num er of countries where the Group operates is complex and there is an inherent judgment made when applying those laws and regulations that are open to interpretation. As such, there is a risk that further disputes and claims from employees could arise in the future. Where there is a dispute (or where there is a risk of a dispute on claims in the future) and where, ased on legal counsel advice, the Group estimates that it is pro a le that the dispute will result in an outflow of economic resources, provision is made ased on the Group’s est estimate of the likely financial outcome. For further details of how the Group has applied judgments and estimates to these provisions and, where relevant, an analysis of the sensitivity of the provisions to the key underlying estimates and assumptions, refer to note 33 on pages 179 to 181. In certain instances it is not possi le to determine a relia le estimate or a reasona le range of potential outcomes. For these cases, disclosure of the relevant items as contingent lia ilities is provided in note 33. Integrated Report and Accounts 2017 G4S plc 145 Financial report Notes to the consolidated financial statements continued 5. Re enue An analysis of t e Group’s revenue, as defined by IAS 18 – Revenue, is as follows: Continuing operations Sale of goods Rendering of services Revenue from construction contracts Revenue from continuing operations as presented in t e Consolidated income statement Notes 6 2017 £m 281 7,344 203 7,828 2016 £m 311 7,072 207 7,590 6. Operating segments T e Group operates on a worldwide basis and derives a substantial proportion of its revenue and operating profit from eac of t e following seven geograp ic regions: Africa, Asia Pacific, Latin America, Middle East & India, Europe, Nort America and UK & Ireland. For eac of t ese reportable segments, t e Group Executive Committee (t e c ief operating decision maker) reviews internal management reports on a regular basis. Segment information is presented below: Re enue by reportable segment Africa Asia Pacific Latin America Middle East & India Emerging markets Europe Nort America UK & Ireland* De eloped markets Total re enue Total gross segment re enue 2017 £m 554 763 732 864 2,913 1,491 2,034 1,419 4,944 7,857 Inter-segment re enue 2017 £m (6) (2) – (12) (20) (1) (5) (3) (9) (29) External re enue 2017 £m 548 761 732 852 2,893 1,490 2,029 1,416 4,935 7,828 Total gross segment revenue 2016 £m 502 717 660 862 2,741 1,442 1,908 1,513 4,863 7,604 Inter-segment revenue 2016 £m (1) (3) – (3) (7) (1) (4) (2) (7) (14) External revenue 2016 £m 501 714 660 859 2,734 1,441 1,904 1,511 4,856 7,590 *Revenue in t e UK, being t e Group’s country of domicile, was £1,298m (2016: £1,406m). Re enue by product/ser ice Secure Solutions Cas Solutions Total re enue External re enue 2017 £m 6,532 1,296 7,828 External revenue 2016 £m 6,349 1,241 7,590 Inter-segment sales are c arged at prevailing market prices. T e Group as no transactions (2016: none) wit a single external customer t at amount to 10% or more of total Group revenue. 146 G4S plc Integrated Report and Accounts 2017 6. Operating segments continued Operating profit before corporate costs by reportable segment Africa Asia Pacific Latin A erica Middle East & India Europe North A erica UK & Ireland Adjusted PBITA before corporate costs Corporate costs Adjusted PBITA Net specific ite s Restructuring costs Net profit on disposal/closure of subsidiaries Goodwill i pair ent A ortisation of acquisition-related intangible assets Operating profit/(loss) Continuing operations 2017 £m 39 65 28 56 109 124 119 540 (49) 491 (34) (20) 74 – Discontinued operations 2017 £m – – – – – (6) – (6) – (6) – – – – (10) 501 – (6) Total 2017 £m 39 65 28 56 109 118 119 534 (49) 485 (34) (20) 74 – (10) 495 Continuing operations 2016 £ 35 56 15 76 95 115 119 511 (50) 461 (13) (12) 7 (9) Discontinued operations 2016 £ (1) – – – – (2) – (3) – (3) – – – – (32) 402 – (3) Total 2016 £ 34 56 15 76 95 113 119 508 (50) 458 (13) (12) 7 (9) (32) 399 Refer to note 7 for details on discontinued operations. Non-current assets The following infor ation is analysed by reportable seg ent and by the geographical area in which the assets are located: Non-current assets1 By reportable segment Africa Asia Pacific Latin A erica Middle East & India Europe North A erica UK & Ireland* Total segment non-current assets1 Corporate Total non-current assets1 Other non-current assets2 Less: Non-current assets held for sale Total non-current assets 2017 £m 2016 £ 105 256 158 117 410 496 862 2 404 47 2 451 424 (26) 2 849 118 277 180 126 466 577 877 2,621 19 2,640 460 (77) 3,023 * Non-current assets in the UK, being the Group’s country of do icile, a ounted to £817 (2016: £825 ). 1. Non-current assets co prise goodwill, other acquisition-related intangible assets, non-acquisition-related intangible assets, property, plant and equip ent and invest ents in joint ventures. 2. Other non-current assets co prise trade and other receivables, invest ents, retire ent benefit surpluses and deferred tax assets. Integrated Report and Accounts 2017 G4S plc 147 Financial report Notes to the consolidated financial statements continued Other information By reporta le segment Africa Asia Pacific Latin America Middle East & India Europe North America UK & Ireland Corporate Total Impairment losses recognised in income 2017 £m – – – – – – – – – Depreciation and amortisation 2017 £m 14 12 11 12 41 10 30 6 136 Impairment losses recognised in income 2016 m – – 14 – – – 9 – 23 Depreciation and amortisation 2016 m 13 13 15 11 45 10 53 3 163 Capital additions 2017 £m 13 10 7 6 28 12 22 10 108 Capital additions 2016 m 12 6 9 9 33 13 32 15 129 7. Discontinued operations The loss from discontinued operations of 6m in the current year relates to impairments of trade receivables and costs and charges incurred or expected to be incurred relating to historical disposals of businesses classified as discontinued operations at the time of sale (2016: 3m costs and charges relating to historical disposals). Discontinued operations incurred no tax charge during the year (2016: nil). None of the Group’s businesses currently held for sale or closure meet the criteria to be classified as discontinued operations in the current year (2016: none). The effect of discontinued operations on segment results is disclosed in note 6. Discontinued operations generated no cash flows for the year ended 31 December 2017 (2016: 9m operating cash outflow). 8. Operating profit The Consolidated income statement can be analysed as follows: Continuing operations Revenue Cost of sales Gross profit Administration expenses Goodwill impairment Share of profit after tax from joint ventures Operating profit 2017 £m 7,828 (6,432) 1,396 (904) – 9 501 2016 m 7,590 (6,212) 1,378 (976) (9) 9 402 Operating profit includes items that are separately disclosed for the year ended 31 December 2017 relating to: • Net specific items charge of 34m (2016: 13m), of which 19m (2016: 4m) primarily relates to the anticipated total losses over the next 15-20 years in respect of certain UK contracts. The net specific item charge also includes 6m relating to the estimated cost of settlement of subcontractor claims from commercial disputes in respect of prior years, and 9m relating mainly to the settlement of labour-related disputes in respect of prior years in North America and Latin America. Specific items in 2016 included a 10m charge due to the revision of estimates relating to legacy acquisitions and labour claims in Latin America, 7m relating to commercial restructuring in Middle East & India, and a net 4m supplementary onerous contract provision primarily in respect of the Compass asylum seekers contract, all offset by an 8m credit mainly relating to the recovery of a legal claim in Europe and of certain disputed debtor balances in the UK; • Costs of 20m (2016: 12m) arising from restructuring activities during the year, mainly in the UK & Ireland and Europe regions, as part of the multi-year strategic prodcutivity programme across the Group which is now drawing to a close. In addition, the Group incurred non-strategic severance costs of 10m (2016: 9m) which are included within cost of sales and administration expenses as appropriate. Going forwards the Group has announced a three-year plan to 2020 to implement efficient organisational design and leaner processes, which is likely to require further restructuring investment; • Amortisation of acquisition-related intangible assets of 10m (2016: 32m) is lower than the prior year as certain intangible assets recognised on a number of legacy acquisitions became fully amortised in 2016; and • As part of the portfolio programme, the Group realised net profit of 74m (2016: 7m) relating to the disposal of a number of the Group’s operations including the US Youth Services business, the children’s homes business in the UK, the cash businesses in Peru and Paraguay, and the Group’s businesses in Israel and Bulgaria (see note 17). In 2016, the Group recorded a goodwill impairment charge of 9m in relation to businesses identified for sale or closure. 148 G4S plc Integrated Report and Accounts 2017 9. Profit from operations Profit from continuing and discontinued operations as been arrived at after c arging/(crediting): Continuin 2017 £m Discontinued 2017 £m Notes Total 2017 £m Continuing 2016 £m Discontinued 2016 £m Cost of sales Cost of inventories recognised as an expense Administration expenses Amortisation of acquisition-related intangible assets Net specific items Restructuring costs Goodwill impairment Depreciation of property, plant and equipment Amortisation of non-acquisition-related intangible assets Net profit on disposal/closure of subsidiaries/businesses Impairment of trade receivables Researc and development expenditure Operating lease rentals payable S are-based payments 8 8 8 18 19 18 17 23 39 98 10 34 20 – 104 22 (74) 17 4 104 10 – – – – – – – – 4 – – – 98 112 10 34 20 – 104 22 (74) 21 4 104 10 32 13 12 9 106 25 (7) 21 4 98 13 – – – – – – – – – – – – Total 2016 £m 112 32 13 12 9 106 25 (7) 21 4 98 13 Integrated Report and Accounts 2017 G4S plc 149 Financial report Notes to the consolidated financial statements continued 10. A ditor’s rem neration Fees pa able to the Compan ’s auditor for the audit of the parent compan and consolidated financial statements Fees pa able to the Compan ’s auditor and its associates for other services: The audit of the Compan ’s subsidiaries* All other services** * 2017 fees included £1m (2016: £1m) in respect of prior ears. 2017 £m 2016 £m 1 7 1 1 7 2 ** Other services of £0.7m (2016: £1.9m) relate mainl to other assurance services for £0.5m (2016: £0.8m) which include the half ear review. The Audit Committee Report on pages 85 to 91 outlines the Compan ’s established polic for ensuring that audit independence is not compromised through the provision b the Compan ’s auditor of other services. 11. Staff costs and employees The average monthl number of emplo ees, in continuing and discontinued operations, including executive directors was: By reportable segment Africa Asia Pacific Latin America Middle East & India Europe North America UK & Ireland Head office Total average n mber of employees (excl ding joint vent res) Average number of emplo ees emplo ed b joint ventures Total average n mber of employees (incl ding joint vent res) Their aggregate remuneration, in continuing and discontinued operations, comprised: Wages and salaries Social securit costs Emplo ee benefits Total staff costs (excl ding joint vent res) Joint venture staff costs Total staff costs (incl ding joint vent res) 2017 N mber 125,451 58,613 71,502 165,847 50,066 54,578 34,865 248 561,170 12,501 573,671 2017 £m 4,629 501 233 5,363 70 5,433 2016 Number 126,182 59,996 73,907 176,330 53,287 55,522 34,293 171 579,688 13,209 592,897 2016 £m 4,533 479 228 5,240 64 5,304 Information on directors’ remuneration, long-term incentive plans, pension contributions and entitlements is set out in the Directors’ Remuneration report on pages 93 to 115. 150 G4S plc Integrated Report and Accounts 2017 12. Net finance expense Interest and other ncome on cash, cash equ valents and nvestments Interest rece vable on loan-note related der vat ves Ga n ar s ng from fa r value adjustment to the hedged loan note tems Loss ar s ng from change n fa r value of der vat ve f nanc al nstruments hedg ng loan notes Finance income Interest on bank overdrafts and loans Interest on loan notes Interest on obl gat ons under f nance leases Other nterest charges* Total Group borrow ng costs F nance costs on def ned ret rement benef t obl gat ons Finance expense 2017 £m 12 4 14 (14 16 (18 (87 (3 (12 (120 (11 (131 2016 £m 15 18 11 (11) 33 (21) (97) (5) (6) (129) (10) (139) Net finance expense (115 (106) * Other nterest charges nclude £2m (2016: £n l) relat ng to d scounts unwound on prov s ons (see note 33). 13. Tax Continuing operations 2017 £m Discontinued operations 2017 £m Current tax expense Current year Adjustments n respect of pr or years (note (v )) Total current tax expense Deferred tax expense/(credit (see note 34 Current year Re-assessment of deferred tax recoverab l ty on losses (note (v )) Adjustments n respect of pr or years (note (v )) Total deferred tax expense/(credit 89 8 97 42 (5 (6 31 Total income tax expense for the year 128 – – – – – – – – Cont nu ng operat ons 2016 £m D scont nued operat ons 2016 £m Total 2017 £m 89 8 97 42 (5 (6 31 91 19 110 6 (36) (4) (34) 128 76 Total 2016 £m 91 19 110 6 (36) (4) (34) 76 – – – – – – – – UK corporat on tax s calculated at 19% (2016: 20%) of the est mated assessable prof ts for the year. Overseas tax s calculated at the corporat on tax rates preva l ng n the relevant jur sd ct ons. Integrated Report and Accounts 2017 G4S plc 151 Financial report Notes to the consolidated financial statements continued 13. Ta continued The tax charge for the ear can be reconciled to the profit per the Consolidated income statement as follows: Profit before ta Continuing operations Discontinued operations Total profit before ta Tax at UK corporation tax rate of 19% (2016: 20%) Items that are not deductible and other additions to taxable profit (note (i)) Goodwill impairments not deductible Profits on disposal of businesses not taxable or covered b capital losses (note (ii)) Losses on disposal of businesses not relieved (note (ii)) Different tax rates of subsidiaries operating in non-UK jurisdictions (note (iii)) Benefit of tax incentives and credits Impact of phased reduction in UK rate to 17% Adjustment for joint ventures Tax losses not recognised in the current ear (note (iv)) Impact of US tax reforms (note (v)) Re-assessment of deferred tax recoverabilit on losses (note (vi)) – Adjustment in respect of prior ears current and deferred tax (note (vii)) Total income ta charge Effective ta rate for continuing and discontinued operations The effective tax rate for continuing operations was 33% (2016: 26%). 2017 £m 386 (6) 380 74 20 – – 1 23 (5) (2) (1) 2 19 (5) 2 128 34% 2016 £m 296 (3) 293 59 25 2 (8) 7 12 (5) 4 (1) 2 – (36) 15 76 26% (i) Items that are not deductible and other additions to taxable profit £ 0m ( 016: £ 5m) This categor reflects the tax effect of items which, in management’s judgment, are potentiall disallowable for the purposes of determining local taxable profits. This includes unrelieved withholding taxes of £8m (2016: £9m) relating to withholding tax deducted on domestic or cross-border pa ments in excess of the profits tax arising in the recipient compan . – (ii) Profits on disposal of businesses not taxable or covered by capital losses – £nil ( 016: £(8)m) This relates to profits arising on the disposal of businesses where an taxable gain arising on the disposal is either exempt from tax under the relevant tax legislation or there are capital losses available to offset against those taxable gains, for which deferred tax assets were not previousl recognised. Similarl , losses on disposal of businesses not relieved of £1m (2016: £7m) relates to the disposal of businesses where no deductible loss arises or where there is a low probabilit that losses will be utilised. (iii) Different tax rates of subsidiaries operating in non-UK jurisdictions £ 3m ( 016: £1 m) This relates to the effect of profits of the Group being subject to tax at rates different from the current UK corporation tax rate of 19%. – (iv) Tax losses not recognised in the current year £ m ( 016: £ m) This relates to current- ear losses not recognised as deferred tax assets on the basis that there are insufficient taxable profits available to utilise those losses in the foreseeable future. – – (v) Impact of US tax reforms £19m ( 016: £nil) On 22 December 2017, the US tax legislation known as the Tax Cuts and Jobs Act was signed into law and introduced significant changes in US tax laws taking effect on 1 Januar 2018. For 2017, the changes in legislation result in a one-off charge to the income statement of £19m which relates to a revaluation of deferred tax asset balances due to the reduction in the US Federal tax rate and the impairment of foreign tax credits which are no longer expected to be utilisable in future periods against foreign source income. On the basis of currentl available information and anal sis completed since the legislation was enacted, these are likel to be the most significant impacts for the Group. However, as more detailed anal sis and future legislative guidance becomes available, it is possible that the Group ma be further impacted in the current ear and subsequent ears b the legislative changes. (vi) Re-assessment of deferred tax recoverability on losses – £(5)m ( 016: £(36)m) Relates to the recognition of additional deferred tax assets on historical tax losses during the period as a result of improvements in profitabilit in group forecasts and business plans. Forecasted taxable profits for future ears support a marginal increase in the level of deferred tax assets recognised on tax losses compared to the prior ear. The increased recognition in 2016 reflected improvements in the taxable profit profile of the relevant Group companies, underpinned b the continuing progress of the Group’s transformation strateg to generate future, sustainable profitable growth. (vii) Adjustment in respect of prior years current and deferred tax – £ m ( 016: £15m) This relates to a re-assessment of the tax deductibilit of expense items and provisions for unresolved tax issues as a result of case law developments and settlements with tax authorities. – 152 G4S plc Integrated Report and Accounts 2017 Issues relating to taxation The calculation o the Group’s total tax charge involves consideration o certain items whose tax treatment cannot be ultimately determined until inal resolution has been reached through negotiation with the relevant tax authorities, or via a domestic or international dispute resolution process. The global nature o the Group’s operations means that the most signi icant tax risk is in relation to challenges rom tax authorities in relation to the pricing o cross-border transactions and the Group’s interpretation o the OECD’s arm’s-length principle. This risk is largely driven by the inherently subjective nature o trans er pricing and the divergent views taken by tax authorities. In determining the appropriate level o provisions in respect o such challenges, the Group applies a risk-based approach which considers actors such as the quantum o the charge, the countries party to the transaction and the relevant statutes o limitation. An assessment is also made o the likelihood that compensating adjustments will be obtained under the relevant tax treaties to mitigate the level o double taxation which could arise. As the Group operates in a signi icant number o countries, determining the appropriate level o judgment is typically in luenced by the Group’s evolving experience o tax controversy in di erent countries. The Group has open tax periods in a number o countries involving a number o issues, with the most material disputes typically being in respect o cross-border transactions. As at 31 December 2017, the Group had total tax exposures o approximately £146m (2016: £102m) o which £42m (2016: £37m) is provided against. The Group believes that it has made appropriate provision or open tax periods which have not yet been agreed by tax authorities. The inal agreed liabilities may vary rom the amounts provided, as these are dependent upon the outcomes o the domestic and international dispute resolution processes in the relevant countries. The Group typically has limited control over the timing o resolution o uncertain tax positions with tax authorities. Acknowledging this inherent unpredictability, and on the basis o currently available in ormation, the Group does not expect material changes to occur to the level o provisions against uncertain tax positions during the next twelve months. Following the re erendum held on 23 June 2016, the UK voted to leave the European Union. The potential tax impacts which could arise as a consequence o the UK withdrawing rom the European Union are currently uncertain, but on the basis o current in ormation the Group does not anticipate that signi icant additional tax liabilities will arise. The ollowing taxation (charge)/credit has been recognised directly in equity within the Consolidated statement o comprehensive income: Tax relating to de ined retirement bene it schemes Recognition o tax losses on exchange movements previously recognised within other comprehensive income Current tax charge or exchange movements recognised within other comprehensive income Change in air value o net-investment and cash- low hedging inancial instruments Total tax (charged)/credited to other comprehensive income 14. Dividends Amounts recognised as distributions to equity holders of the parent in the year Final dividend or the year ended 31 December 2015 Interim dividend or the six months ended 30 June 2016 Final dividend or the year ended 31 December 2016 Interim dividend or the six months ended 30 June 2017 Pence per share DKK per share 5.82 3.59 5.82 3.59 0.5615 0.3143 0.5029 0.2948 Proposed final dividend for the year ended 31 December 2017 6.11 0.5097 2017 m (4) – – – (4) 2017 m – – 90 55 145 95 2016 £m 28 29 (8) 1 50 2016 £m 90 55 – – 145 – The proposed inal dividend is subject to approval by shareholders at the Annual General Meeting. I so approved, it will be paid on 15 June 2018 to shareholders who are on the register on 4 May 2018. The Danish kroner exchange rate shown above or the dividend is that at 7 March 2018. Integrated Report and Accounts 2017 G4S plc 153 Financial report Notes to the consolidated financial statements continued 15. Ea nings pe sha e att ibutable to equity sha eholde s of the pa ent F om continuing and discontinued ope ations Pro it or the year attributable to equity shareholders o the parent Weighted-average number o ordinary shares* (m) Ea nings pe sha e f om continuing and discontinued ope ations (pence) Basic and diluted F om continuing ope ations Ea nings Pro it or the year attributable to equity shareholders o the parent Adjustment to exclude loss or the year rom discontinued operations (net o tax) Pro it rom continuing operations Ea nings pe sha e f om continuing ope ations (pence) Basic and diluted F om discontinued ope ations Loss or the year rom discontinued operations (net o tax) Loss pe sha e f om discontinued ope ations (pence) Basic and diluted 2017 £m 236 1,548 2016 £m 198 1,546 15.2p 12.8p 236 6 242 198 3 201 15.6p 13.0p (6) (3) (0.4)p (0.2)p * Excluding shares held by the Group’s Employee Bene it Trust and accounted or as treasury shares (see note 36). 16. Acquisitions The Group has not made any material acquisitions in the current or prior year. During the year, the Group has invested £16m in the acquisition o non-controlling interests in certain operations, primarily in the Group’s Europe region (2016: £2m in the A rica region). 154 G4S plc Integrated Report and Accounts 2017 17. Disposals and closures As part of the Group’s portfo io programme, in 2017 the Group so d nine businesses, inc uding the US Youth Services business, the chi dren’s homes business in the UK, the cash businesses in Peru and Paraguay, and the Group’s businesses in Israe and Bu garia, rea ising net cash consideration of £156m. These businesses generated Adjusted PBITA of £8m to the date of disposa (2016 fu year: £21m). A further four businesses were c osed during the year. In the year ended 31 December 2016 the Group so d 12 businesses, inc uding the Cash So utions business in Thai and, the businesses in Fin and, Brunei and Kazakhstan, and the Uti ities Services and ATM engineering businesses in the UK, rea ising net cash consideration of £82m. A further four businesses were c osed during that year, and in addition the Group recognised a oss of £16m in re ation to a systems business in Latin America which was in the process of being c osed down. The net assets and net profit on disposa /c osure of operations disposed of or c osed were as fo ows: Goodwi Other acquisition-re ated intangib e assets Non-acquisition-re ated intangib e assets Property, p ant and equipment Other non-current assets Current assets Liabi ities Net assets of operations disposed of/c osed Less: recyc ing from currency trans ation reserve Net impact on the Conso idated statement of financia position due to disposa s Fair va ue of retained investment in former joint venture Profit on disposa /c osure of subsidiaries/businesses Tota consideration Satisfied by: Cash received Net disposal costs paid Net cash consideration received in the year Deferred consideration receivab e Accrued disposa and other costs Tota consideration 2017 £ 52 1 – 13 17 78 (61) 100 (18) 82 (3) 74 153 166 (10) 156 4 (7) 153 2016 £m 9 1 3 18 2 86 (44) 75 – 75 – 7 82 90 (8) 82 – – 82 Integrated Report and Accounts 2017 G4S plc 155 Financial report Notes to the consolidated financial statements continued Acquisition-related intangible assets Goodwill £m Trademarks £m Customer- related £m Non-acquisition- related intangible assets £m Technology £m 2,157 – (2) – (9) – (66) 2,080 (167) – – 1 – (166) 1,990 1,914 1,962 2 – (1) (49) (2) 245 2,157 (134) – (9) – – (24) (167) 1,828 1,990 34 – – (32) – 1 – 3 (32) (2) 32 – – (2) 2 1 33 – – – – – 1 34 (31) – – – – (1) (32) 2 2 674 – – (599) – – (14) 61 (658) (8) 599 – 14 (53) 16 8 643 – – (6) (23) 2 58 674 (599) (31) – 3 22 (53) (658) 44 16 9 – – (9) – – – – (9) – 9 – – – – – 9 – – – – – – 9 (8) (1) – – – – (9) 1 – Total £m 3,129 24 (2) (657) (16) 2 (80) 2,400 (1,035) (32) 657 7 14 (389) 255 24 – (17) (7) 1 – 256 (169) (22) 17 6 – (168) 86 88 2,094 2,011 235 – 30 (28) (3) – 21 255 (153) (25) – 23 2 (16) (169) 2,882 2 30 (35) (75) – 325 3,129 (925) (57) (9) 26 24 (94) (1,035) 82 86 1,957 2,094 18. ntangible assets 2017 Cost At 1 January 2017 Additions Disposa s Write-off of fu y amortised intangib e assets Transferred to he d for sa e Re-c assifications Exchange differences At 31 December 2017 Accumulated amortisation and impairment losses At 1 January 2017 Amortisation charge Write-off of fu y amortised intangib e assets Transferred to he d for sa e Exchange differences At 31 December 2017 Carrying amount At 1 January 2017 At 31 December 2017 2016 Cost At 1 January 2016 Acquisition of businesses Additions Disposa s Transferred to he d for sa e Re-c assifications Exchange differences At 31 December 2016 Accumu ated amortisation and impairment osses At 1 January 2016 Amortisation charge Impairment Disposa s Transferred to he d for sa e Exchange differences At 31 December 2016 Carrying amount At 1 January 2016 At 31 December 2016 156 G4S plc Integrated Report and Accounts 2017 Goodwill allocation Goodwill ac uired in a business combination is allocated to the cash-generating units (CGUs) which are expected to benefit from that business combination. A significant portion of the Group’s goodwill was generated by the merger of the security services businesses of Group 4 Falck and Securicor in 2004, which was accounted for as an ac uisition of Securicor by Group 4 Falck. Goodwill impairment testing The Group tests tangible and intangible assets, including goodwill, for impairment on an annual basis or more fre uently if there are indications that any of these assets may be impaired. The Group’s annual impairment test compares the carrying value of goodwill and other relevant non-current assets held by each CGU with the recoverable amount of each CGU as at 31 December each year. CGUs for goodwill impairment testing purposes are identified on a country-level basis including significant business units, consistent with the Group’s detailed management accounts. Under IAS 36 – Impairment of Assets, an impairment is deemed to have occurred where the recoverable amount of a CGU is less than the carrying value of goodwill and other relevant non-current assets. The recoverable amount of a CGU is generally determined by its value in use which is derived from discounted cash flow calculations. The key inputs to the calculations are described below. In certain circumstances, where market prices can be ascertained (for example through recent transactions or by reference to normal industry standard multiples), the fair value less costs to sell is used as a basis for the recoverable amount. In the current year the value of goodwill in the Group’s Greece CGU was supported by this valuation method. Forecast cash lows All operating countries in the Group are re uired to submit a budget for the next financial year (for the year ending 31 December 2018) and strategic plan forecasts for the two years following the budget year (i.e. for the years ending 31 December 2019 and 31 December 2020). Estimated future cash flows are based on these plan forecasts for the first three years, with year 4, year 5 and the terminal value projected by applying growth rates as set out in the growth rate section below. Estimated cash flows are discounted using country-specific risk-adjusted discount rates as described in the discount rate section. Growth rates The following table demonstrates the application of growth rates to forecast cash flows: Growth assumptions Input Year 1 Budget1 Year 2 Strategic plan forecast1 Year 3 Strategic plan forecast1 Year 4 Projected midpoint between years 3 and 5 – to achieve Example 8% 7% 6% 4% 1. Budgets and strategic plan forecasts are reviewed by the group board. 2. Sourced from IMF website. Year 5 Projected lower of year 3 forecast or country-specific inflation rate2 2% Terminal value Country-specific long-term inflation rate2 2% In this example, budgeted year 1 growth rate is 8%, forecast growth in year 2 is 7% and in year 3 is 6%. The long-term country inflation rate is 2% so the year 4 growth rate is calculated to be the midpoint between 6% in year 3 and 2% in year 5, i.e. 4%. The terminal value calculation is then based on the long-term inflation rate of 2%. Integrated Report and Accounts 2017 G4S plc 157 Financial report Notes to the consolidated financial statements continued 18. Intan ible assets continued Discount rates The follo ing key inputs are used to calculate country-specific discount rates for all CGUs: Input Risk-free rate (Group) Adjusted risk-free rate (country specific) Unleveraged beta Debt margin Weighted-average cost of capital (pre-tax) How determined The Group’s risk-free rate is based on the UK government's 20 year gilt / bond rates. Country-specific risk free rates are derived for each CGU by adjusting the Group’s risk-free rate for both the relevant inflation rate differential bet een the UK and that CGU’s country and by applying an appropriate country-specific risk premium sourced primarily from the IMF and Ne York University ebsites as ell as other studies by independent economists. Beta is a risk adjustment applied to the discount rate to reflect the risk of the Group’s operating companies relative to the market as a hole. The Group’s beta is estimated by performing an analysis of comparable multi- national listed companies and is adjusted for the appropriate leverage of the Group. The Group applies a Group- ide debt margin to the country-specific risk- free rates to obtain a cost of debt for each CGU. The debt margin is determined by calculating the premium bet een the yield on a BBB-rated 15+ year UK benchmark bond and the UK risk-free rate. The eighted-average cost of capital is calculated by eighting the cost of equity and the cost of debt by the applicable debt to equity ratio at the year end. 31 Dec 2017 1.75% in UK 31 Dec 2016 1.89% in UK 2.3% in UK 2.4% in UK 0.75 for the Group 0.7 for the Group 1.3% in UK 1.5% in UK 9.1% in UK 8.1% in UK The table belo sets out the pre-tax discount rates and gro th rates used for the countries that represent significant good ill balances: Brazil United States of America Hong Kong Malaysia Estonia Netherlands United Kingdom Other (all allocated) Total oodwill Discount rate 2017 15.6% 10.1% 9.5% 10.9% 9.5% 8.2% 9.1% Discount rate 2016 19.7% 9.7% 7.0% 11.9% 9.8% 6.9% 8.1% Lon -term rowth rate* 2017 4.0% 2.3% 3.0% 3.0% 2.5% 1.6% 2.0% Long-term gro th rate* 2016 4.5% 2.2% 3.0% 3.0% 2.7% 1.2% 2.0% Goodwill 2017 £m 77 447 46 38 38 160 696 412 1,914 Good ill 2016 £m 86 490 51 37 36 154 696 440 1,990 * Lo er of long-term country inflation rate per the IMF and implied year 3 business forecast gro th rate. Within the UK, the most significant CGUs and their good ill carrying values are UK Central Government Services (£225m), UK Cash Solutions (£205m) and UK Secure Solutions (£107m). Within the USA, the most significant CGU is US Commercial Security Solutions ith good ill of £405m. 158 G4S plc Integrated Report and Accounts 2017 Impairment charge in 2016 During the prior year the roup recognised an impairment charge of £9m relating to businesses held for sale or closure as a result of their estimated recoverable amounts being less than the carrying value of their net assets. Sensitivit to ke assumptions The key assumptions used in the discounted cash flow calculations relate to the discount rates and long-term growth rates used. The table below shows the additional impairment that would arise from an increase in discount rates by 1% and 3% (with all other variables being equal, for example, increasing the UK base rate from 9.1% to 10.1% and 12.1%) or a decrease in long-term growth rates by 1% and 3% (to a minimum of 0% with all other variables being equal, for example, decreasing the UK long-term growth rate from 2.0% to 1.0% and 0.0%) for the roup in total and for each of its countries that represent significant goodwill balances: Base discount rate 2017 15.6% 10.1% 9.5% 10.9% 9.5% 8.2% 9.1% Goodwill 2017 £m 77 447 46 38 38 160 696 412 1,914 Additional impairment Additional impairment 1% increase 2017 £m – – – – – – – (1) (1) 3% increase 2017 £m (5) – – – – – – (4) (9) Base growth rate1 2017 4.0% 2.3% 3.0% 3.0% 2.5% 1.6% 2.0% 1% decrease 2017 £m (7) – – – – – – (3) (10) 3% decrease 2017 £m (18) – – – – – (18) (7) (43) Brazil2 United States of America Hong Kong Malaysia Estonia Netherlands United Kingdom2 Other2 (all allocated) Total 1. Lower of the long-term country growth rate per the IMF and the implied year 3 business forecast growth rate. 2. For the Brazil C U, for certain C Us in the United Kingdom (primarily the UK Cash Solutions C U) and for the Risk Management C U (included within ‘other’ with a goodwill balance of £35m), the impairment model indicated a potential impairment when applying sensitivities as presented in the table above. For these C Us management is satisfied that the carrying value of goodwill is currently supported by fair value less costs to sell and therefore no impairment is required as at 31 December 2017. Integrated Report and Accounts 2017 G4S plc 159 Financial report Notes to the consolidated financial statements continued 19. roperty, plant and equipment 2017 Cost At 1 January 2017 Additions Disposa s Transferred to he d for sa e Re-c assifications Exchange differences At 31 December 2017 Accumulated depreciation and impairment losses At 1 January 2017 Depreciation charge Disposa s Transferred to he d for sa e Re-c assifications Exchange differences At 31 December 2017 Carrying amount At 1 January 2017 At 31 December 2017 2016 Cost At 1 January 2016 Additions Disposa s Transferred to he d for sa e Re-c assifications Exchange differences At 31 December 2016 Accumu ated depreciation and impairment osses At 1 January 2016 Depreciation charge Disposa s Transferred to he d for sa e Re-c assifications Exchange differences At 31 December 2016 Carrying amount At 1 January 2016 At 31 December 2016 Land and buildings £m Equipment and vehicles £m 255 11 (15) (9) 5 (1) 246 (109) (13) 13 4 (5) 1 (109) 146 137 933 73 (136) (37) (1) (18) 814 (642) (91) 132 28 1 16 (556) 291 258 Land and bui dings £m Equipment and vehic es £m 232 12 (5) (6) 1 21 255 (89) (14) 4 2 – (12) (109) 143 146 816 87 (73) (10) (6) 119 933 (532) (92) 59 2 5 (84) (642) 284 291 Total £m 1,188 84 (151) (46) 4 (19) 1,060 (751) (104) 145 32 (4) 17 (665) 437 395 Tota £m 1,048 99 (78) (16) (5) 140 1,188 (621) (106) 63 4 5 (96) (751) 427 437 The net book va ue of equipment and vehic es he d under finance eases was £26m (2016: £39m). Accumu ated depreciation on these assets was £109m (2016: £126m) and the depreciation charge for the year was £16m (2016: £21m). The rights over assets he d on finance eases are effective y security for ease iabi ities. These rights revert to the essor in the event of defau t. 160 G4S plc Integrated Report and Accounts 2017 The net book alue of equipment and ehicles includes £25m (2016: £23m) of assets leased by the Group to third parties under operating leases. Accumulated depreciation on these assets was £28m (2016: £40m) and the depreciation charge for the year was £9m (2016: £7m). The net book alue of land and buildings comprises freeholds of £68m (2016: £71m), long leaseholds of £17m (2016: £20m) and short leaseholds of £52m (2016: £55m). 20. Investment in joint ventu es The following is summarised aggregate financial information for the Group’s interest in joint entures that are not material to the Group, based on the amounts reported in the Group’s consolidated financial statements: Carrying amount of interests in joint entures Group’s share of: Profit from continuing operations Total comprehensi e income 21. Invento ies Raw materials Work in progress Finished goods including consumables Total invento ies 2017 £m 20 9 9 2017 £m 8 12 84 104 22. Investments In estments include listed securities of £27m (2016: £31m) held by the Group’s wholly-owned capti e insurance subsidiaries. These securities are stated at fair alue based on quoted market prices consistent with Le el 1 of the aluation hierarchy. Use of these in estments is restricted to the settlement of claims against the Group’s capti e insurance subsidiaries. During the year the 2016 comparati es ha e been re-presented, as explained in Note 3(a). 23. T ade and othe eceivables Within cu ent assets Accrued income Trade debtors Pro ision for impairment of trade recei ables Recei ables from customers in respect of cash-processing operations Other debtors Prepayments Amounts due from construction contract customers Deri ati e financial instruments at fair alue Total t ade and othe eceivables included within cu ent assets Within non-cu ent assets Deri ati e financial instruments at fair alue Other debtors Total t ade and othe eceivables included within non-cu ent assets Notes 26 24 30 30 2017 £m 167 1,071 (61) 7 106 64 17 45 1,416 40 43 83 2016 £m 19 9 9 2016 £m 7 15 90 112 2016 £m 151 1,060 (65) 10 106 79 17 23 1,381 53 48 101 Integrated Report and Accounts 2017 G4S plc 161 Financial report Notes to the consolidated financial statements continued 23 Trade and other receivables continued Credit risk on trade receivables There is li ited concentration of credit risk with respect to trade receivables, as the Group’s custo ers are both large in nu ber and dispersed geographically in around 90 countries. The Group perfor s various services to a nu ber of UK Govern ent agencies which, in total, co prised approxi ately 6% of the total trade debtor balance as at 31 Dece ber 2017 (2016: 8%). The Group considers these individual Govern ent agencies to be separate custo ers due to the li ited econo ic integration between each agency. Manage ent are satisfied that across the G4S Group’s total trade debtors as at 31 Dece ber 2017 there is no significant concentration risk. Group co panies are required to follow the Group Finance Manual guidelines with respect to assessing the credit- worthiness of potential custo ers. These guidelines include processes such as obtaining approval for credit li its over a set a ount, perfor ing credit checks and assess ents and obtaining additional security where required. Credit ter s vary across the Group and can range fro 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 ade for debts according to local conditions and past default experience. The ove ent in the provision for i pair ent of trade receivables is as follows: At 1 January Provision for i pair ent of trade receivables A ounts written off during the year Unused a ounts reversed Exchange differences At 31 December The ageing of trade debtors, net of provision for i pair ent of trade receivables, is as follows: Accrued inco e Not yet due 1-30 days overdue 31-60 days overdue 61-90 days overdue 91-180 days overdue 181-365 days overdue Over 365 days Net trade debtors and accrued income 2017 £m (65) (21) 16 6 3 (61) 2017 £m 167 754 143 45 21 26 13 8 1,177 2016 £ (53) (21) 10 6 (7) (65) 2016 £ 151 769 125 41 22 22 11 5 1,146 No additional provision has been ade on the above a ounts as there has not been a significant change in credit quality and the Group believes that the a ounts are still recoverable. The Group does not hold any collateral over these balances. The proportion of trade debtors at 31 Dece ber 2017 that were overdue for pay ent was 22% (2016: 20%). The Group’s DSO easure (days’ sales outstanding) for continuing operations based on revenue fro the last 90 days of the year is 52 days (2016: 46 days). The directors believe that the fair value of trade and other receivables, being the present value of future cash flows, approxi ates to their book value. 24 Construction contracts A ounts due fro contract custo ers included in trade and other receivables A ounts due to contract custo ers 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 Notes 23 29 2017 £m 17 (2) 15 173 (158) 15 2016 £ 17 (3) 14 198 (184) 14 At 31 Dece ber 2017, advances received fro custo ers for contract work a ounted to £9 (2016: £14 ), and the value of retentions held by custo ers for contract work a ounted to £3 (2016: £5 ). All trade and other receivables arising fro construction contracts are due for settle ent within one year. 162 G4S plc Integrated Report and Accounts 2017 25. Disposal groups classified as held for sale As at 31 December 2017 disposal groups classified as held for sale include the assets and liabilities associated with minor operations in the Group’s Africa Asia Pacific Latin America and Europe regions. As at 31 December 2016 disposal groups classified as held for sale include the assets and liabilities associated with a number of group- wide operations. The more material of these operations include G4S Israel the US Youth Services business and the children’s homes business in the UK. The major classes of assets and liabilities comprising the operations classified as held for sale are as follows: Assets Goodwill Acquisition-related intangible assets Property plant and equipment and non-acquisition-related intangible assets Investments (non-current) Other non-current assets Inventories Trade and other receivables (current) Cash and cash equivalents Total assets of disposal groups classified as held for sale Liabilities Bank overdrafts Bank loans Trade and other payables Retirement benefit obligations Deferred tax liability Obligations under finance leases Provisions Total liabilities of disposal groups classified as held for sale Net assets of disposal groups 2 17 £m 9 – 16 – 1 2 17 8 53 – (2) (12) (3) (1) (1) – (19) 34 2016 £m 50 1 15 7 4 4 62 8 151 (1) (1) (48) (1) (1) – (6) (58) 93 26. Cash, cash equivalents and bank overdrafts The Group’s Cash Solutions businesses provide a range of cash handling and processing services on behalf of customers. Certain of those services comprise collection segregated storage and delivery of customer cash with title to the cash handled remaining with the customer throughout the process. Such cash is never recorded in the Group’s balance sheet. A number of other cash-processing services are provided to customers such as the sale and purchase of physical cash balances and the replenishment of ATMs and similar machines from customer funds held in Group bank accounts. Such funds which are generally settled within two working days are classified as “funds within cash-processing operations” along with the related balances due to and from customers in respect of unsettled transactions and are included gross within the relevant balance sheet classifications. Funds within cash-processing operations Stocks of money included within cash and cash equivalents Overdraft facilities related to cash-processing operations included within bank overdrafts Liabilities to customers in respect of cash-processing operations included within trade and other payables Receivables from customers in respect of cash-processing operations included within trade and other receivables Funds within cash-processing operations (net) 2 17 £m 74 (19) (62) 7 – 2016 £m 95 (22) (83) 10 – Integrated Report and Accounts 2017 G4S plc 163 Financial report Notes to the consolidated financial statements continued 26. ash, cash equivalents and bank overdrafts continued Whilst such cash and ank alances are not formally restricted y legal title, they are restricted y the Group’s own internal policies such that they cannot e used for the purposes of the Group’s own operations. For the purposes of the Group’s Consolidated statement of cash flow, funds within cash-processing operations are therefore recorded net of the related alances due to and from customers in respect of unsettled transactions, within cash, cash equivalents and ank overdrafts, and hence have no impact on the Group’s statutory cash flow. A reconciliation of cash, cash equivalents and ank overdrafts at the end of the year per the Consolidated statement of financial position to the corresponding alances included within the Consolidated statement of cash flow is as follows: Cash and cash equivalents in the Consolidated statement of financial position Bank overdrafts in the Consolidated statement of financial position Cash, cash equivalents and ank overdrafts included within disposal groups classified as held for sale Total cash, cash equivalents and bank overdrafts Add: Lia ilities to customers in respect of cash-processing operations, included within trade and other paya les Receiva les from customers in respect of cash-processing operations, included within trade and other receiva les 2017 £m 902 (284) 8 626 (62) 7 2016 £m 831 (93) 7 745 (83) 10 ash, cash equivalents and bank overdrafts at the end of the year in the onsolidated statement of cash flow 571 672 Cash and cash equivalents comprise principally short-term money market deposits, current account alances and Group-owned cash held in ATM machines. At 31 Decem er 2017 cash and cash equivalents earned interest at a weighted-average rate of 0.6% (2016: 0.6%). The credit risk on cash and cash equivalents is limited ecause wherever possi le, and in accordance with Group Treasury policy, the cash is placed with ank counterparties that hold investment grade credit ratings assigned y international credit-rating agencies. The Consolidated statement of financial position at 31 Decem er 2016 has een re-presented to show the re-classification of certain items within cash and cash equivalents of £20m as trading investments. As a consequence of this change in presentation, cash and cash equivalents at 31 Decem er 2016 have decreased from £851m to £831m. Cash and cash equivalents of £71m (2016: £75m) are held y the Group’s wholly-owned captive insurance su sidiaries. Their use is restricted to the settlement of claims against the Group’s captive insurance su sidiaries. 27. Bank overdrafts, bank loans and loan notes Bank overdrafts Bank loans Loan notes* Total bank overdrafts, bank loans and loan notes The orrowings are repaya le 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 Loan notes Amount due for settlement after 12 months (shown under non-current liabilities) * Loan notes include £463m (2016: £675m) of private loan notes and £1,678m (2016: £1,717m) of pu lic loan notes. 2017 £m 284 13 2,141 2,438 947 466 142 883 2,438 (284) (8) (655) (947) 1,491 2016 £m 93 20 2,392 2,505 786 659 536 524 2,505 (93) (16) (677) (786) 1,719 164 G4S plc Integrated Report and Accounts 2017 Analysis of ank overdrafts, ank loans and loan notes y currency is as follows: Bank overdrafts Bank loans Loan notes At 31 December 2017 Bank overdrafts Bank loans Loan notes At 31 Decem er 2016 Sterling £m 145 – 394 539 1 – 395 396 Euros £m 17 – 1,328 1,345 10 – 1,366 1,376 US dollars £m 86 2 419 507 50 6 631 687 thers £m 36 11 – 47 32 14 – 46 Total £m 284 13 2,141 2,438 93 20 2,392 2,505 Of the orrowings in currencies other than Sterling, £1,214m (2016: £1,198m) is designated as a net-investment hedge. The weighted-average interest rates on ank overdrafts, ank loans and loan notes at 31 Decem er 2017, adjusted for hedging, were as follows: Bank overdrafts Bank loans* Private loan notes Pu lic loan notes 2017 % 4.3 – 4.8 3.7 2016 % 3.8 – 4.1 3.5 * There were no material ank loans in place at either 31 Decem er 2017 or 31 Decem er 2016. At 31 Decem er 2017, the Group’s committed ank orrowings comprised a £1 n multi-currency revolving credit facility with £964m maturing in January 2022 and the remainder in January 2021. At 31 Decem er 2017, this committed facility was undrawn. Interest on all committed ank orrowing facilities is at prevailing LIBOR or EURIBOR rates (with a floor of zero), dependent upon the period of drawdown, plus an agreed margin, and is re-priced 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 31. The Group’s main sources of finance and their applica le rates as of 31 Decem er 2017 are set out elow: Debt instrument/ Year of issue US PP 2008 US PP 2007 US PP 2008 Pu lic Bond 2012 Pu lic Bond 2009 Pu lic Bond 2016 Pu lic Bond 2017 Revolving Credit Facility 2015 Nominal amounta £44m US$250m US$298.5m €500m £350m €500m €500m £1 n (multi- currency) Post-hedging average Issued interest interest rate rate 7.56% 7.56% 5.96% 6.06% 2.20% 6.78% 6.88% 6.90% 2.62% 2.63% 7.75% 7.75% 2.24% 1.5% 3.21% 1.5% – – 2018 44 154 417 Year of redemption and amounts (£m) 2019 2020 2021 2022 2023 2024 78 55 107 350 448 421 Total 44 185 209 417 350 448 421 Undrawn Undrawn 615 457 55 – 78 448 – 421 2,074 a. Nominal de t amount. For fair value carrying amount see note 31. . Applying foreign exchange rates at 31 Decem er 2017 or hedged foreign exchange rates where applica le. Integrated Report and Accounts 2017 G4S plc 165 Financial report Notes to the consolidated financial statements continued 27. ank overdrafts, bank loans and loan notes continued The Group’s a erage cost of gross borrowings in 2017, net of interest hedging, was 4.1% (2016: 4.1%). In June 2017 the Group issued a €500m Public Bond which matures in June 2024 and pays an annual coupon of 1.5%. The committed bank facilities and the pri ate loan notes are subject to one financial co enant (based on a net debt to Adjusted EBITDA ratio where Adjusted EBITDA is calculated as Group Adjusted PBITA plus depreciation and amortisation of non-acquisition- related intangible assets) and non-compliance with the co enant may lead to an acceleration of maturity. The Group complied with the financial co enant throughout the year to 31 December 2017 and the year to 31 December 2016. The Group has not defaulted on, or breached the terms of, any material loans during the year. Bank o erdrafts, bank loans, the loan notes issued in July 2008 and May 2009, €380m of the loan notes issued in December 2012, the loan notes issued in No ember 2016 and €400m of the loan notes issued in June 2017 are stated at amortised cost. The loan notes issued in March 2007, €120m of the loan notes issued in December 2012 and €100m of the loan notes issued in June 2017 are stated at amortised cost but are designated in a fair- alue hedge relationship which has a fair- alue adjustment in relation to the hedged interest-rate risk. Cross-currency swaps with a nominal alue of US$50m (£37m) relating to the loan notes issued in July 2008 ha e a fair- alue mark-to- market gain of £12m (2016: gain £16m), predominantly resulting from fixing the Sterling alue of this portion of the loan notes at an exchange rate of 1.975 and partly from fixing the Sterling and US dollar interest rates. Cross-currency swaps with a nominal alue of €350m (£311m) relating to the loan notes issued in December 2012 ha e a fair- alue mark-to-market gain of £30m (2016: gain £20m), predominantly resulting from fixing the Sterling alue of this portion of the loan notes at an exchange rate of 1.233 and partly from fixing the Sterling and Euro interest rates. Cross-currency swaps with a nominal alue of €270m (£240m) relating to the loan notes issued in No ember 2016 ha e a fair- alue mark-to-market loss of £9m (2016: loss £17m), predominantly resulting from fixing the Sterling alue of this portion of the loan notes at an exchange rate of 1.109 and partly from fixing the Sterling and Euro interest rates. Cross-currency swaps with a nominal alue of €400m (£356m) relating to the loan notes issued in June 2017 ha e a fair- alue mark-to- market gain of £12m, predominantly resulting from fixing the Sterling alue of this portion of the loan notes at an exchange rate of 1.157 and partly from fixing the Sterling and Euro interest rates. 28. Obligations under finance leases Amounts payable under finance leases: Within one year In the second to fifth years inclusi e After fi e years Less: future finance charges on finance leases Present value of lease obligations Less: amount due for settlement within 12 months (presented within current liabilities) Amount due for settlement after 12 months (presented within non-current liabilities) Minimum lease payments 2017 £m Minimum lease payments 2016 £m Present value of minimum lease payments 2017 £m Present alue of minimum lease payments 2016 £m 15 20 1 36 (1) 35 22 36 2 60 (3) 57 15 19 1 35 (15) 20 20 35 2 57 (20) 37 The Group leases certain of its fixtures and equipment under finance leases. The weighted-a erage lease term is six years (2016: six years). For the year ended 31 December 2017, the weighted-a erage effecti e borrowing rate was 5.7% (2016: 5.7%). Interest rates are fixed at the related contract dates. All leases are on a fixed repayment basis and no arrangements ha e been entered into for contingent rental payments. The Group’s obligations under finance leases are secured by the lessors’ charges o er the leased assets. 166 G4S plc Integrated Report and Accounts 2017 29. Trade and other payable Within current liabilitie : rade creditors Amounts due to construction-contract customers Other taxation and social security costs Holiday pay and other wage-related accruals Liabilities to customers in respect of cash-processing operations Other creditors Other accruals Deferred income Derivative financial instruments at fair value Total trade and other payable included within current liabilitie Within non-current liabilitie : Derivative financial instruments at fair value Other creditors Total trade and other payable included within non-current liabilitie Notes 24 26 30 30 2017 £m 249 2 206 370 62 62 240 64 7 1,262 6 17 23 2016 £m 252 3 204 373 83 61 203 76 5 1,260 14 16 30 rade and other payables comprise principally amounts outstanding for trade purchases and on-going costs. he average credit period taken for trade purchases for continuing operations is 42 days (2016: 35 days). 30. Derivative financial in trument he carrying values of derivative financial instruments at the balance sheet date are presented below: Cro -currency wap Cash-flow hedges Net-investment hedges Intere t-rate wap Cash-flow hedges Fair-value hedges Not in a hedging relationship Forward-currency contract Cash-flow hedges Not in a hedging relationship Less: non-current portion Current portion A et 2017 £m Assets 2016 £m Liabilitie 2017 £m Liabilities 2016 £m 54 16 – 15 – – – 85 (40) 45 48 – – 27 – – 1 76 (53) 23 9 2 – 1 1 – – 13 (6) 7 17 – 1 – – 1 – 19 (14) 5 Derivative financial instruments are stated at fair value, measured using techniques consistent with Level 2 of the valuation hierarchy (inputs other than quoted prices in active markets that are observable for the asset and liability, either directly or indirectly). Market prices are sourced from Bloomberg or third-party relationship counterparty banks. he 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. his value is compared to the original transaction value giving a fair value of the instrument at the balance sheet date. Certain financial instruments are not designated or do not qualify for hedge accounting. Changes in fair value of any derivative instruments in this category are immediately recognised in the Consolidated income statement. In 2017 these included certain interest-rate swaps and in 2016 included certain forward-currency contracts used for interest and cash management. he mark-to-market valuation of the derivatives has improved by £15m during the year, mainly due to an increase in the value of the cross-currency swaps as a result of Sterling’s weakness. Offsetting and enforceable master netting agreements Financial assets and liabilities are offset and the net amount reported in the Consolidated statement of financial position when there is a legally enforceable right to offset the recognised amounts and there is an intention to settle on a net basis or realise the asset and settle the liability simultaneously. here were no material amounts offset in the Consolidated statement of financial position and no material balances associated with enforceable master netting agreements were identified. Integrated Report and Accounts 2017 G4S plc 167 Financial report Notes to the consolidated financial statements continued 30. erivative financial instruments continued The interest-rate cross-currency and forward-currency contracts treated as cash-flow or net-investment hedges have the following maturities: Within one year In the second year In the fourth year In the fifth year or greater Total carrying value Assets 2017 £m 41 – – 26 67 Assets 2016 £m 12 36 – – 48 Liabilities 2017 £m – – – 8 8 Liabilities 2016 £m 1 – 1 17 19 In the table above derivatives are presented as either assets or liabilities at the date of maturity. The projected settlement of cash flows (including accrued interest) associated with derivatives treated as cash-flow or net investment hedges is as follows: Within one year In the second year In the third year In the fourth year In the fifth year or greater Total cash flows Assets 2017 £m 41 (7) (7) (7) 50 70 Assets 2016 £m 16 35 – – – 51 Liabilities 2017 £m 10 3 3 3 (5) 14 Liabilities 2016 £m 5 4 4 3 3 19 31. Financial risk Capital management £964m of the original £1 billion multi-currency revolving credit facility matures in January 2022 with the remainder maturing in January 2021. At 31 December 2017 there were no drawings from the facility. In May 2017 Standard & Poor’s affirmed the Group’s long-term credit rating of BBB- (negative). The Group will continue to manage its capital structure so that it retains an investment-grade rating. The Group’s policy objective is a net debt to Adjusted EBITDA ratio of less than 2.5x. At the end of 2017 the ratio was 2.4x (2016: 2.8x). The next debt maturities are £44m and US$224m of US Private Placement debt maturing in July 2018 and a €500m Public Bond maturing in December 2018. Overall the debt portfolio has a medium to long-term debt maturity profile. The Group is currently well placed to access finance from the debt-capital markets and from the bank market if required. Borrowings are principally in Sterling US dollars and Euros reflecting the geographies of the Group’s significant operational assets and profits. Liquidity risk The Group mitigates liquidity risk by ensuring there are sufficient undrawn committed facilities available to it. For more details of the Group’s bank overdrafts bank loans and loan notes see note 27. The percentage of the available committed Revolving Credit Facility that was undrawn during the course of the year was as follows: 31 December 2016 31 March 2017 30 June 2017 30 September 2017 31 December 2017 100% 86% 93% 89% 100% To reduce re-financing risk Group Treasury obtains finance with a range of maturities to minimise the impact of a single material source of finance terminating on a single date. Re-financing risk is further reduced by Group Treasury opening negotiations to either replace or extend any major medium-term facility at least 12 months before its termination date. 168 G4S plc Integrated Report and Accounts 2017 Maturity profile of loans and borro ings The contractual matur t es of f nanc al assets and l ab l t es, est mated based on expectat ons at the report ng date, together w th the r carry ng amounts nclud ng nterest payments n the Consol dated statement of f nanc al pos t on, are shown below, subtotalled by category: 31 December 2017 Investments Der vat ve f nanc al nstruments ( nterest-rate swaps) Financial assets designated at fair value through profit or loss Notes 22 Der vat ve f nanc al nstruments (cross-currency swaps) Financial assets designated as cash-flo hedges Der vat ve f nanc al nstruments (cross-currency swaps) Financial assets designated as net-investment hedges Net trade rece vables and accrued ncome Cash and cash equ valents** Loans and receivables Loan notes ( ssued March 2007, 5.96%-6.06%, matur ng 2019-22) Der vat ve f nanc al nstruments ( nterest-rate swaps) Financial liabilities designated as fair-value hedges Der vat ve f nanc al nstruments (cross-currency swaps) Financial liabilities designated as cash-flo hedges Der vat ve f nanc al nstruments (cross-currency swaps) Financial liabilities designated as net-investment hedges Der vat ve f nanc al nstruments ( nterest-rate swaps) Financial liabilities designated at fair value through profit or loss Loan notes ( ssued July 2008, 6.78%-7.56%, matur ng 2018-20) Loan notes ( ssued May 2009, 7.75%, matur ng 2019) Loan notes ( ssued December 2012, 2.625%, matur ng 2018)* Loan notes ( ssued November 2016, 1.5%, matur ng 2023) Loan notes ( ssued June 2017, 1.5%, matur ng 2024)* Bank loans Bank overdrafts** F nance lease l ab l t es Trade cred tors Financial liabilities measured at amortised cost 30 30 26 27 30 30 30 30 27 27 27 27 27 27 27 28 29 16 16 1,177 828 2,005 Carrying amount £m 62 15 77 54 54 16 16 Total contractual cash flo s £m 62 19 81 Fair value £m 62 15 77 Within 1 year £m 42 9 51 2-5 years £m 20 10 30 Over 5 years £m – – – 54 54 16 16 54 361+(320) 22+(34) 388+(363) 25 54 (12) 41 – – 34+(49) 361+(330) 31 (15) 1,177 828 2,005 1,177 828 2,005 1,177 828 2,005 – – (198) (1) (199) (193) (1) (194) (221) (1) (222) (11) – (11) (210) – (210) – – – (1) (1) (9) (9) (2) (2) (1) (1) (9) (9) (2) (2) (1) (1) (265) (350) (445) (443) (440) (13) (265) (35) (249) (2,505) (274) (380) (456) (456) (450) (13) (265) (35) (249) (2,578) (10) (10) 9+(15) 15+(28) 256+(247) 9 (13) (6) (4) (4) (2) (2) (291) (404) (456) (484) (491) (13) (265) (35) (249) (2,688) 9+(13) (4) (1) (1) (228) (27) (456) (7) (7) (8) (265) (15) (249) (1,262) – – (1) (1) (63) (377) – (27) (27) (5) – (19) – (518) – – – – – – – (450) (457) – (1) – (908) * €120m (£107m) of December 2012 loan notes and €100m (£89m) of June 2017 loan notes are held n fa r-value hedge relat onsh ps. ** Exclud ng cash and overdraft balances n respect of cash-process ng operat ons (see note 26). Note: In the table above, certa n values are presented gross, to show both the asset and the l ab l ty. Integrated Report and Accounts 2017 G4S plc 169 Financial report Notes to the consolidated financial statements continued 31. Financial isk continued 31 December 201 Investments Derivative financial instruments (interest-rate swaps) Derivative financial instruments (forward-currency contracts) Financial assets designated at fair value through profit or loss Notes 22 30 30 Derivative financial instruments (cross-currency swaps) Financial assets designated as cash-flow hedges Net trade receivables and accrued income Cash and cash equivalents** Loans and receivables Loan notes (issued May 2009, 7.75%, maturing 2019) Loan notes (issued March 2007, 5.8 %- .0 %, maturing 2017-22) Financial liabilities designated as fair-value hedges Derivative financial instruments (cross-currency swaps) Derivative financial instruments (interest-rate swaps) Derivative financial instruments (forward-currency contracts) Financial liabilities designated as cash-flow hedges Loan notes (issued July 2008, .78%-7.5 %, maturing 2018-20)* Loan notes (issued May 2012, 2.875%, maturing 2017)* Loan notes (issued December 2012, 2. 25%, maturing 2018)* Loan notes (issued November 201 , 1.5%, maturing 2023) Bank loans Bank overdrafts** Finance lease liabilities Trade creditors Financial liabilities measured at amortised cost 30 23 2 27 27 30 30 30 27 27 27 27 27 27 28 29 Carrying amount £m 4 27 1 92 48 48 Fair value £m 4 27 1 92 48 48 Total contractual Within 1 year cash flows £m £m 52 4 49 30 1 175+(174) 83 114 2-5 years £m 12 18 – 30 51 29 +(280) 355+(320) 35 1 51 1,14 73 1,882 1,14 73 1,882 (351) (389) (740) (398) (381) (779) 1,14 73 1,882 (431) (420) (851) 1,14 73 1,882 (27) (184) (211) – – – (404) (148) (552) Over 5 years £m – 1 – 1 – – – – – – (88) (88) (17) (1) (1) (19) (17) (1) (1) (19) (17) (1) (1) (19) 1+(5) 14+(27) 254+(254) – (1) – – – (14) – 34+(35) (5) (28 ) (513) (428) (425) (20) (71) (57) (252) (2,052) (30 ) (518) (44 ) (429) (20) (71) (57) (252) (2,099) (334) (527) (450) (459) (20) (71) (57) (252) (2,170) (20) (527) (11) ( ) (1 ) (71) (20) (252) (923) (314) – (439) (2 ) (4) – (37) – (820) – – – (427) – – – – (427) * £44m of July 2008 loan notes, €90m (£ m) of May 2012 loan notes and €120m (£89m) of December 2012 loan notes were held in fair-value hedge relationships. ** Excluding cash and overdraft balances in respect of cash-processing operations (see note 2 ). Note: In the table above, certain values are presented gross, to show both the asset and the liability. The gross cash flows disclosed in the tables above represent the contractual undiscounted cash flows relating to derivative financial assets and liabilities held for risk management purposes and which are usually not closed out before contractual maturity. The disclosure shows the net cash-flow amount for derivatives that are net cash-settled and gross cash inflow and outflow amounts for derivatives that have simultaneous gross cash settlement – e.g. forward-currency contracts. 170 G4S plc Integrated Report and Accounts 2017 Market risk Currency risk and forward-currency contracts The Group conducts bus ness n many currenc es. Transact on r sk s l m ted s nce, wherever poss ble, each bus ness operates and conducts ts f nanc ng act v t es n local currency. However, the Group presents ts consol dated f nanc al statements n Sterl ng and t s n consequence subject to fore gn-exchange r sk due to the translat on of the results and net assets of ts fore gn subs d ar es. Treasury pol cy s to manage s gn f cant translat on r sks n respect of net operat ng assets and ts consol dated net debt/Adjusted EBITDA rat o by hold ng fore gn currency denom nated loans, cross-currency swaps and to a lesser extent forward-currency contracts. The Group has hedged a substant al proport on of ts exposure to fluctuat ons n the translat on nto Sterl ng of ts overseas net assets through these nstruments. Translat on adjustments ar s ng on the translat on of fore gn currency loans and on changes n the fa r value of cross-currency swaps meet ng hedge account ng cr ter a are recogn sed n equ ty to match translat on adjustments on fore gn currency equ ty nvestments as they qual fy as net nvestment hedges w th no res dual mpact to equ ty. At 31 December 2017, the Group’s US dollar and Euro net assets were approx mately 91% and 90% respect vely hedged by fore gn currency loans and the cross-currency swaps des gnated as net- nvestment hedges (2016: US dollar 80%, Euro 93%). Cross-currency swaps w th a nom nal value of $449m (£332m) were arranged and des gnated as net- nvestment hedges. Cross-currency swaps w th a nom nal value of £25m are n place hedg ng the fore gn currency r sk on US$50m of the second US Pr vate Placement notes ssued n July 2008, effect vely f x ng the Sterl ng value of th s port on of debt at an exchange rate of 1.9750. Cross-currency swaps w th a nom nal value of £284m are n place hedg ng the fore gn currency r sk on €350m of the Euro publ c notes ssued n December 2012, effect vely f x ng the Sterl ng value of th s port on of debt at an exchange rate of 1.2332. Cross-currency swaps w th a nom nal value of £244m are n place hedg ng the fore gn currency r sk on €270m of the Euro publ c notes ssued n November 2016, effect vely f x ng the Sterl ng value of th s port on of debt at an exchange rate of 1.1088. Cross-currency swaps w th a nom nal value of £346m were arranged to hedge the fore gn currency r sk on €400m of the Euro publ c notes ssued n June 2017, effect vely f x ng the Sterl ng value of th s port on of debt at an exchange rate of 1.1570. Apply ng the relat ve movements n US dollar and Euro fore gn exchange rates aga nst Sterl ng n 2017 compared w th 2016 to carry ng values at 31 December 2017, the fa r value net ga n on the cross-currency swaps wh ch hedge part of the currency loan notes would have ncreased by £33m w th a d rect mpact on the Consol dated ncome statement. Th s would be offset by an equal and oppos te revaluat on to the underly ng bonds. Any of the underly ng bonds not n a cash-flow hedge are n a net nvestment hedge relat onsh p so that ult mately the mpact on the Consol dated ncome statement s n l. Interest-rate risk and interest-rate swaps Much of the Group’s debt s ssued at f xed rate, but to the extent there s borrow ng at float ng rates as descr bed n note 27, the Group s exposed to cash-flow nterest-rate r sk, wh ch the Group manages w th n pol cy l m ts approved by the d rectors. Interest-rate swaps and, to a l m ted extent, forward-rate agreements are ut l sed to f x the nterest rate on a proport on of borrow ngs on a reduc ng scale over forward per ods up to a max mum of f ve years. At 31 December 2017 there were no such contracts n place (2016: £60m). The US Pr vate Placement market s predom nantly a f xed-rate market, w th nvestors preferr ng a f xed-rate return over the l fe of the loan notes. At the t me of the f rst ssue n March 2007, the Group was comfortable w th the proport on of float ng rate exposure not hedged by nterest-rate swaps and therefore rather than take on a h gher proport on of f xed-rate debt arranged f xed to float ng swaps effect vely convert ng the f xed coupon on the Pr vate Placement to a float ng rate. Follow ng the swaps the result ng average coupon on the US Pr vate Placement s LIBOR + 60bps. These swaps have been documented as fa r-value hedges of the US Pr vate Placement f xed nterest loan notes, w th the movements n the r fa r value recogn sed n the Consol dated ncome statement at the same t me as the movement n the fa r value of the hedged tem. The nterest on the US Pr vate Placement notes ssued n July 2008, the Sterl ng publ c notes ssued n May 2009, €510m of the Euro publ c notes ssued n May 2012, €380m of the Euro publ c notes ssued n December 2012, the Euro publ c notes ssued n November 2016 and €400m of the publ c notes ssued n June 2017 was n t ally kept at f xed rate. In Apr l 2014, the nterest rate on £44m of the US Pr vate Placement notes ssued n July 2008 and on all the Sterl ng publ c notes ssued n May 2009 was swapped from f xed to float ng for a per od of three years us ng der vat ves and therefore matured n 2017. All four publ c notes have a coupon step-up of 1.25% wh ch s tr ggered should the cred t rat ng of G4S plc fall below nvestment grade. The core Group borrow ngs are held n US dollars, Euros and Sterl ng. Although the mpact of r s ng nterest rates s largely sh elded by f xed-rate loans and nterest-rate swaps wh ch prov de certa nty on the vast major ty of the exposure, some nterest-rate r sk rema ns. A 1% ncrease n nterest rates across the y eld curve n each of these currenc es, w th the 31 December 2017 debt pos t on constant throughout 2018, would result n an expectat on of an add t onal nterest charge of £6m n the 2018 f nanc al year. Commodity risk and commodity swaps The Group’s pr nc pal commod ty r sk relates to the fluctuat ng level of d esel pr ces, part cularly affect ng ts Cash Solut ons bus nesses. Commod ty swaps and commod ty opt ons are on occas ons used to f x synthet cally part of the exposure and reduce the assoc ated cost volat l ty. The hedg ng programme s under evaluat on, and as a consequence there was no commod ty hedg ng n place at 31 December 2017. Integrated Report and Accounts 2017 G4S plc 171 Financial report Notes to the consolidated financial statements continued 31. inancial risk continued Counterparty credit risk The Group’s strateg for credit-risk management is to set minimum credit ratings for counterparties and to monitor these on a regular basis. For treasur -related transactions, the Group’s polic limits the aggregate credit risk assigned to a counterpart . The utilisation of a credit limit is calculated b appl ing a weighting to the notional value of each transaction outstanding with each counterpart based on the t pe and duration of the transaction. The total mark-to-market value outstanding with each counterpart is also closel monitored against polic limits assigned to each counterpart . For short-term transactions (under one ear), at inception of the transaction, the financial counterpart must be investment-grade rated b either the Standard & Poor’s or Mood ’s rating agencies. For long-term transactions, at inception of the transaction, unless otherwise approved, the financial counterpart must have a minimum rating of BBB+/Baa1 from Standard & Poor’s or Mood ’s. Treasur transactions are dealt with through the Group’s relationship banks, all of which have a strong investment grade rating. At 31 December 2017 the largest two counterpart exposures related to treasur transactions were £48m and £29m and both were held with institutions with a long-term Standard & Poor’s credit rating of A. These exposures represent 29% and 18% of the carr ing values of the treasur transactions, with a fair value gain at the balance sheet date. Both of these banks had significant loan commitments outstanding to G4S plc at 31 December 2017. The Group operates a multi-currenc notional pooling cash management s stem with a wholl -owned subsidiar of an A-rated bank. At ear end, credit balances of £271m were pooled with debit balances of £260m, resulting in a net pool credit balance of £11m. There exists a legal right of set-off under the pooling agreement and an overdraft facilit of £3m. In accordance with IFRS Interpretations Committee (IC) requirements, the cash and overdraft pool balances are presented gross in the Consolidated statement of financial position. At an operating level the minimum investment-grade rating criteria applies. Exceptionall , where required b local countr circumstances, counterparties with no rating 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. 32. 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, multi-emplo er and funded and unfunded defined benefit schemes. Defined contribution arrangements The majorit of the retirement benefit arrangements operated b the Group are of a defined contribution structure, where the emplo er contribution and resulting income statement charge is fixed at a set level or is a set percentage of emplo ees’ pa . Contributions made to defined contribution schemes in 2017 and charged to the Consolidated income statement totalled £67m (2016: £77m). In the UK, following the closure of the defined benefit schemes to new entrants in 2004, the main scheme for new emplo ees is a contracted-in defined contribution scheme. Multi-employer arrangement In the Netherlands, most emplo ees are members of the Securit Industr Wide Pension Fund (IWPF). This is a career-average defined benefit plan. Pensionable salar is subject to a cap, and minus an offset that reflects social securit levels. Withdrawal from the scheme is onl possible under certain strict conditions determined b Dutch law and b the pension fund board of the IWPF. The plan is funded b a premium that is set b the IWPF board in line with the financing rules that state that the premium should cover the cost of the annual accrual of pension benefits. As of 1 Januar 2018 the premium is 35.3% and historicall has been around 30% of pensionable salaries. The emplo er pa s 60% of this premium and the emplo ees the remaining 40%. The financing rules specif that an emplo er is not obliged to pa an further premiums in respect of previousl accrued benefits. This means that in case of insufficient funding, the benefits of participants could, in theor , be reduced. The current solvenc ratio is 104.2% (December 2017). The required solvenc ratio according to Dutch law is 124.2% (as at 31 December 2017). Should a surplus appear within the scheme the board will decide if a reduction in premium is possible although this would onl be possible at much higher solvenc levels. Premiums paid to the scheme b the Group and charged to the Consolidated income statement in 2017 totalled £11m (2016: £10m). The estimated premium expected to be paid to the scheme during the financial ear commencing 1 Januar 2018 in respect of the on-going accrual of benefits is approximatel £12m. The scheme is not accounted for as a defined benefit scheme under IAS 19 – Emplo ee Benefits as it is not possible to identif the Group’s share of the scheme’s assets and liabilities. As a result, and in line with general practice for such schemes, the scheme is accounted for as if it were a defined contribution scheme under IAS 19. The Netherlands Cash Solutions Pension Plan (“the Cash Solutions scheme”) is a separate scheme operated b the Group but is required to provide benefits at least equivalent to the IWPF, and in particular pension increases in pa ment and deferment, as well as revaluation of active members’ rights in the Cash Solutions scheme, have to follow the multi-emplo er scheme (which applies a conditional approach). 172 G4S plc Integrated Report and Accounts 2017 Defined benefit arrangements The Group operates severa funded defined retirement benefit schemes where the benefits are based on emp oyees’ ength of service. Whi st the Group’s primary scheme is in the UK, it a so operates the Cash So utions scheme in the Nether ands and other ess materia p ans e sewhere. Under funded arrangements, the assets of defined benefit schemes are he d in separate trustee-administered funds or simi ar structures in the countries concerned. C ns lidated inc me statement The amounts recognised in the Conso idated income statement in re ation to the materia funded schemes are inc uded within the fo owing categories: Cost of sa es Administration expenses Net finance costs T tal f r material funded defined benefit schemes 2017 £m 4 2 8 14 2016 £m 4 2 7 13 There are a so various ess materia unfunded arrangements, for which the Group does not ho d re ated assets separate from the Group. In aggregate, other unfunded arrangements incurred £10m (2016: £8m) of costs within cost of sa es and finance costs of £3m (2016: £3m). C ns lidated statement f c mprehensive inc me Re-measurements of the net defined benefit ob igation are recognised in fu in the Conso idated statement of comprehensive income in the year in which they arise. These comprise the impact on the net defined benefit iabi ity of changes in demographic and financia assumptions compared with the start of the year, actua experience being different to those assumptions and the return on p an assets above the amount inc uded in the net pension interest expense. During the year the Group recognised a tota net re-measurement gain of £26m (2016: oss of £169m) within other comprehensive income (OCI) comprising a re-measurement gain of £29m (2016: oss of £164m) re ating to materia funded defined benefit schemes offset by a re-measurement oss of £3m (2016: oss of £5m) re ating to unfunded or other funded defined benefit schemes. C ns lidated statement f financial p siti n The Group’s net defined benefit deficit recognised in the Conso idated statement of financia position at 31 December 2017 was £381m (2016: £437m), or £318m (2016: £368m) net of app icab e tax in the re evant jurisdictions. The defined benefit ob igations (DBO) and assets for defined benefit schemes are as fo ows: 2017 UK secti ns: Securicor Group 4 GSL T tal UK Nether ands T tal f r material funded defined benefit schemes Tota provision for unfunded and other funded defined benefit schemes T tal net pr visi n f r all defined benefit schemes 2016 UK sections: Securicor Group 4 GSL Tota UK Nether ands Tota for materia funded defined benefit schemes Tota provision for unfunded and other funded defined benefit schemes Tota net provision for a defined benefit schemes DBO £m Assets £m (Deficit)/surplus £m (1,911) (414) (270) (2,595) (96) (2,691) 1,658 337 350 2,345 63 2,408 (253) (77) 80 (250) (33) (283) (98) (381) DBO £m Assets £m (Deficit)/surp us £m (1,957) (430) (272) (2,659) (81) (2,740) 1,655 337 347 2,339 60 2,399 (302) (93) 75 (320) (21) (341) (96) (437) Integrated Report and Accounts 2017 G4S plc 173 Financial report Notes to the consolidated financial statements continued 32 Retirement benefit obligations continued UK defined benefit scheme The defined enefit scheme in the UK accounts for 88% (2016: 94%) of the net alance sheet lia ility for material funded defined retirement enefit schemes. It comprises three sections: the Group 4 section which is the pension scheme demerged from the former Group 4 Falck A/S, the Securicor section, for which the Group assumed responsi ility on 20 July 2004 with the acquisition of Securicor plc, and the GSL section, for which the Group assumed responsi ility on 12 May 2008 with the acquisition of GSL. The UK scheme is closed to future accrual apart from some su -sections of the GSL section, and for most mem ers defines the pension ased on final salary. Certain su -sections of the GSL section have historically remained open to provide a facility to accept former pu lic-sector employees who join the Group through outsourcings. In the Group 4 and Securicor sections, mem ers retain their link to final salary where appropriate on their enefits accrued up to closure in 2011. As at the latest actuarial funding valuation the participants of the UK pension scheme sections can e analysed as follows: At 5 April 2015 Active participants • Num er • Average age Deferred participants • Num er • Average age Pensioner participants • Num er • Average age Group 4 section – N/A 3,653 52.0 3,346 71.0 GSL section 607 49.0 1,236 51.0 883 65.0 Securicor section – N/A 8,535 53.0 9,551 69.0 Total 607 49 0 13,424 52 5 13,780 69 2 There is a mix of fixed and inflation-dependent pension increases (in payment and deferment) which vary from mem er to mem er according to their mem ership history and the section of the scheme. The discounted weighted-average duration of the accrued lia ilities of the sections is as follows: Group 4 GSL Securicor 2017 17 19 18 2016 17 20 18 The scheme is set up under UK law and governed y a Trustee company which is responsi le for the scheme’s investments, administration and management. The Board of the Trustee company comprises an independent chairman and further independent, Group and scheme mem ership representatives. The current schedule of deficit recovery contri utions provides for a contri ution of approximately £41m during 2018. In addition, the Company has pledged a share of any material disposal proceeds to the pension scheme (to e shared in the same proportion as the pension scheme deficit ears to overall group inde tedness) and has agreed that additional contri utions would e made in the event that the average annual dividend payment to ordinary shareholders over the three financial years 2016, 2017 and 2018 exceeds a certain threshold or in the event that the Company makes a significant special dividend payment (or equivalent capital return), to its ordinary shareholders over the same period. A funding valuation is carried out for the scheme’s Trustee every three years y an independent firm of actuaries. Depending on the outcome of that valuation a schedule of future contri utions is negotiated; the Group has guaranteed any contri utions due from its su sidiaries. Under the terms of the existing agreement with the pension trustees, deficit payments are due to increase y 3% per annum until the next funding valuation in 2018 when they will e su ject to review and potential renegotiation. The Group has concluded that it should allow for a refund of any residual surplus in all three sections of the UK Scheme assuming wind-up after all enefits have een paid in the normal course of events. Therefore no adjustments for asset ceiling or additional lia ilities under the IFRIC 14 interpretation are made. At present the GSL section has a surplus and the other two sections have deficits. The IASB is proposing to amend IFRIC 14 and the Group will assess if there are any implications once the final form of the revised interpretation is clarified. 174 G4S plc Integrated Report and Accounts 2017 Principal risks The Group’s pens on schemes create a number of r sk exposures. Annual ncreases n benef ts are, to a vary ng extent from scheme to scheme, dependent on nflat on so the ma n uncerta nt es affect ng the level of benef ts payable are future nflat on levels ( nclud ng the mpact of nflat on on future salary ncreases) and the actual longev ty of the membersh p. Benef ts payable w ll also be nfluenced by a range of other factors nclud ng member dec s ons on matters such as when to ret re and the poss b l ty to draw benef ts n d fferent forms. A key r sk s that add t onal contr but ons are requ red f the nvestment returns fall short of those ant c pated when sett ng the contr but ons to the pens on plans. For the UK fund ng valuat on those assumed nvestment returns (for fund ng valuat ons) are set based on f xed marg ns over the LIBOR swap curve. The management of the UK pens on fund assets has been delegated to an asset manager, who manages the assets aga nst a l ab l ty benchmark. The key parameters of th s mandate can be summar sed as follows: Risk Asset m x Description The plan assets may fall n value. Interest rate r sk The plan assets may fall n value as a result of a fall n nterest rates. Inflat on r sk The plan assets may fall n value as a result of r se n nflat on. Currency r sk Regulatory r sk Actuar al assumpt ons r sk Any plan assets held n fore gn currenc es are exposed to changes n fore gn currency exchange rates. All pens on schemes are regulated by the relevant jur sd ct ons. These nclude extens ve leg slat on and regulatory mechan sms that are subject to change and may mpact the Group’s pens on schemes. Actuar al assumpt ons made on a range of demograph c and f nanc al matters that are used to project the expected benef t payments nclud ng future nflat on, salary growth and l fe expectancy. The DBO and serv ce cost are also very sens t ve to the IAS 19 d scount rate, wh ch determ nes the d scounted value of the projected benef t payments. The d scount rate depends on market y elds on h gh- qual ty corporate bonds. M t gat on The assets are managed dynam cally over t me rather than a set strateg c allocat on. Managed w th the benchmark of hedg ng 100% of these r sks as a percentage of the asset value through the use of debt nstruments (government bonds) and der vat ves. Managed w th the benchmark of hedg ng 100% of these r sks as a percentage of the asset value through the use of debt nstruments (government bonds) and der vat ves. Managed w th the object ve of hedg ng at least 70% of the overseas currency exposure n the portfol o through the use of forward fore gn currency contracts. G4S mon tors changes n regulat ons n the UK and the Netherlands to assess the potent al mpact these changes could have on the Group’s mater al pens on schemes. The UK pens on trustees have adopted nvestment strateg es to m t gate changes n key assumpt ons appl ed to the valuat on of pens on l ab l t es for fund ng purposes. These strateg es ma nly hedge aga nst nterest rate and nflat on expectat ons generally, as descr bed above, but do not spec f cally seek to hedge aga nst changes n cred t spreads that also affect the IAS 19 d scount rate. As a result the d fference between the market value of the assets and the valuat on of the pens on obl gat ons under IAS 19 may be volat le. Financial assumptions an sensitivity analysis The we ghted averages for each of the pr nc pal assumpt ons used for the purposes of the actuar al valuat ons were as follows: Key assumptions use at 31 December 2017 D scount rate Expected rate of salary ncreases Pens on ncreases n payment (for the UK, at RPI* w th a l m t of 5% p.a.) Inflat on Key assumpt ons used at 31 December 2016 D scount rate Expected rate of salary ncreases Pens on ncreases n payment (for the UK, at RPI* w th a l m t of 5% p.a.) Inflat on UK Netherlan s 2.55% 3.3% 3.1% 3.2% 2.5% 3.4% 3.1% 3.3% 2.0% N/A 1.2% 1.8% 2.0% N/A 0.8% 1.9% * RPI w th a l m t of 5% p.a. s the most common level of ncrease n the UK arrangements. Assumpt ons for other ncreases are der ved from the above nflat on assumpt on for RPI, and an annual CPI assumpt on of 2.2% (2016: 2.3%) as appropr ate. IAS 19 spec f es that pens on l ab l t es should be d scounted at appropr ate h gh qual ty corporate bond rates. The Group cons ders that t s appropr ate to cons der AA-rated corporate bonds as h gh qual ty and has therefore used d scount rates based on y elds on such bonds correspond ng to the l ab l ty prof le of the respect ve schemes. In 2017 the Group has ref ned ts approach to exclude certa n un vers ty and government-backed bonds that the Group does not cons der to be corporate bonds for the purposes of IAS 19. The effect of a movement n the d scount rate appl cable n the UK alters reported l ab l t es (before assoc ated deferred tax adjustments) by approx mately the amounts shown n the table overleaf. Integrated Report and Accounts 2017 G4S plc 175 Financial report Notes to the consolidated financial statements continued 32. etirement benefit obligations continued Sensitivity analysis Discount rate assumption being 0.5% ig er Discount rate assumption being 0.5% lower Increase/(decrease) in the DBO of the UK scheme 2017 £m (220) 242 Increase/(decrease) in t e DBO of t e UK sc eme 2016 £m (221) 243 T e effect of a movement in RPI inflation applicable in t e UK alters reported liabilities (before associated deferred tax adjustments) by approximately t e amounts s own in t e table below: Sensitivity analysis Inflation assumption being 0.5% ig er Inflation assumption being 0.5% lower Increase/(decrease) in the DBO of the UK scheme 2017 £m 90 (95) Increase/(decrease) in t e DBO of t e UK sc eme 2016 £m 92 (85) T e above sensitivities allow for inflation-dependent assumptions suc as salary growt and relevant pension increases to vary corresponding to t e inflation assumption variation. Due to t e caps and floors on pension increases a certain movement in t e inflation assumption will not generally result in t e same movement in t e pension increase assumption. Demographic assumptions and sensitivity analysis In addition to t e above, t e Group uses appropriate mortality assumptions w en calculating t e sc emes’ obligations. T e mortality tables used for t e sc eme in t e UK are: Birt year table S2P[M/F]A Base wit future improvements in line wit CMI_2015 Core projections, based on a long-term improvement rate of 1.25% p.a. and allowing for individual scaling factors based on t e mortality analysis carried out as part of t e last funding valuation. T e resulting assumed life expectancy of a male member of t e UK sc emes currently aged 65 is 21 years. T e assumed life expectancy at 65 of a male currently aged 52 is 22 years. At t ose ages, t e assumed life expectancy for a female member is between two and t ree years longer t an for a male member. T e effect of a one-year c ange in t is UK life expectancy assumption is to alter reported liabilities (before associated deferred tax adjustments) by approximately £123m (2016: £137m). T e selection of t ese movements to illustrate t e sensitivity of t e DBO to key assumptions s ould not be interpreted as t e Group expressing any specific view of t e probability of suc movements appening. 176 G4S plc Integrated Report and Accounts 2017 Analysis of amounts recognise in the Group’s Consoli ate statement of financial position The amounts recognised in the roup’s Consolidated statement of financial position in respect of the material funded defined benefit schemes, and in the various components of income, OCI and cash flow are as follows: 2017 Amounts recognise in the Consoli ate statement of financial position at the beginning of the year DBO £m Assets £m Provision £m (2,740) 2,399 (341) Amounts recognise in income: Current service cost Interest on obligations and assets Administration costs paid from plan assets Total amounts recognise in the Consoli ate income statement Re-measurements: – Actuarial gain change in financial assumptions – Actuarial loss change in demographic assumptions – Actuarial gain experience Return on assets in excess of interest Re-measurement effects recognise in the Consoli ate statement of comprehensive income* Cash: Employer contributions Benefits paid from plan assets Net cash Other: Impact of exchange rates Amounts recognise in the Consoli ate statement of financial position at the en of the year (4) (67) (2) (73) 22 (3) 16 – 35 – 91 91 – 59 – 59 – – – (6) (6) 43 (91) (48) (4) 4 (4) (8) (2) (14) 22 (3) 16 (6) 29 43 – 43 – (2,691) 2,408 (283) * Total re-measurements recognised in OCI of £26m are shown net of re-measurement losses relating to other unfunded schemes of £3m. Integrated Report and Accounts 2017 G4S plc 177 Financial report Notes to the consolidated financial statements continued 32. etirement benefit obligations continued 2016 Amounts recognised in the Consolidated statement of financial position at the beginning of the year DBO m Assets m Provision m (2,281) 2,076 (205) Amounts recognised in income: Current service cost Interest on obligations and assets Administration costs paid from plan assets Total amounts recognised in the Consolidated income statement Re-measurements: – Actuarial loss change in financial assumptions – Actuarial gain change in demographic assumptions – Actuarial gain experience Return on assets in excess of interest Re-measurement effects recognised in the Consolidated statement of comprehensive income* Cash: Employer contributions Benefits paid from plan assets Net cash (4) (85) (2) (91) (545) 81 23 – (441) – 83 83 – 78 – 78 – – – 277 277 43 (83) (40) (4) (7) (2) (13) (545) 81 23 277 (164) 43 – 43 Other: Impact of exchange rates Amounts recognised in the Consolidated statement of financial position at the end of the year (10) 8 (2) (2,740) 2,399 (341) * Total re-measurements recognised in OCI in 2016 of 169m are shown net of re-measurements relating to other unfunded schemes of 5m. Employer contributions in 2017 included 40m (2016: 39m) of additional contributions in respect of the deficit in the UK schemes. Analysis of scheme assets The composition of the scheme assets at the reporting date is as follows: 2017 Equity Government bonds Other Total 2016 Equity Government bonds Other Total UK £m 552 72 1,721 2,345 UK m 747 237 1,355 2,339 Netherlands £m 10 39 14 63 Netherlands m 11 39 10 60 Total £m 562 111 1,735 2,408 Total m 758 276 1,365 2,399 178 G4S plc Integrated Report and Accounts 2017 A more granular, approx mate spl t of assets of the UK scheme at 31 December 2017 s as follows: Equ ty Pr vate equ ty Government bonds Cred t Property Macro-or entated Mult -strategy Der vat ves Cash and cash equ valents Total UK ass ts 2017 £m 409 143 72 83 83 243 202 382 728 2,345 2016 £m 628 119 237 51 71 339 217 412 265 2,339 Mult -strategy assets are held n a pooled fund structure, wh ch s a mult -asset fund nvest ng across all asset classes. W th n the UK pens on fund, the Equ ty, Cred t, Macro-or entated and Mult -strategy sub-categor es cons st of pooled veh cles nvest ng predom nantly n assets w th quoted pr ces n act ve markets. All government bonds are ssued by the UK government and have quoted pr ces n act ve markets. Other UK nvestments are predom nantly unquoted. Der vat ves nclude a range of nterest-rate and nflat on-l nked swaps, forward-currency contracts, equ ty- ndex total return swaps, equ ty opt ons, and futures. Invest ng n nterest-rate and nflat on-l nked swaps s des gned to m t gate the mpact of future changes n nterest rates and nflat on. None of the pens on scheme assets are held n the Group’s own f nanc al nstruments or n any assets held or used by the Group. The fa r value of d rectly-held secur t es (equ t es and bonds) s taken as the clos ng pr ce on an act vely-traded market. Fa r value of hold ngs n pooled funds s prov ded by the nvestment manager, who calculates the pr ce based on the aggregate value of the underly ng assets held by the fund (based on clos ng pr ces of the secur t es on an act vely-traded market) and the number of un ts ssued. 33. Provisions and conting nt liabiliti s At 1 January 2017 Add t onal prov s on n the year Ut l sat on of prov s on Re-class f cat ons Unused amounts reversed Unw nd ng of d scounts Exchange d fferences At 31 D c mb r 2017 Included n current l ab l t es Included n non-current l ab l t es Employ b n fits £m 19 4 (3) 1 – – (1) 20 R structuring £m 5 20 (20) – (1) – – 4 Claims £m 96 58 (43) (1) (2) 2 (6) 104 On rous custom r contracts £m 69 19 (22) (4) – – – 62 Prop rty and oth r £m 59 22 (26) 2 (3) – (2) 52 Total £m 248 123 (114) (2) (6) 2 (9) 242 104 138 242 Judgment s requ red n quant fy ng the Group’s prov s ons, part cularly n connect on w th cla ms and onerous customer contracts, wh ch are based on a number of assumpt ons and est mates where the ult mate outcome may be d fferent to the amount prov ded. Each of these prov s ons reflects the Group’s best est mate of the probable exposure at 31 December 2017 and th s assessment has been made hav ng cons dered the sens t v ty of each prov s on to reasonably poss ble changes n key assumpt ons. The Group s sat sf ed that t s unl kely that changes n these key assumpt ons w ll have a mater al mpact on the Group’s overall prov s on ng pos t on n the next 12 months. Employ b n fits The prov s on for employee benef ts s n respect of any employee benef ts wh ch accrue over the work ng l ves of the employees, typ cally nclud ng tems such as long serv ce awards and term nat on ndemn ty schemes. The Group’s net obl gat on n respect of long-term serv ce benef ts other than ret rement benef ts represents the present value of the future benef t that employees have earned at the balance sheet date, less the fa r value of scheme assets out of wh ch the obl gat ons are to be settled d rectly. Integrated Report and Accounts 2017 G4S plc 179 Financial report Notes to the consolidated financial statements continued 33. rovisions and contingent liabilities continued Restructuring Restructuring provisions include amounts or redundancy payments, and the costs o closure o activities in acquired businesses and discontinued operations. Settlement o restructuring provisions is highly probable. The timing is uncertain but is generally likely to be short-term. During the year the Group incurred restructuring costs o £20m (2016: £12m) within speci ic items relating to the multi-year strategic productivity programme across the Group. In addition, the Group incurred non-strategic reorganisation costs o £10m (2016: £9m) which are included within Adjusted PBITA. Claims Claims provisions represent any outstanding litigation claims against the Group that are considered likely to lead to the out low o unds in the uture, including provisions within the captive insurance companies to cover (where appropriate) anticipated claims incurred as at the balance sheet date, based on actuarial assessments to calculate the liabilities. These claims reserves are held by the Group’s wholly-owned captive insurance subsidiaries in Guernsey and the US which underwrite part o the Group’s Cash Solutions, general liability, workers’ compensation and auto liability policies. In the year the Group provided £36m (2016: £20m) in relation to claims made under these policies which comprise a signi icant number o unrelated claims, most o which are individually immaterial. Claims provisions are subject to regular actuarial review and are adjusted as appropriate. Settlement o these provisions is highly probable but both the value o the inal settlements and their timing is uncertain, dependent upon the outcome o on-going processes to determine both liability and quantum in respect o a wide range o claims or possible claims. During the year the Group also recognised additional provisions o £9m mainly relating to the settlement o labour-related disputes in North and Latin America in respect o prior years, and £6m relating to the estimated cost o settlement o subcontractor claims rom commercial disputes in respect o prior years. Both o these amounts have been presented within speci ic items in the Consolidated income statement. Onerous customer contracts The Group recognised as speci ic items additional onerous contract provisions o £19m (2016: £4m) relating primarily to the anticipated total losses over the next 15 to 20 years in respect o certain UK contracts. It is expected that around 60% o the Group’s total provision or onerous contracts will be utilised by the end o 2020, mainly as the Compass contract comes to an end in August 2019. Given the short period remaining to the inalisation o this contract, any potential uture changes to key assumptions made when estimating its uture losses are not expected to have a signi icant impact. The additional expected losses o £19m are mainly related to two other PFI contracts where there has been an expected increase in costs to deliver the required maintenance regime. The expected additional uture losses are expected to be partially o set by pro it improvement plans, although these are re lected only to the extent that they have been implemented and are delivering the expected savings. A number o pro it improvement plans that have been designed but which have not yet been embedded success ully in the contract delivery were not considered when estimating uture expected losses. This is consistent with the Group’s policy which requires evidence that pro it improvement plans will be success ully implemented be ore they are re lected in anticipated uture cash low projections or onerous contract provisioning purposes. There is no single change in key variables that could materially a ect uture expected losses on these contracts. Furthermore, management believes that the current level o provision is balanced and that any signi icant potential downside rom possible changes to key assumptions could be o set by urther progress made in those pro it improvement plans that have not been considered ollowing the Group’s policy described above. The discount rates applied when calculating onerous contract provisions or these contracts were between 1.4% and 1.7%. roperty and other Included within property and other provisions are uture liabilities or long-term idle leased properties, or properties sub-let at a short all, or the cost o replacing or reinstalling assets where there is a present contractual requirement, and or customer claims on contracts that are related to the per ormance on a contract but do not orm part o onerous customer contract provisions. Whilst the likelihood o settlement o these obligations is considered probable, there is uncertainty over their value and duration. Included in property and other provisions are contract-related provisions o £35m (2016: £43m) and onerous property lease provisions o £17m (2016: £16m). Contingent liabilities The Group is involved in disputes in a number o countries, mainly related to activities incidental to its operations. Currently there are a number o disputes open in relation to the application o local labour law, commercial agreements with customers and subcontractors and claims and compliance matters, in some cases in the course o litigation. In addition, the interpretation o labour laws and regulations in a number o countries where the Group operates is complex and there is inherent judgment made when applying those laws and regulations that are open to interpretation. As such, there is risk that urther disputes and claims rom employees could arise in the uture. Where there is a dispute or where there is a risk o a dispute or claims in the uture and where, based on legal counsel advice, the Group estimates that it is probable that the dispute will result in an out low o economic resources, provision is made based on the Group’s best estimate o the likely inancial outcome. Where a reliable estimate cannot be made, or where the Group, based on legal counsel advice, considers that it is not probable that there will be an out low o economic resources, no provision is recognised. In this regard, the Group is party to a number o on-going litigation processes in relation to interpretation o local labour law and regulations in a number o countries, and where it is expected that these matters will not be resolved in the near uture. At this stage, the Group’s view is that these cases will either be resolved in a manner avourable to the interests o the Group or, due to the nature and complexity o the cases, it is not possible to estimate the potential economic exposure. In addition, in the ordinary course o business, other contingent liabilities exist where the Group is subject to commercial claims and litigation rom a range o parties in respect o contracts, agreements, regulatory and compliance matters, none o which are expected to have a material impact on the Group. 180 G4S plc Integrated Report and Accounts 2017 The investigation opened y the Serious Fraud Office in 2013 in respect of the Group’s Electronic Monitoring contract remains on- going. The Group continues to co-operate fully with the investigation ut, ased on currently availa le information, is una le to make a relia le estimate of the outcome of that review. 34. Deferred tax The following are the major deferred tax lia ilities and assets recognised y the Group and movements thereon during the year: At 1 January 2017 Charge to the income statement Disposal of su sidiaries Charge to equity Exchange differences At 31 December 2017 At 1 January 2016 Credit/(charge) to the income statement Acquisition of su sidiaries Credit to equity Exchange differences Transfers and re-classifications At 31 December 2016 Retirement benefit bligati ns £m 69 (2) – (4) – 63 45 – – 23 – 1 69 Tax l sses £m 110 (18) – – – 92 51 35 – 22 2 – 110 Other temp rary differences £m 93 (11) (1) – (5) 76 82 (1) (2) – 14 – 93 T tal £m 272 (31) (1) (4) (5) 231 178 34 (2) 45 16 1 272 Certain deferred tax assets and lia ilities have een offset where permitted. The following is the analysis of the deferred tax alances (after offset): Deferred tax lia ilities Deferred tax assets Net deferred tax (lia ility)/asset included in assets of disposal groups classified as held for sale Net deferred tax assets 2017 £m (8) 240 (1) 231 2016 £m (14) 285 1 272 At 31 Decem er 2017, the Group had unutilised tax losses of approximately £780m (2016: £842m) potentially availa le for offset against future profits. A deferred tax asset of £92m (2016: £110m) has een recognised in respect of approximately £508m (2016: £529m) of gross losses ased on profita ility from approved udgets and usiness plans. No deferred tax asset has een recognised in respect of the remaining £272m (2016: £313m) of gross losses due to the unpredicta ility and availa ility of future profit streams in the relevant jurisdictions, and the fact that a significant proportion of such losses remains unaudited y the relevant tax authorities. In certain cases, there are continuing structural issues which prevent the utilisation of losses within the foreseea le future. Losses which will never e utilised, for example due to the operation of statute, are not included in the a ove figures. Approximately £54m (2016: £80m) of the gross unrecognised losses relate to the UK group. Utilisation of such losses is dependent upon the profita ility of particular trading and corporate entities. The financial projections used in assessing the future profita ility are consistent with those used in assessing the carrying value of goodwill as set out in note 18. The utilisation of these losses will occur at different rates due to the incidence and timing of profits within these entities, which consequently impacts their recognition as deferred tax assets. Included in unrecognised tax losses are gross losses of £27m (2016: £40m) which will expire etween 2018 and 2026. Other losses may e carried forward indefinitely. At 31 Decem er 2017, the Group has capital losses availa le to carry forward of approximately £2.6 n (2016: £0.25 n). The in-year increase is mainly related to liquidation of dormant holding companies crystallising tax losses. These losses have no expiry date and have not een agreed with the relevant tax authorities. No deferred tax assets have een recognised in respect of these losses on the asis that the likelihood of their future utilisation is considered to e remote. At 31 Decem er 2017, the aggregate amount of undistri uted earnings of non-UK su sidiaries and joint ventures on which temporary differences may exist was £1,416m (2016: £1,646m). A deferred tax lia ility of £2m (2016: £3m) has een recognised on undistri uted earnings, ased on expected distri utions from such su sidiaries and joint ventures. Other temporary differences vary y country and include items relating to the local tax treatment of fixed assets, employee enefits, and provisions. Integrated Report and Accounts 2017 G4S plc 181 Financial report Notes to the consolidated financial statements continued 35 Share capital G4S plc Issued and fully paid ordinary shares of 25p each Ordinary shares in issue At 1 January At 31 December 36 Other reserves At 1 January 2017 Total comprehensive loss attributable to equity shareholders of the parent Recycling of net investment hedge Recycling of cumulative translation adjustments Own shares awarded Own shares purchased At 31 December 2017 At 1 January 2016 Total comprehensive (loss)/income attributable to equity shareholders of the parent Own shares awarded At 31 December 2016 Other reserves include: 2017 £ 387,898,609 2016 £ 387 898 609 2017 Number 1,551,594,436 1,551,594,436 2016 Number 1 551 594 436 1 551 594 436 Hedging reserve £m – Translation reserve £m 43 Merger reserve £m 426 Reserve for own shares £m (13) Total other reserves £m 456 – – – – – – 3 (3) – – (69) 24 (42) – – (44) (210) 253 – 43 – – – – – 426 426 – – 426 – – – 11 (10) (12) (18) – 5 (13) (69) 24 (42) 11 (10) 370 201 250 5 456 Hedging reserve The hedging reserve comprises the effective portion of the cumulative net change in the fair value of cash-flow hedging instruments related to the hedged transactions that have not yet occurred (net of tax). During the year a fair value gain of £21m (2016: £69m) was recognised in the hedging reserve relating to the increase in fair value of the cash-flow hedging instruments. Out of this gain £21m (2016: £73m) relating to the re-translation of those hedging instruments was transferred from the hedging reserve to the Consolidated income statement. This was offset by an equal and opposite revaluation to the hedged loan note items so that the net impact on the Consolidated income statement was nil. 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 Group’s net investment in foreign operations (net of tax). During the year £42m (2016: £nil) of cumulative translation adjustments and £24m (2016: £nil) of cumulative net investment hedging amounts relating to business disposals were recycled to the Consolidated income statement (see note 17). 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. In accordance with Section 612 of the Companies Act 2006 the £308m premium on ordinary shares issued in the Group’s 9.99% share placement in August 2013 was initially recorded in the merger reserve and has subsequently been transferred to retained earnings. Reserve for own shares An Employee Benefit Trust established by the Group held 4 362 068 shares at 31 December 2017 (2016: 4 844 243 shares) to satisfy the vesting of awards under the performance share plan and performance-related schemes (see note 39). During the year 3 489 049 shares (2016: no shares) were purchased by the trust and 3 971 224 shares (2016: 1 475 901 shares) were used to satisfy the vesting of awards under the schemes. At 31 December 2017 the cost of shares held by the trust was £12 330 829 (2016: £12 896 107) whilst the market value of these shares was £11 646 722 (2016: £11 383 971). Shares held by the trust are treated as treasury shares are deducted from equity do not receive dividends and are excluded from the calculations of earnings per share. Distributable reserves As at 31 December 2017 the parent company of the Group had distributable reserves of £885m (2016: £918m). 182 G4S plc Integrated Report and Accounts 2017 37. Analysis of net debt A reconciliation of net debt to a ounts in the Consolidated state ent of financial position is presented below: Cash and cash equivalentsa Receivables fro custo ers in respect of cash-processing operationsb Net cash and overdrafts included within assets of disposal groups held for sale Bank overdrafts Liabilities to custo ers in respect of cash-processing operationsc Total group cash, cash equivalents and bank overdrafts Invest entsa Net debt (excluding cash and overdrafts) included within assets of disposal groups held for sale Bank loans Loan notes Obligations under finance leases Fair value of loan note derivative financial instru ents Net debt a. The 2016 co paratives for cash and cash equivalents and invest ents have been re-presented – see note 3(a). b. Included within trade and other receivables. c. Included within trade and other payables. An analysis of ove ents in net debt in the year is presented below: (Decrease)/increase in cash, cash equivalents and bank overdrafts per Consolidated statement of cash flow Sale of invest ents Net decrease in borrowings Repay ent of finance leases Decrease in net debt resulting from cash flows New finance leases Net debt (excluding cash, cash equivalents and bank overdrafts) in disposed entities Net decrease in net debt before foreign exchange movements Exchange differences Net debt at the beginning of the year Net debt at the end of the year 017 £m 90 7 8 ( 84) (6 ) 571 6 (3) (13) ( ,141) (35) 7 (1,487) 017 £m (87) (3) 35 3 168 (3) (3) 16 1 (1,670) (1,487) 2016 £ 831 10 7 (93) (83) 672 64 6 (20) (2,392) (57) 57 (1,670) 2016 £ 197 (6) 11 22 224 (7) 5 222 (110) (1,782) (1,670) 38. Operating lease arrangements The Group as lessee As at 31 Dece ber 2017, the Group had outstanding co it ents 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 017 £m 99 46 1 5 470 2016 Restateda £ 113 288 124 525 The Group leases a nu ber of its office properties, vehicles and other operating equip ent under operating leases. Property leases are negotiated over an average ter of around ten years, at rates reflective of arket rentals. Periodic rent reviews take place to bring lease rentals into line with prevailing arket conditions. So e, but not all, lease agree ents have an option to renew the lease at the end of the lease ter . Leased vehicles and other operating equip ent are negotiated over an average lease ter of four years. a. As a consequence of the detailed work carried out to date to assess the i pact of IFRS16 Leases, effective 1 January 2019, it has been deter ined that the operating lease co it ents reported at 31 Dece ber 2016 were understated. The ageing analysis previously reported was £104 payable within one year, £272 payable within two to five years and £110 payable after ore than five years. – Integrated Report and Accounts 2017 G4S plc 183 Financial report Notes to the consolidated financial statements continued 39 Share-based payments Long Term Incentive Plan (LTIP) Shares allocated under the Group s LTIP are subject to performance conditions and forfeitures, as detailed in the Directors Remuneration report on page 93. Under the Group s LTIP, Relative Total Shareholder Return (a market performance condition) constitutes 30% (2016: 30%) of the performance criteria and is measured over three financial years. The Relative Total Shareholder Return is measured against a comparator group of selected relevant companies. 25% of this element of the award vests upon the Group s Total Shareholder Return being ranked median against the comparator group. The fair value of the shares awarded which is subject to this market performance condition has therefore been reduced by 75%. Deferred Bonus Share Plan (DBSP) and Restricted Share Plan (RSP) Shares allocated under the Group s DBSP and RSP are not subject to further financial performance conditions, but in both cases, are subject to forfeitures, either in part or in full, subject to continued employment, unless a participant is deemed a good leaver by the Remuneration Committee. Share awards under the RSP were granted in 2016 for the first time. Share-based payment plans information All three share plans have a three-year vesting period from their dates of grant. The following table shows the movements in the number of shares held under the share-based payment plans outstanding but not exercisable: Outstanding at 1 January Granted during the year Exercised during the year Forfeited during the year Expired during the year Outstanding at 31 December DBSP and RSP 2017 Number 1,518,118 1,620,857 (183,563) (43,086) – 2,912,326 LTIP 2017 Number 20,587,152 6,085,959 (4,745,747) (5,188,807) (1,439,326) 15,299,231 Total 2017 Number 22,105,270 7,706,816 (4,929,310) (5,231,893) (1,439,326) 18,211,557 DBSP and RSP 2016 Number 858,866 1,017,512 (358,260) – – 1,518,118 LTIP 2016 Number 17,210,721 10,431,311 (1,424,577) (2,104,420) (3,525,883) 20,587,152 Total 2016 Number 18,069,587 11,448,823 (1,782,837) (2,104,420) (3,525,883) 22,105,270 The weighted-average remaining contractual life of conditional share allocations outstanding at 31 December 2017 was 15 months (2016: 17 months). The weighted-average share price at the date of allocation of shares allocated conditionally during the year was 283.1p (2016: 185.2p) and the contractual life of all conditional allocations was three years. The weighted-average share price at the date of exercise for the shares exercised during the year was 279.0p (2016: 196.3p). The Consolidated income statement is charged with an estimate for the vesting of shares awarded conditionally and subject to non-market performance conditions. The charge for 2017 was £10m (2016: £13m), out of which £9m (2016: £10m) arose from equity-settled share-based payments. The total carrying amount for the liabilities arising from share-based payment transactions as at 31 December 2017 was £6m (31 December 2016: £6m). 184 G4S plc Integrated Report and Accounts 2017 40. Related party transactions Transactions and balances ith joint ventures Transactions between t e Company and its subsidiaries ave been eliminated on consolidation and are not disclosed in t is note. Details of transactions between t e Group and ot er related parties are disclosed below. All transactions wit related parties are entered into in t e normal course of business. Transactions wit joint ventures included revenue recorded of £56m (2016: £49m) and purc ases recorded of £6m (2016: £nil). Amounts due from related parties include £5m (2016: £8m) from joint ventures. Amounts due to related parties include £2m (2016: £nil) to joint ventures. No expense (2016: £nil) as been recognised in t e year for impairment in respect of amounts owed by related parties. T e Group as a legal interest in a number of joint ventures and joint arrangements, w ere t e economic interest was divested by t e Global Solutions Group prior to its acquisition by G4S plc in 2008. Transactions wit t ese entities during t e year comprised: W ite Horse Education Partners ip Limited Integrated Accommodation Services plc Fazakerley Prison Services Limited Onley Prison Services Limited UK Court Services (Manc ester) Limited East London Lift Company Limited Total 2017 Services/sales to £m 3 46 39 17 2 1 108 2016 Services/sales to £m 3 54 34 16 2 1 110 T e Group ad outstanding balances of £11m due from t ese entities at 31 December 2017 (2016: £12m). Transactions ith post-employment benefit schemes Details of transactions wit t e Group’s post-employment benefit sc emes are provided in note 32. Unpaid contributions owed to sc emes amounted to £0.3m at 31 December 2017 (31 December 2016: £0.5m). Transactions ith other related parties In t e normal course of t e Group’s business t e Group provides services to and receives services from certain non-controlling interests on an arm’s-lengt basis. Remuneration of key management personnel T e Group’s key management personnel are deemed to be t e non-executive directors and t ose individuals, including t e executive directors, w ose remuneration is determined by t e Remuneration Committee. T eir remuneration is set out below. Furt er information about t e remuneration of individual directors included wit in key management personnel is provided in t e audited part of t e Directors’ Remuneration report on pages 93 to 115. S ort-term employee benefits Post-employment benefits Ot er long-term benefits Termination benefits S are-based payment Total 41. Events after the balance sheet date No significant post-balance s eet events ave affected t e Group since 31 December 2017. 2017 £ 11,112,484 121,781 27,833 – 7,349,358 18,611,456 2016 £ 11,463,651 74,390 28,728 305,159 6,417,657 18,289,585 Integrated Report and Accounts 2017 G4S plc 185 Financial report Notes to the consolidated financial statements continued 42. Significant in estments The companies isted be ow are those which were part of the Group at 31 December 2017 and which, in the opinion of the directors, significant y affected the Group’s resu ts and net assets during the year. A comprehensive ist of a Group undertakings is disc osed on pages 187 to 200. The principa activities of the companies isted be ow are indicated according to the fo owing key: Secure So utions Cash So utions These businesses operate principa y in the country in which they are incorporated. S C Product segment Country of incorporation Ultimate ownership Subsidiary undertakings G4S So uciones de Seguridad S.A. G4S Custodia Services Pty Limited G4S Secure So utions AG (Austria) G4S Secure So utions SA/NV G4S Cash So utions (Be gium) NV G4S Interativa Service Ltda Vanguarda Segurança e Vigi ância Ltda G4S Secure So utions (Canada) Limited G4S Secure So utions Co ombia S.A. G4S Security Services A/S G4S Care and Justice Services (UK) Limited G4S Cash Centres (UK) Limited G4S Cash So utions (UK) Limited G4S Faci ities Management (UK) Limited G4S Risk Management Limited G4S Secure So utions (UK) Limited AS G4S Ba tics G4S Keszpenz ogisztikai Kft G4S Secure So utions (India) Pvt. Limited1,3 G4S Kenya Limited G4S Security So utions S.A.R.L. Safeguards G4S Sdn Bhd2,3 G4S Cash So utions BV G4S Security Services BV G4S Peru S.A.C. A Maja Service Master LLC3 Mohammed Bin Abdoud A Amoudi Co for Civi ian Security Services Partnership (A maja )3 G4S Cash So utions (SA) (Pty) Limited G4S Secure So utions (SA) (Pty) Limited3 G4S Security Services (Thai and) Limited G4S Secure So utions LLC3 G4S Retai So utions (USA) Inc. G4S Secure So utions (USA) Inc. G4S Techno ogy LLC 1. G4S Secure So utions (India) Pvt. Limited has a year end of 31 March. 2. Safeguards G4S Sdn Bhd has a year end of 30 June. S S S S C S S S S+C S S C C S S S S+C C S S+C S+C S+C C S S S S+C C S S S+C C S S Argentina Austra ia Austria Be gium Be gium Brazi Brazi Canada Co ombia Denmark Eng and Eng and Eng and Eng and Eng and Eng and Estonia Hungary India Kenya Luxembourg Ma aysia Nether ands Nether ands Peru Saudi Arabia Saudi Arabia South Africa South Africa Thai and United Arab Emirates USA USA USA 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 49% 100% 100% 49% 100% 100% 100% 49% 0% 75% 72% 98% 49% 100% 100% 100% 3. By virtue of shareho der agreements, options, pre-emption rights and other contractua arrangements, the Group has the power to govern the financia and operating po icies, so as to obtain the benefits from the activities of these companies. These are therefore conso idated as fu subsidiaries. 186 G4S plc Integrated Report and Accounts 2017 43. Details of related undertakin s of G4S plc Subsidiaries Entities listed belo are subsidiaries at 31 December 2017, by reason of the holding of a majority of the voting rights or, if a majority is not held, by virtue of section 1162 (2) (c) of the Companies Act 2006. Not all of the companies listed belo are trading entities. Company Name G4S ALGERIE EURL SECURICOR GRAY SECURITY SERVICES (ANGOLA) (PTY) LTD G4S SERVICOS DE SEGURANCA (ANGOLA) LIMITADA G4S SOLUCIONES DE SEGURIDAD S.A. G4S SERVICIOS DE SEGURIDAD S.A. INDOMEGA S.A. MANAR S.A. PROTECCION E INVERSIONES S.A. G4S SOLUCIONES GLOBALES S.A. G4S APPLIED SECURITY S.A. G4S CONTROL SYSTEMS S.A. G4S DETCON S.A. ORCANI PTY LTD G4S INTERNATIONAL LOGISTICS (AUSTRALIA) PTY LTD G4S COMPLIANCE & INVESTIGATIONS PTY LTD G4S AUSTRALIA PTY LTD G4S HEALTH SERVICES AUSTRALIA PTY LTD G4S CUSTODIAL SERVICES PTY LTD G4S AUSTRALIA HOLDINGS PTY LTD G4S INTEGRATED SERVICES PTY LTD G4S CORRECTIONAL SERVICES (AUSTRALIA) PTY LTD G4S SECURE SOLUTIONS AG (AUSTRIA) G4S SECURITY SYSTEMS GMBH G4S DIENSTLEISTUNGS GMBH G4S SECURE SOLUTIONS BAHRAIN W.L.L G4S REGIONAL CONSULTANCY SERVICES (NAMESA) WLL G4S SECURE SOLUTIONS BANGLADESH (P) LTD FIRST SELECT BANGLADESH LIMITED Country of Incorporation Algeria Angola % owned by Group 100.0% 100.0% % owned by plc Angola Argentina Argentina Argentina Argentina Argentina Argentina Argentina Argentina Argentina Australia Australia Australia Australia Australia Australia Australia Australia Australia Austria Austria Austria Bahrain Bahrain 65.0% 100% 75.1% 99.9% 100% 80.0% 75.0% 75.0% 85.8% 75.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 34.3% 100.0% Re istered address Lotissement Benhedadi Said N°3 Dar Diaf Cherraka, 16050, Algeria Byls Bridge Office Park, Building 11, 13 Candela Street, Highveld Ext 73, 0157 Centurion, South Africa Rua di reita da Samba, No 58, Corimba, Samba Luanda, Angola Timoteo Gordillo 5697/5611, C1439 GKA Buenos Aires, Argentina Timoteo Gordillo 5697/5611, C1439 GKA Buenos Aires, Argentina Peru 338 San Fernando del Valle de Catamarca, K4700AKJ Catamarca, Argentina Peru 338 San Fernando del Valle de Catamarca, K4700AKJ Catamarca, Argentina Timoteo Gordillo 5697/5611, C1439 GKA Buenos Aires, Argentina Jose Demaria 4470 (C1425AEB), Buenos Aires, Argentina Timoteo Gordillo 5697/5611, C1439 GKA Buenos Aires, Argentina Timoteo Gordillo 5697/5611, C1439 GKA Buenos Aires, Argentina Lavalle 1528, 3º “E” (C1048AAL), Ciudad Autónoma de Buenos Aires, Argentina Level 4 616 St Kilda Road, Melbourne, 3004 Victoria, Australia c/o HLB Mann Judd, Level 19, 207b Kent Street, 2000 Sydney, Australia P.O. Box 7332 (Level 3, 182-184 Bourke Road), NSW 2015 Alexandria, Australia Level 4 616 St Kilda Road, Melbourne, 3004 Victoria, Australia Level 4 616 St Kilda Road, Melbourne, 3004 Victoria, Australia Level 4 616 St Kilda Road, Melbourne, 3004 Victoria, Australia Level 4 616 St Kilda Road, Melbourne, 3004 Victoria, Australia Level 4 616 St Kilda Road, Melbourne, 3004 Victoria, Australia Level 4 616 St Kilda Road, Melbourne, 3004 Victoria, Australia Dresdner Strasse 91/1, A-1200 Vienna, Austria Peilsteinerstr. 5-7, A-5020 Salzburg, Austria Dresdner Strasse 91/1, A-1200 Vienna, Austria Villa 925, Road 3830, Manama, Qudaybiyah 338, P. O. Box 15193 Adliya, Bahrain 2235 West To er BFH Manama, Bahrain Bangladesh 100.0% House # KA 79, Joar Sahara, Dhaka, 1212 Dhaka, Bangladesh Bangladesh Barbados G4S SECURE SOLUTIONS (BARBADOS) LTD G4S CASH SOLUTIONS (BELGIUM) SA/NV Belgium Belgium G4S SUPPORT SERVICES SA/NV Belgium G4S SECURE SOLUTIONS SA/NV Belgium G4S CARGO SOLUTIONS SA/NV Belgium G4S TRAINING & CONSULTANCY SERVICES SA/NV G4S AVIATION SECURITY SA/NV G4S SECURE MONITORING SA/NV G4S SECURITY SYSTEMS SA/NV G4S CARE SA/NV G4S EVENT SERVICES SA/NV G4S EVENT SECURITY SA/NV G4S FIRE AND SAFETY BV/BA G4S BELGIUM NOMINEE NV G4S SAFETY SYSTEMS N.V. ASC SAFETY SERVICES B.V/B.A. G4S BOLIVA S.A. Belgium Belgium Belgium Belgium Belgium Belgium Belgium Belgium Belgium Belgium Bolivia 40.0% 51.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 50.4% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 99.9% 100% Apartment 10/A, Rupsha To er, 7 Kamal Ataturk Avenue, Banani, Dhaka, Bangladesh Brighton, Spring Garden, St. Michael, Barbados Buro & Design Center PB 77 Heizel Esplanade 1020 Brussels, Belgium Buro & Design Center PB 77 Heizel Esplanade 1020 Brussels, Belgium Buro & Design Center PB 77 Heizel Esplanade 1020 Brussels, Belgium Buro & Design Center PB 77 Heizel Esplanade 1020 Brussels, Belgium Buro & Design Center PB 77 Heizel Esplanade 1020 Brussels, Belgium Buro & Design Center PB 77 Heizel Esplanade 1020 Brussels, Belgium Buro & Design Center PB 77 Heizel Esplanade 1020 Brussels, Belgium Buro & Design Center PB 77 Heizel Esplanade 1020 Brussels, Belgium Buro & Design Center PB 77 Heizel Esplanade 1020 Brussels, Belgium Buro & Design Center PB 77 Heizel Esplanade 1020 Brussels, Belgium Buro & Design Center PB 77 Heizel Esplanade 1020 Brussels, Belgium Buro & Design Center PB 77 Heizel Esplanade 1020 Brussels, Belgium Buro & Design Center PB 77 Heizel Esplanade 1020 Brussels, Belgium Abtsdreef 10, 2940 Stabroek, Belgium Abtsdreef 10, 2940 Stabroek, Belgium Marcelo terceros Banzer S/N, 3er Anillo Ext. Equipetrol (Frente Hotel Casa Blanca), Santa Cruz, Bolivia Integrated Report and Accounts 2017 G4S plc 187 Financial report Notes to the consolidated financial statements continued Registe ed add ess C/o Grant Thornton usiness Services (Pty) Ltd, Acumen Park, Plot 50370, Fairgrounds Gaborone otswana C/o Grant Thornton usiness Services (Pty) Ltd, Acumen Park, Plot 50370, Fairgrounds Gaborone otswana Plot 50370, Fairgrounds Office Park, Gaborone, otswana Rua Rui arbosa 70, 2º andar, 01326-010 São Paulo, razil Rua Rui arbosa 70, 3º andar, ela Vista, São Paulo, razil Rua Maria José 69, ela Vista, 01324-010 São Paulo, razil Rua Rui arbosa 191,1º andar, 01326-010 São Paulo, razil Rua Santa Rosa, 911, airro Santa Paula, Sao Caetano do Sul, Sao Paulo, razil Rua Rui arbosa 70-A, 01326-010 São Paulo, razil Rua Maria José 133, ela Vista, 01324-010 São Paulo, razil Rua Rui arbosa 70, 1º andar, ela Vista 01326-010 São Paulo, razil CITCO uilding, Wickhams City, P.O. ox 662, Road Town, Tortola, ritish Virgin Islands Flat/ RM 101 & 104/F, Tower 2, The Harbourfront, 22 Tak Fung Street, Kowloon, Hong Kong 1395 University lvd, 33458 Jupiter, FL, United States Craigmuir Chambers, P.O. ox 71, Road Town, Tortola, ritish Virgin Islands Kingston Chambers, P.O. ox 173, Road Town Tortola, ritish Virgin Islands 1395 University lvd, 33458 Jupiter, FL, United States P.O. ox 957, Offshore Incorporations Centre, Road Town, Tortola, ritish Virgin Islands 1395 University lvd, 33458 Jupiter, FL, United States Old Airport Road, onapriso Doula, Cameroon 150 Ferrand Drive, Suite 600, M3C 3E5 Toronto, Ontario, Canada 5255 Orbitor Drive, L4W 5M6 Mississauga Ontario, Canada 160 Elgin Street, K1P 1C3, Ottawa, Canada Sterling Trust (Cayman) Limited, Whitehall House, 238 North Church Street, k1-1102 Grand Cayman, Cayman Islands No 48/85, Avenue Kolwezi, Gombe, Kinshasa, DRC – – – – – Avda. Zañartu 1680, Ñuñoa Santiago, Chile Santiago, Chile Avda. Zañartu 1680, Ñuñoa Avda. Zañartu 1680, Ñuñoa Santiago, Chile Avda. Zañartu 1680, Ñuñoa Santiago, Chile Avda. Zañartu 1680, Ñuñoa Santiago, Chile 13F, Hui Shang uilding, 1286 Min Sheng Road, Pudong New District, 200122, Shanghai, China West Floor 9, us Tower 1001, Lianhau branch, Futian District, 518036 Shenzhen, China Room 01-4 Tower A 8F, Yi Cheng International Centre No.10 Rong Hua Middle Road eijing Development Area, 100176 eijing, China Room 710A, 7/F, Nan Fang Securities uilding, 140 -148 Ti Yu Dong Lu, Tian He District, Guangzhou, China 6A, Huamin Empire Plaza, No. 728 Yan An Road (W), 200050 Shanghai, China 17-1 ai Ma Miao Xiang, Shangcheng District, Hangzhou, China Room 204-7, 2/Floor, China Diamond Exchange Center uilding, Tower , No. 1701 Century oulevard, Pudong New Area, Shanghai, China 13F, Hui Shang uilding, 1286 Min Sheng Road, Pudong New District, 200122, Shanghai, China 43. Details of elated unde takings of G4S plc continued Subsidia ies continued Company Name G4S ( OTSWANA) LTD Count y of Inco po ation otswana % owned by G oup 70.0% % owned by plc FIDELITY CASH MANAGEMENT SERVICES ( OTSWANA) PTY LTD G4S FACILITIES MANAGEMENT OTSWANA (PTY) LTD G4S RAZIL HOLDING LTDA G4S MONITORAMENTO E SISTEMAS LTDA G4S SERVIÇOS LTDA G4S ENGENHARIA E SISTEMAS LTDA G4S INTERATIVA SERVICE LTDA G4S VANGUARDA SEGURANÇA E VIGILÂNCIA LTDA EMPRESA NACIONAL DE SEGURANCA LTDA G4S PARTICIPAÇÕES LTDA G4S GROUP HOLDING (ASIA) LTD otswana 100.0% otswana 48.9% razil razil razil razil razil razil razil 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% razil ritish Virgin Islands 100.0% 100.0% G4S SECURE SOLUTIONS (ASIA) LTD ritish Virgin Islands 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 48.4% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 75.0% 100.0% 100.0% 90.0% 100.0% 100.0% ritish Virgin Islands ritish Virgin Islands ritish Virgin Islands ritish Virgin Islands ritish Virgin Islands G4S HOLDINGS LTD ARMORGROUP (SPECIAL CLEARANCE SERVICES) LTD HILL & ASSOCIATES CONSULTANTS LTD G4S ( VI) HOLDCO (COLOM IA II) LTD HILL & ASSOCIATES CONSULTANTS (MIDDLE EAST) LTD ASHINO HOLDINGS LTD G4S SECURITY SERVICES CAMEROON PLC Cameroon G4S SECURE SOLUTIONS (CANADA) LTD. (G4S SOLUTIONS DE SECURITE (CANADA) LTEE) INDO RITISH GARMENTS (CANADA) LTD Canada Canada I-VISION SYSTEMS INC Cayman Islands SERVICE MASTERS LTD Canada ritish Virgin Islands G4S CENTRAFRIQUE SECURITE SOLUTION SURL G4S HOLDINGS CHILE S.A. G4S SECURITY SERVICES REGIONES, S.A. G4S SECURITY SERVICES LIMITADA ARRIENDOS FAST CAR, LTDA CAPACITACIÓN Y DESARROLLO, LTDA G4S FACILITIES MANAGEMENT LTD Central African Republic Chile Chile Chile Chile Chile China SHENZHEN G4S DONAR TECHNOLOGY CO, LTD G4S SECURITY SYSTEMS ( EIJING) CO., LTD China China G4S TECHNOLOGY (CHINA) LTD HILL & ASSOCIATES (PRC) LTD G4S ZHEJIANG SECURE SOLUTIONS CO LTD G4S INTERNATIONAL LOGISTICS (SHANGHAI) CO. LTD G4S MANAGEMENT SERVICES (SHANGHAI) CO. LTD China China China China China 188 G4S plc Integrated Report and Accounts 2017 Subsidiaries continued Coun ry of Incorpora ion Company Name G4S SE URE SOLUTIONS OLOMBIA S.A. olombia G4S RISK MANAGEMENT OLOMBIA S.A. olombia olombia G4S HOLDING OLOMBIA SA G4S TE HNOLOGY OLOMBIA S.A. olombia G4S ASH SOLUTIONS OLOMBIA LTDA. olombia olombia EB INGENIERIA S.A.S osta Rica GFOURS S.A. % owned by group 100.0% 94.5% 100.0% 100.0% 100.0% 100.0% 100.0% G UATRO S VALOURS S.A. osta Rica 100.0% % owned by plc osta Rica WA KENHUT SERVI IOS DE SEGURIDAD, S.A. WA KENHUT SERVI IO DE ES OLTAS, S.A. G FOUR S GRUPO DE SERVI IOS ESPE IALES DE SEGURIDAD, S.A. G FOUR S ONSULTOR EN SEGURIDAD, S.A. G UATRO S LOGISTI A DE VALORES SA osta Rica osta Rica osta Rica osta Rica 100.0% 100.0% 100.0% 100.0% 100.0% G UATRO S ASH SOLUTIONS S.A. osta Rica 100.0% G4S GULF HOLDINGS NV G4S SE URE SOLUTIONS ( YPRUS) LTD G4S HOLDING YPRUS LTD G4S AVIATION ( YPRUS) LTD G4S SE URE SOLUTIONS ( Z), A.S. G4S ASH SOLUTIONS ( Z) A.S. G4S SERVI ES S.R.O. G4S (DR ) S.A.R.L. G4S HOLDINGS (DK) A/S G4S INTERNATIONAL (DK) A/S G4S SE URITY SERVI ES A/S G4S KYHLENSO A/S G4S VIKINGA SURAMERI ANA APS G4S SURAMERI ANA HOLDING APS G4S SE URE SOLUTIONS 100.0% 74.0% 100.0% 80% 100.0% 100.0% 100.0% 95.0% uracao yprus yprus yprus zech Republic zech Republic zech Republic Democratic Republic of ongo 100.0% Denmark 100.0% Denmark 100.0% Denmark 100.0% Denmark 100.0% Denmark Denmark 100.0% Dominican Republic 95.0% G4S ASH SOLUTIONS Dominican Republic 95.0% Ecuador Ecuador Ecuador Ecuador Ecuador Egypt Egypt Egypt Egypt Egypt Egypt 99.9% 99.9% 99.9% 99.9% 100.0% 85.0% 99.0% 99.0% 60.0% 51.0% G4S SE URE SOLUTIONS (E UADOR) IA LTDA. G4S HOLDING (E UADOR) S.A. DEFEN E SYSTEMS E UADOR DSE IA LTDA G4S FA ILITY MANAGEMENT IA LTDA EFOSEG IA. LTDA. G4S SE URE SOLUTIONS (EGYPT) LL INDO BRITISH GARMENTS EGYPT S.A.E. FS INVESTMENTS LL FIRST SELE T EGYPT LL G4S LOTUS FA ILITIES MANAGEMENT OMPANY G4S FA ILITIES MANAGEMENT (EGYPT) LL G4S SE URE SOLUTIONS EL SALVADOR S.A. DE .V. AS G4S BALTI S AS G4S GRUPP AS G4S EESTI ALARMTE AS AS ÜHISTEENUSED – Regis ered address Avenida 26 No 69A-51 Torre A, Int 1 Piso 3, Bogota, olombia Avenida 26 No. 69A 51 Torre A, Int 1, Piso 2, Bogota, olombia Avenida 26 No 69A-51 Torre A, Int 1 Piso 3, Bogota, olombia Avenida 26 No 69A-51 Torre A, Int 1 Piso 3, Bogota, olombia Avenida de las Americas No. 41 – 08, Bogota, olombia Avenida 26 No 69A-51 Torre A, Int 1 Piso 3, Bogota, olombia Sabana Sur Yamuni 200 Sur de Frente a onsejo Nacional de Produccion, San Jose, osta Rica inco Esquinas de Tibas de la linica, lorito Picado 150 mts. Oeste, San Jose, osta Rica Sabana Sur Yamuni 200 Sur de Frente a onsejo Nacional de Produccion, San Jose, osta Rica Sabana Sur Yamuni 200 Sur de Frente a onsejo Nacional de Produccion, San Jose, osta Rica Sabana Sur Yamuni 200 Sur de Frente a onsejo Nacional de Produccion, San Jose, osta Rica Sabana Sur Yamuni 200 Sur de Frente a onsejo Nacional de Produccion, San Jose, osta Rica inco Esquinas de Tibas de la linica, lorito Picado 150 mts. Oeste, San Jose, osta Rica inco Esquinas de Tibas de la linica, lorito Picado 150 mts. Oeste, San Jose, osta Rica Kaya Flamboyan 6, uraçao, Dutch West Indies, uracao Diianiras 17, 2045 Strovolos Nicosia, P.O. Box 23989 1687, Nicosia, yprus P.O. Box 23989, 1687 Nicosia, yprus Diianiras 17, 2045 Strovolos Nicosia, P.O. Box 23989 1687, Nicosia, yprus Na Kosince 2257/9, 180 00 Prague 8, zech Republic Na Kosince 2257/9, 180 00 Prague 8, zech Republic Na Kosince 2257/9, 180 00 Prague 8, zech Republic 108, Boulevard du 30 Juin, Gombe, Kinshasa, Democratic 100.0% 28.50% Roskildevej 157, DK-2620 Albertslund, Denmark Roskildevej 157, DK-2620 Albertslund, Denmark Roskildevej 157, DK-2620 Albertslund, Denmark Roskildevej 157, DK-2620 Albertslund, Denmark Roskildevej 157, DK-2620 Albertslund, Denmark Roskildevej 157, DK-2620 Albertslund, Denmark Paseo de los Locutores #36, Ensanche Piantini, Santo Domingo, Dominican Republic Paseo de los Locutores #36, Ensanche Piantini, Santo Domingo, Dominican Republic Gral. Giacomo Roca N33-92 y Bosmediano, Quito, Ecuador Luis ordero E12-114 y Toledo, Quito, Ecuador alle Moscú E09-8 y Av. República del Salvador, Quito, Ecuador alle Moscú E09-8 y Av. República del Salvador Quito, Ecuador Av. Principal la Perla S52-136 y Quinta Transversal Quito Ecuador 2nd District, 90th Street, Area 6, 5th Settlement, New airo, airo, Egypt Head Office: Ismalia Public Free Zone Area, Egypt 7 El Sherka El Porsaidia St., Auba Boula Sq. Ard El Golf, Heliopolis, airo, Egypt Flat no. 7, Bur Saeediya ompany Street, Alan Babula Square, Heliopolis, Golf Land, airo, Egypt 3A Nabatat Street, Garden ity, airo, Egypt 12 Suhag St. Extension of Harun El-Rasheed St., Heliopolis, airo, Egypt El Salvador 100.0% Av. Olimpica 3765, San Salvador, El Salvador Estonia Estonia Estonia Estonia Estonia 100.0% 100.0% 100.0% 100.0% 100.0% Paldiski mnt 80, 10617 Tallinn, Estonia Paldiski mnt 80, 10617 Tallinn, Estonia Paldiski mnt 80, 10617 Tallinn, Estonia Töökoja 1, 11313 Tallinn, Estonia Tarta mnt 80j, 10112 Tallinn, Estonia Integrated Report and Accounts 2017 G4S plc 189 Financial report % owned by Group 100.0% % owned by plc Registered address 18 R Pasquier, 75008 Paris, France Notes to the consolidated financial statements continued 43. etails of related undertakings of G4S plc continued Subsidiaries continued Country of Incorporation France Company Name G4S IN ERNA IONAL HOLDINGS (FRANCE) SAS France G4S AVIA ION SECURI Y (FRANCE) SAS France G4S SECURE SOLU IONS FRANCE SAS G4S GABON SECURE SOLU IONS S.A. Gabon G4S SECURE SOLU IONS (GAMBIA) L D Gambia G4S SECURI Y HOLDINGS DE GMBH Germany G4S IN ERNA IONAL LOGIS ICS (GERMANY) GMBH G4S IMMOBILIEN-VERWAL UNGS GMBH Germany Germany Ghana Ghana Ghana Ghana Greece Greece Greece Greece Greece Greece G4S SECURI Y SERVICES (GHANA) L D G4S (GHANA) L D G4S SECURE SOLU IONS (GHANA) L D G4S RISK MANAGEMEN (AFRICA) L D G4S SECURE SOLU IONS SA G4S HELLAS HOLDING SA G4S CASH SOLU IONS SA G4S ELEMA IX SA WSW SKYKAP SERVICES SA G4S AVIA ION AND POR S SECURE SOLU IONS SA HELLAS GUARD S.A. UNDER LIQUIDA ION G4S RMS L D CSI DEFENSE L D G4S SECURI Y SYS EMS AND MONI ORING SERVICES (GREECE) SA G4S SECURE SOLU IONS (GRENADA) L D. Grenada Guam G4S SECURE SOLU IONS (GUAM), INC. Guam G4S SECURI Y SYS EMS (GUAM) INC. Guatemala WACKENHU DE GUA EMALA S.A. Guatemala WACKENHU ELEC RONICA S.A. Guatemala G4S DOCUMEN A, S.A. Guatemala FACILI Y SERVICES, S.A. Guatemala G4S SECURE SOLU IONS, S.A. G4S SECURE SOLU IONS (GUERNSEY) L D Guernsey Guernsey G4S INSURANCE (GUERNSEY) L D Greece Greece Greece Greece G4S SECURI Y SERVICES (GUINEA) SARL Guinea 100.0% 100.0% 99.9% 100.0% 100.0% 100.0% 100.0% 5.20% 100.0% 100.0% 100.0% 49.0% 100.0% 100.0% 100.0% 39.4% 42.5% 100.0% 18.0% 100% 50.0% 100.0% 51.0% 100.0% 100.0% 50.0% 47.5% 50.0% 28.0% 50.0% 100.0% 100.0% 75.0% 100.0% G4S (HONG KONG HOLDING) L D – Hong Kong 100.0% VERDI L D Hong Kong 100.0% G4S SECURE SOLU IONS (HONG KONG) L D G4S GURKHA SERVICES L D Hong Kong 100.0% Hong Kong 100.0% HONG KONG SECURI Y L D Hong Kong 100.0% G4S DOCUMEN MANAGEMEN SERVICES (HONG KONG) L D G4S FACILI Y SERVICES (HONG KONG) L D G4S CASH SOLU IONS (HONG KONG) L D SECURICOR MACAU INVES MEN L D G4S GROUP HOLDING (CHINA) L D Hong Kong 100.0% Hong Kong 100.0% Hong Kong 100.0% Hong Kong 100.0% Hong Kong 100.0% S ARPOIN INVES MEN S L D Hong Kong 100.0% G4S IN ERNA IONAL LOGIS ICS (HONG KONG) L D G4S SECURI Y SYS EMS (HONG KONG) L D Hong Kong 100.0% Hong Kong 100.0% 190 G4S plc Integrated Report and Accounts 2017 9 Place De La Madeleine 75008 Paris, France 9 Place De La Madeleine 75008 Paris, France Quartier Ambowe, BP 4000 Libreville, Gabon 9 Booster Street, Fajara, SK Serrekunda, Gambia C/o Baker illy Roelfs AG Wirtschaftspruefungsgesellschaft Valentinskamp 88 20355 Hamburg, Germany Rathenaustrasse 53, D-63263 Neu-Isenburg, Germany C/o Baker illy Roelfs AG Wirtschaftspruefungsgesellschaft Valentinskamp 88 20355 Hamburg, Germany 31 Second Labone Street, Labone, Accra, Ghana 31 Second Labone Street, Labone, Accra, Ghana 31 Second Labone Street, Labone, Accra, Ghana 31 Second Labone Street, Labone, Accra, Ghana 7, Sorou Str., 144 52 Metamorphosis, Athens, Greece 7, Sorou Str., 144 52 Metamorphosis, Athens, Greece 7, Sorou Str., 144 52 Metamorphosis, Athens, Greece 7, Sorou Str., 144 52 Metamorphosis, Athens, Greece 5 klm, Spaton-Loutsas aven., 190 19 Spata, Greece 7, Sorou Str., 144 52 Metamorphosis, Athens, Greece National Road Palaiokastritsas, 491 00 Kerkiras, Greece 7, Sorou Str., 144 52 Metamorphosis, Athens, Greece 35 Kountouriotou, 555-35 hessaloniki, Greece 7, Sorou Str., 144 52 Metamorphosis, Athens, Greece Maurice Bishop Highway, Grand Anse St., George’s, Grenada 1851A Army Drive, Harmon, Guam, 96913, Guam 1851A Army Drive, Harmon, Guam, 96913, Guam Avenida Petapa 42-51, Zona 12 Guatemala City, Guatemala Avenida Petapa 42-51, Zona 12 Guatemala City, Guatemala Avenida Petapa 42-51, Zona 12 Guatemala City, Guatemala Avenida Petapa 42-51, Zona 12 Guatemala City, Guatemala Avenida Petapa 42-51, Zona 12 Guatemala City, Guatemala Homefield, Rue de L’Epinel Forest, GY8 0HL, Guernsey P.O. Box 384, 4th Floor, he Albany, South Esplanade, GY1 4NF St. Peter Port, Guernsey Commune de Ratoma, Kipe Centre Emetteur, Pres de la Seg, Conakry, Guinea 1/F, Securicor Ctre, 481 Castle Peak Rd, Cheung Sha Wan, Kowloon, Hong Kong 1/F, Securicor Ctre, 481 Castle Peak Rd, Cheung Sha Wan, Kowloon, Hong Kong 1/F, Securicor Ctre, 481 Castle Peak Rd, Cheung Sha Wan, Kowloon, Hong Kong 1/F, Securicor Ctre, 481 Castle Peak Rd, Cheung Sha Wan, Kowloon, Hong Kong 1/F, Securicor Ctre, 481 Castle Peak Rd, Cheung Sha Wan, Kowloon, Hong Kong 1/F, Securicor Ctre, 481 Castle Peak Rd, Cheung Sha Wan, Kowloon, Hong Kong 1/F, Securicor Ctre, 481 Castle Peak Rd, Cheung Sha Wan, Kowloon, Hong Kong 1/F, Securicor Ctre, 481 Castle Peak Rd, Cheung Sha Wan, Kowloon, Hong Kong 1/F, Securicor Ctre, 481 Castle Peak Rd, Cheung Sha Wan, Kowloon, Hong Kong 1/F, Securicor Centre, 481 Castle Peak Road, Cheung Sha Wan, Kowloon, Hong Kong 1/F, Securicor Ctre, 481 Castle Peak Rd, Cheung Sha Wan, Kowloon, Hong Kong Unit 02, 7/F, Beautiful Group ower, 77 Connaught Rd Central, Hong Kong 1/F, Securicor Centre, 481 Castle Peak Road, Cheung Sha Wan, Kowloon, Hong Kong Subsidiaries continued Company Name GREAT STE INVESTMENT LTD Coun ry of Incorpora ion Hong Kong % owned by Group 100.0% % owned by plc VICTORY STE GROU LTD Hong Kong 75.0% G4S TECHNOLOGY (HONG KONG) LTD HILL & ASSOCIATES LTD Hong Kong 100.0% Hong Kong 100.0% G4S BIZTONSÁGTECHIKAI ZRT G4S KÉSZ ÉNZLOGISZTIKAI KFT G4S BIZTONSÁGI SZOLGÁLTATÁSOK ZRT G4S HOLDING KFT G4S CENTRAL MONITORING SERVICES (INDIA) VT. LTD G4S SECURE SOLUTIONS (INDIA) VT. LTD India Hungary Hungary Hungary Hungary India INDO-BRITISH GARMENTS ( ) LTD India 100.0% 100.0% 100.0% 100.0% 100.0% 49.0% 100.0% G4S CASH SOLUTIONS (INDIA) VT LTD India 100.0% 18.50% G4S FLEET MANAGEMENT SERVICES (INDIA) VT. LTD G4S RODUCTS (INDIA) VT. LTD India India G4S SECURITY SYSTEMS (INDIA) VT. LTD India MONITRON SECURITY ( ) LTD G4S COR ORATE SERVICES (INDIA) VT. LTD FIRST SELECT ( ) LTD India India India G4S FACILITY SERVICES (INDIA) VT. LTD India G4S IT SERVICES (INDIA) VT. LTD ROTEX SECURITY SERVICES (A ) VT. LTD INVESTIGATION AND SECURITY SERVICES (INDIA) VT. LTD MONITRON SU ORT SERVICES VT. LTD HILL & ASSOCIATES (INDIA) VT. LTD SO EDU SECURITY RIVATE LIMITED T G4S SECURITY SERVICES T G4S CASH SERVICES India India India India India India Indonesia Indonesia 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 84.5% 48.9% 46.7% 49.5% 100.0% 100% 97.0% 83.9% T CASINTRANS ERDANA Indonesia 100.0% T G4S EURONET (INDONESIA) Indonesia T HILL KONSULTAN INDONESIA Indonesia T G4S SECURITY SOLUTION SERVICES Indonesia T ARGENTA ADHILOKA RATAMA Indonesia GROU 4 SECURICOR GLOBAL RISKS LTD G4S SECURE SOLUTIONS (IRE) LTD G4S SU ORT SERVICES (IRELAND) LTD G4S HOLDINGS (IRELAND) LTD G4S CASH SOLUTIONS IRELAND LTD G4S MONITORING (IRE) LTD A1 SECURITY TECHNOLOGIES LTD G4S FACILITIES MANAGEMENT (IRE) LTD Ireland Ireland Ireland Ireland Ireland Ireland Ireland Ireland 53.0% 99.0% 51.0% 51.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% Regis ered address 1/F, Securicor Centre, 481 Castle eak Road, Cheung Sha Wan, Kowloon, Hong Kong 1/F, Securicor Centre, 481 Castle eak Road, Cheung Sha Wan, Kowloon, Hong Kong 1/F, Securicor Centre, 481 Castle eak Road, Cheung Sha Wan, Kowloon, Hong Kong Suite 1701-08, Tower 2, Times Square, 1 Matheson Street, Causeway Bay, Hong Kong Harrer ál u. 3., 1033 Budapest, Hungary Rozsnyai u. 21-25, 1139 Budapest, Hungary olgár u. 8-10, 1033 Budapest, Hungary olgár u. 8-10, 1033 Budapest, Hungary C-16, Community Centre, Janakpuri, Behind Janak Cinema, 110058 New Delhi, India C-16, Community Centre, Janakpuri, Behind Janak Cinema, 110058 New Delhi, India C-16, Community Centre, Janakpuri, Behind Janak Cinema, 110058 New Delhi, India C-16, Community Centre, Janakpuri, Behind Janak Cinema, 110058 New Delhi, India C-16, Community Centre, Janakpuri, Behind Janak Cinema, 110058 New Delhi, India C-16, Community Centre, Janakpuri, Behind Janak Cinema, 110058 New Delhi, India C-16, Community Centre, Janakpuri, Behind Janak Cinema, 110058 New Delhi, India Office Unit No.301, Third Floor, A-Wing,Eureka Tower, Building No. 7, Mind Space, Link Road, Malad (west), 400064 Mumbai, India C-16, Community Centre, Janakpuri, Behind Janak Cinema, 110058 New Delhi, India C-16, Community Centre, Janakpuri, Behind Janak Cinema, 110058 New Delhi, India C-16, Community Centre, Janakpuri, Behind Janak Cinema, 110058 New Delhi, India Block B3, 3rd Floor, DLF World Tech ark, DLF IT SEZ, Silokhera 122001 Gurgaon, Haryana, India lot No. 43, Road No. 14, Banjara Hills, 500034 Hyderabad, India lot No. 43, Road No. 14, Banjara Hills, 500034 Hyderabad, India C-16, Community Centre, Janakpuri, Behind Janak Cinema, 110058 New Delhi, India Upper Ground Floor, Tower B, Building No. 10, DLF Cyber City, 122002 DLF hase II, Gurgaon, Haryana, India C-30, Chirag Enclave, , 110048 New Delhi, India The Security Center- Unit 407, Cilandak Commercial Estate KKO, 12560 Jakarta, Indonesia Jl. Ciputat Raya No. 18, ondok inang, Kebayoran Lama, 12310 Jakarta, Indonesia Menara Jamsostek Fl.22, Jl. Jend. Gatot Subroto No. 38, Kuningan Barat, Jakarta Selatan, Indonesia The Security Center- Unit 407, Cilandak Commercial Estate KKO, 12560 Jakarta, Indonesia Gedung Setiabudi 2 Lt.3A Suite 3A-01 Jl. H.R. Rasuna, Said Kav.62, 12920 Jakarta, Indonesia The Security Center- Unit 407, Cilandak Commercial Estate KKO, 12560 Jakarta, Indonesia Jl. Administrasi Negara 1A No. 30, Bendungan Hilir, Tanah Abang, 10210 Jakarta, Indonesia 2013 Orchard lace, City West, Dublin 24, Ireland 2013 Orchard lace, City West, Dublin 24, Ireland 2013 Orchard lace, City West, Dublin 24, Ireland 2013 Orchard lace, City West, Dublin 24, Ireland Bluebell Industrial Estate, Bluebell Ave, Dublin 12, Ireland 2013 Orchard lace, City West, Dublin 24, Ireland 2013 Orchard lace, City West, Dublin 24, Ireland Unit 5 Calmount Business ark, Ballymount, Dublin 12, Ireland Integrated Report and Accounts 2017 G4S plc 191 Financial report % owned by plc % owned by G oup 100.0% 100.0% Registe ed add ess 2013 Orchard Place, City West, Dublin 24, Ireland 2013 Orchard Place, City West, Dublin 24, Ireland 100.0% 2013 Orchard Place, City West, Dublin 24, Ireland 2013 Orchard Place, City West, Dublin 24, Ireland IOM Business Park, Ballacottier, Braddon, Isle of Man, IM2 2SE 14 Scacham St., Petch ikva, Israel 1a Ha’Yarden St. Air Port City, Lod, Israel 111, Arlozorov Street, el Aviv-Yafo, Israel, 6209809 20 B.P., 845 Abidjan 20, Ivory Coast 3 Boulevard Valerie Giscard d’Estaing, 01 BP 6065 ABJ 01 Abidjan, Ivory Coast Rue B31, Lot 29, Cocody danga Nord Abidjan, 20 BP 845 Abidjan 20 Abidjan, Ivory Coast 6-8 East Avenue, 5 Kingston W.I., Jamaica 202, Musashino Hills, 2299-4 Fussa, Fussa-shi, 1970011 Fussa-shi, Japan 2-2-15, #403, Minami-Aoyama, Minato-ku, 107-0062 okyo, Japan hird Floor, 37 Esplanade, JE2 3QA St Helier, Jersey he Security Centre, Rue des Pres rading Estate, JE2 7QP St Saviour, Jersey he Old Chapel, Sacre Coeur, Rouge Bouillon St Helier, Jersey, JE2 3ZA # 12, Mithqual El Fayez St., hird Circle, Jebel, P.O. Box 831358, 11183 Amman, Jordan Roxy Al Ozaizi Street Dana Center 2, 11183 Amman, Jordan – Witu Rd, off Lusaka Rd, P O Box 30242, GPO 00100 Nairobi, Kenya Witu Rd, off Lusaka Rd, P O Box 30242, GPO 00100 Nairobi, Kenya Plot No. LR 209/368/10, Armor House, Lenana Road, P.O. Box 2714 Nairobi, Kenya Witu Rd, off Lusaka Rd, P O Box 30242, GPO 00100 Nairobi, Kenya Stigu Str 10, LV-1021, Riga, Latvia Stigu Str 10, LV-1021, Riga, Latvia Saliba Building Awkar Dbayeh, 70-461, Antelias Beirut, Lebanon Saliba Building Awkar Dbayeh, 70-461, Antelias Beirut, Lebanon 397 Hilton Hill Road Maseru, Lesotho 397 Hilton Hill Road, Maseru, Lesotho – – – J.Jasinskio 16C, L -01112 Vilnius, Lithuania 14 Rue du Père Raphaël P.O. Box 1513, L-1015 Luxembourg 14 Rue du Père Raphaël P.O. Box 1513, L-1015 Luxembourg 14 Rue du Père Raphaël P.O. Box 1513, L-1015 Luxembourg Avenida Venceslau de Morais, 157, BL 2,2, Edificio Centro Ind. Keck Seng, Fase II, 2 Andar H, Macau Avenida Venceslau de Morais, 185-191, 1 Andar A, Macau Avenida Venceslau de Morais, 157, BL 2,2, Edificio Centro Ind. Keck Seng, Fase II, 2 Andar H, Macau Avenida Venceslau de Morais, 157, BL 2,2, Edificio Centro Ind. Keck Seng, Fase II, 2 Andar H, Macau Avenida Venceslau de Morais, 157, BL 2,2, Edificio Centro Ind. Keck Seng, Fase II, 2 Andar H, Macau Avenida Venceslau de Morais, 157, BL 2,2, Edificio Centro Ind. Keck Seng, Fase II, 2 Andar H, Macau Lot II, 161 HC Ambohijatovo Ivandry Immeuble Millenium, 10101 101 Antananarivo Renivohitra C.U., Madagascar Notes to the consolidated financial statements continued 43. Details of elated unde takings of G4S plc continued Subsidia ies continued Company Name ALARM MONI ORING SERVICES L D G4S COMPLIANCE AND INVES IGA IONS (IRELAND) LIMI ED G4S FINANCE (IRELAND) L D GDJS SECURI Y L D G4S SECURE SOLU IONS (ISLE OF MAN) L D G4S ISRAEL PPP L D POLICI Y L D G4S IN ERNA IONAL LOGIS ICS (ISRAEL) L D WACKENHU SA G4S SECURE SOLU IONS (CI) SA Count y of Inco po ation Ireland Ireland Ireland Ireland Isle of Man Israel Israel Israel Ivory Coast Ivory Coast 100.0% 100.0% 100.0% 100.0% 25.0% 100.0% 97.5% 97.5% ARMORGROUP CO E D’IVOIRE SA Ivory Coast 100.0% G4S JAMAICA L D G4S SECURE SOLU IONS JAPAN K.K HILL & ASSOCIA ES (JAPAN) KK G4S HOLDINGS INDIA L D G4S SECURE SOLU IONS (JERSEY) L D G4S IN ERNA IONAL EMPLOYMEN SERVICES L D G4S SECURE SOLU IONS IN ERNA IONAL INC (JORDAN) L D. G4S SECURE SOLU IONS IN . (JORDAN) FOR IN EGRA ED SOLU IONS G4S KENYA L D G4S FIRE SERVICES (KENYA) L D ARMORGROUP KENYA L D G4S SECURE DA A SOLU IONS (KENYA) L D AS G4S LA VIA AS G4S CASH SERVICES LA VIA GROUP 4 SECURI Y SERVICES LEBANON SAL G4S SECURI Y SYS EMS LEBANON SAL G4S SECURE SOLU IONS LESO HO (P Y) L D G4S CASH SOLU IONS LESO HO (P Y) L D UAB G4S LIE UVA G4S SECURI Y SOLU IONS S.A.R.L. G4S GENERAL SERVICES SA G4S FINANCE (LUXEMBOURG) SARL HILL & ASSOCIA ES (MACAU) l D Jamaica Japan Japan Jersey Jersey Jersey Jordan Jordan Kenya Kenya Kenya Kenya Latvia Latvia Lebanon Lebanon Lesotho Lesotho Lithuania Luxembourg Luxembourg Luxembourg Macau Macau G4S (MACAU HOLDING) L D G4S SECURE SOLU IONS (MACAU) L D Macau – GREA WALL SECURI Y SERVICES L DA Macau GREA WALL PROPER Y MANAGEMEN SERVICES L D GREA WALL HOLDINGS L D Macau Macau 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 50.0% 60.0% 100.0% 100.0% 100.0% 60.0% 100.0% 100.0% 50.6% 50.7% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100% 100.0% 100.0% 100.0% 100.0% 100.0% G4S MADAGASCAR SOLU IONS DE SECURI E SARL Madagascar 100.0% 50.60% 100.0% 192 G4S plc Integrated Report and Accounts 2017 Subsidiaries continued Coun ry of Incorpora ion Company Name G4S SE URE SOLUTIONS (MALAWI) LTD Malawi Malawi G4S PREMIER GUARDING SERVI ES (MALAWI) LTD G4S PREMIER ALARM MONITORING AND RESPONSE SERVI ES (MALAWI) LTD G4S MALAYSIA SDN. BHD ALMO SYSTEMS SDN BHD GROUP 4 FAL K MS SDN BHD Malaysia Malaysia Malaysia Malawi SAFEGUARDS G4S SDN BHD Malaysia SE URI OR (MALAYSIA) SDN BHD Malaysia SAFEGUARDS G4S (SABAH) SDN BHD Malaysia SAFEGUARDS G4S (SARAWAK) SDN BHD Malaysia SAFEGUARDS G4S SE URITY SYSTEMS SDN BHD GWENKENS SE URITY SERVI ES SDN BHD Malaysia Malaysia G4S MANAGEMENT SERVI ES (ASIA PA IFI ) SDN BHD HILL ORPORATE SERVI ES SDN BHD RISK ONSULTING (L) LTD HILL RISK ONSULTING (MALAYSIA) SDN BHD VIVA POWERTE H SDN. BHD Malaysia Malaysia Malaysia Malaysia Malaysia SAFEGUARDS G4S A ADEMY SDN BHD Malaysia GWENKENS ENTRAL MONITORING SDN BHD INDO BRITISH GARMENTS MALAYSIA SDN BHD G4S (MALI) SARL G4S SE URITY SERVI ES (MALTA) LTD G4S SE URITY SERVI ES LTD G4S HOLDINGS (MALTA) LTD Malaysia Malaysia Mali Malta Malta Malta G4S OMMUNITY SERVI ES LIMITED Malta G4S SE URITY SERVI ES (MAURITANIA) SA Mauritania G4S HOLDINGS HINA LTD Mauritius ROSSKEYS (MAURITIUS) HOLDINGS LTD Mauritius Mauritius HILL RISK MANAGEMENT LTD HILL & ASSO IATES (MAURITIUS) LTD Mauritius HILL RISK ONSULTING (MAURITIUS) LTD Mauritius S GRAY MANAGEMENT SERVI ES LTD Mauritius Mexico Mexico Mexico G4S HOLDINGS MÉXI O, SA DE V G4S SE URITY SYSTEMS S.A. DE .V G4S PRIVATE SE URITY SERVI ES, SA DE V G4S SE URITY SERVI ES RNA GORA DOO PODGORI A MARO PROTE TION SURVEILLAN E SA Morocco Morocco G4S (MARO ) SA Morocco FIRST SELE T MORO O SA Morocco G4S INTEGRATED SERVI ES MORO O SA Montenegro % owned by plc % owned by Group 99.7% 100.0% Regis ered address hirimba Industrial Area, P O Box 720, Blantyre, Malawi hirimba Industrial Area, P O Box 720, Blantyre, Malawi 100.0% hirimba Industrial Area, P O Box 720, Blantyre, Malawi 60.0% 49.0% 49.0% 49.0% 49.0% 49.0% 49.0% 49.0% 44.1% 100.0% 100.0% 100.0% 100.0% 100.0% 44.1% 44.1% 100.0% 100.0% 50.1% 50.1% 100.0% 50.1% 70.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 85.0% 100.0% 100.0% 99.9% 100.0% 25-2, Jalan PjU 1/42A, Dataran Prima, 47301 Petaling Jaya, Malaysia 25-2, Jalan PjU 1/42A, Dataran Prima, 47301 Petaling Jaya, Malaysia Suite 226, 1st floor, FAS Business Avenue, No.1, Jalan Perbandaran, 47301 Petaling Jaya, Malaysia No 1 & 1A, 2nd Floor (Room 2), Jalan Ipoh Kecil, 50350 Kuala Lumpur, Malaysia No 1 & 1A, 2nd Floor (Room 2), Jalan Ipoh Kecil, 50350 Kuala Lumpur, Malaysia No 1 & 1A, 2nd Floor (Room 2), Jalan Ipoh Kecil, 50350 Kuala Lumpur, Malaysia No 1 & 1A, 2nd Floor (Room 2), Jalan Ipoh Kecil, 50350 Kuala Lumpur, Malaysia No 1 & 1A, 2nd Floor (Room 2), Jalan Ipoh Kecil, 50350 Kuala Lumpur, Malaysia 910 (Suite 1), Block B, Phileo Damansara 2, No 15, Jalan 16/11, Off Jalan Damansara, Petaling Jaya,46350 Selangor Darul Ehsan, Malaysia 1st Floor, Lot 6, Jalan 225, Sec 51A, Petaling Jaya, 46100 Selangor, Malaysia 2nd floor, No 2-4 Jalan Manau, 50460 Kuala Lumpur, Malaysia Level 15B, Main Office Tower, Financial Park, Jalan Merdeka, 87000 Labuan, Malaysia Unit No 9-7, The Boulevard, Mid Valley ity, Lingkaran Syed Putra, 59200 Kuala Lumpur, Malaysia Level 21, Suite 21.10, The Gardens South Tower, Mid Valley ity, Lingkaran Syed Putra, 59200 Kuala Lumpur, Malaysia 910 (Suite 1), Block B, Phileo Damansara 2, No 15, Jalan 16/11, Off Jalan Damansara, Petaling Jaya, 46350 Selangor Darul Ehsan, Malaysia 910 (Suite 1), Block B, Phileo Damansara 2, No 15, Jalan 16/11, Off Jalan Damansara, Petaling Jaya, 46350 Selangor Darul Ehsan, Malaysia Suite 1005, 10th Floor, Wisma Hamzah-Kwong Hing No 1 Leboh Ampang, 50100 Kuala Lumpur, Malaysia – Hamdallaye A I 2000, street 405 gate 558, Bamako, Mali Ent A, Level 1, apital Business entre, Triq ta-Zwejt, SGN 3000 San Gwann, Malta Ent A, Level 1, apital Business entre, Triq ta-Zwejt, SGN 3000 San Gwann, Malta Ent A, Level 1, apital Business entre, Triq ta-Zwejt, SGN 3000 San Gwann, Malta Ent A, Level 1, apital Business entre, Triq ta-Zwejt, SGN 3000 San Gwann, Malta BP 4201, Nouakchott, Tevragh Zeina Ilot , No. 261, Nouakchott, Mauritania c/o Multiconsult Ltd, Les ascades Building, Edith avell Street, Port Louis, Mauritius 210 St James ourt, Rue St Denis, Port Louis, Mauritius c/o Multiconsult Ltd, Les ascades Building, Edith avell Street, Port Louis, Mauritius c/o Multiconsult Ltd, Les ascades Building, Edith avell Street, Port Louis, Mauritius c/o Multiconsult Ltd, Les ascades Building, Edith avell Street, Port Louis, Mauritius c/o Intercontinental Trust LTD, Level 3, Alexander House, 35 ybercity, Ebene, Mauritius Barranca del Muerto #380, P 01020 Mexico, D.F., Mexico Barranca del Muerto #380, P 01020 Mexico, D.F., Mexico Barranca del Muerto #380, P 01020 Mexico, D.F., Mexico vijetna Street no.25, Podgorica, Montenegro 24 Lotissement la olline, Sidi Maarouf, 20150 asablanca, Morocco 24 Lotissement la olline, Sidi Maarouf, 20150 asablanca, Morocco 24, Lotissement la olline, Sidi Maârouf, 20150 asablanca, Morocco 24 Lotissement la olline, Sidi Maarouf, 20150 asablanca, Morocco Integrated Report and Accounts 2017 G4S plc 193 Financial report Notes to the consolidated financial statements continued 43. etails of related undertakings of G4S plc continued Subsidiaries continued % owned by plc % owned by Group 90% 87.5% Registered address Rua Mariano Machado nr. 99/186, Maputo, Mozambique Av da Organizacao da Unidade Africana, 121, Maputo, Mozambique 90.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 99.9% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 51.0% 99.9% 99.0% 100.0% 60.0% 100.0% 100.0% 100.0% o 2085, Avenida Ahmed Sekoe Toure, Maputo, Mozambique 33 General Murtala Ramat Muhammed Street, Eros, Windhoek, amibia 33 General Murtala Ramat, Muhammed Street, Eros, Windhoek, amibia 33 General Murtala Ramat Muhammed Street, Eros, Windhoek, amibia 33 General Murtala Ramat Muhammed Street, Eros, Windhoek, amibia 33 General Murtala Ramat Muhammed Street, Eros, Windhoek, amibia 33 General Murtala Ramat Muhammed Street, Eros, Windhoek, amibia 33 General Murtala Ramat Muhammed Street, Eros, Windhoek, amibia Ichhunadi Marg, Baluwatar, Ward o. 4, Kathmandu Metropolitan City, Kathmandu, epal P.O. Box 20423, House # 75/45, Lazimpat, Kailash Chaur, Kathmandu, epal Ichhunadi Marg, Baluwatar, Ward o. 4 , Kathmandu Metropolitan City, Kathmandu, epal Ichhunadi Marg, Baluwatar, Ward o. 4 , Kathmandu Metropolitan City, Kathmandu, epal Hogehilweg 12, 1101CD Amsterdam Zuidoost, etherlands Hogehilweg 12, 1101CD Amsterdam Zuidoost, etherlands Hogehilweg 12, 1101CD Amsterdam Zuidoost, etherlands Evert van de Beekstraat 1 rumimtenummer 66, Luchthaven Schiphol, 1118 CL etherlands Hogehilweg 12, 1101CD Amsterdam Zuidoost, etherlands Hogehilweg 12, 1101CD Amsterdam Zuidoost, etherlands Hogehilweg 12, 1101 CD Amsterdam Zuidoost, etherlands Hogehilweg 12, 1101 CD Amsterdam Zuidoost, etherlands Hogehilweg 12, 1101 CD Amsterdam Zuidoost, etherlands Hogehilweg 12, 1101 CD Amsterdam Zuidoost, etherlands Hogehilweg 12, 1101 CD Amsterdam Zuidoost, etherlands Hogehilweg 12, 1101 CD Amsterdam Zuidoost, etherlands Hogehilweg 12, 1101 CD Amsterdam Zuidoost, etherlands Ptolemaeuslaan 61, 3528 BR Utrecht, etherlands Ptolemaeuslaan 61, 3528 BR Utrecht, etherlands Galvanistraat 89, 6716 AE Ede, etherlands Galvanistraat 89, 6716 AE Ede, etherlands Galvanistraat 89, 6716 AE Ede, etherlands Hogehilweg 12, 1101 CD Amsterdam, etherlands Amperestraat 25, 6716 B Ede, etherlands Tolnasingel 1, 2411 PV Bodegraven, etherlands Hogehilweg 12, 1101CD Amsterdam Zuidoost, etherlands Donk 1D, 2991 LE Barendrecht, etherlands Tolnasingel 1, 2411PV Bodegraven, etherlands. Level3, 2 Kalmia Street, Ellerslie, 1051, ew Zealand Reparta Belmonte, Dr. Hospital Velez Paiz, 1 Cuadra Holis Arriba, icaragua 27, Oba Akinjobi Street, GIRA, Ikeja, Lagos, igeria 13A, A.J. Marinho Drive, Victoria Island, Lagos, igeria 27, Oba Akinjobi Street, GIRA, Ikeja Lagos. igeria AIB Plaza, Off Akin Adesola Street, Victoria Island, Lagos, igeria 1 Murtala Mohammed Drive (Formerly Bank Road), Ikoyi, Lagos, igeria 27, Oba Akinjobi Street, GIRA, Ikeja, Lagos, igeria Plot 7a Acme Road, Block C, Ogba Inustrial Scheme, Ikeja, Lagos, igeria Country of Incorporation amibia Mozambique Company Name WACKE HUT MOZAMBIQUE LIMITADA Mozambique Mozambique G4S SECURE SOLUTIO S MOCAMBIQUE LIMITADA G4S ORD A CE MA AGEME T (MOCAMBIQUE), LIMITADA G FOUR S MA ED SECURITY ( AMIBIA) (PTY) LTD G FOUR S AVIATIO SECURITY ( AMIBIA) (PTY) LTD G FOUR S SECURE SOLUTIO S ( AMIBIA) (PTY) LTD ARMED RESPO SE COMPA Y (PROPRIETARY) LTD RESCUE 911 (PROPRIETARY) LTD PRO-FORCE CORPORATE SECURITY (PROPRIETARY) LTD G FOUR S CASH SOLUTIO S ( AMIBIA) (PTY) LTD G4S SECURITY SERVICES EPAL (P) LTD amibia amibia amibia amibia amibia amibia epal FIRST SELECT EPAL (P) LTD epal SECURITAS PRODUCT EPAL (P). LTD epal G4S FACILITY & EMPLOYME T SERVICES EPAL PVT. LTD G4S I TER ATIO AL ( L) BV G4S HOLDI G (B) BV G4S I DIA HOLDI GS ( L) BV G4S AVIATIO SECURITY BV G4S SECURE MO ITORI G BV G4S I TER ATIO AL HOLDI GS 101 ( L) BV G4S SECURITY SERVICES BV G4S HOLDI GS 102 ( L) B.V G4S HOLDI GS 103 ( L) BV G4S GROUP HOLDI G (ASIA) BV G4S BEHEER BV G4S SERVICES BV G4S PUBLIC SECURITY BV G4S CASH SOLUTIO S B.V G4S CASH MA AGEME T B.V G4S TRAI I G & SAFETY BV G4S DIRECT BV ROTUS BV IBG EUROPE BV G4S PERSO EL BV G4S ZORG & WELZIJ B.V G4S OVERSEAS HOLDI GS BV G4S FIRE & SAFETY B.V. I ZETBAAR B.V. G4S EW ZEALA D LTD G4S SECURE SOLUTIO S ICARAGUA, SOCIEDAD A Ó IMA OUTSOURCI G SERVICES LTD SCHC LTD G4S SECURE SOLUTIO S IGERIA LTD G4S TRACKI G SOLUTIO S LTD ASSETGUARD SERVICES LTD ARMORGROUP ( IGERIA) LTD G4S/GLOBAL RISKS IGERIA LTD epal etherlands etherlands etherlands etherlands etherlands etherlands etherlands etherlands etherlands etherlands etherlands etherlands etherlands etherlands etherlands etherlands etherlands etherlands etherlands etherlands etherlands etherlands etherlands etherlands ew Zealand icaragua igeria igeria igeria igeria igeria igeria igeria 194 G4S plc Integrated Report and Accounts 2017 Country o Incorporation Northern Mariana Islands Oman Oman Subsidiaries continued Company Name G4S SE URE SOLUTIONS ( NMI) IN . G4S SE URITY SOLUTIONS LL G4S SERVI ES LL HILL & ASSO IATES PAKISTAN (PVT.) LTD Pakistan Panama INVERSIONES SETES A Panama SEGURIDAD TE NI A SA Panama TELEMETRIA Y ALARMA SA Panama DETE TA SA Panama LIMPIE SA Panama G4S SA 49.0% 49.0% 100.0% 100.0% 44.0% 17.6% 44.0% 44.0% 100.0% METERS ORP. G4S SE URE SOLUTIONS (PNG) LTD Panama Papua New Guinea 100.0% 100.0% MONT BLAN LIMITED Papua New Guinea 100.0% G4S PNG LIMITED WA KENHUT PARAGUAY SA G4S PERU SA G4S HOLDING, IN . G4S SE URITY SYSTEMS, IN . PERSONAL SE URITY SYSTEMS IN . ATENA SE URITY IN . VALLUM SE URITY SERVI ES ORP. G4S SE URITY TRAINING IN . Papua New Guinea Paraguay Peru Philippines Philippines Philippines Philippines Philippines Philippines ATTINA SE URITY SERVI ES, IN . HILL & ASSO IATE RISK ONSULTING PHILS., IN . A URIA EXE UTIVE PROTE TION & DETE TIVE SERVI ES IN . G4S ASH SOLUTIONS PHILIPPINES IN . YNEWARD SE URITY ORP. G4S SE URE SOLUTIONS (PUERTO RI O) IN . G4S SE URE SOLUTIONS SRL G4S ASH SOLUTIONS SRL G4S FIRE & SAFETY S.R.L. LL PSE G4S SE URITY – SERVI ES SAKHALIN LL G4S TE NI AL SOLUTIONS SAKHALIN G4S EURASIA LL LL GROUP 4 SE URI OR G4S RWANDA LTD G4S SE URE SOLUTIONS (ST.LU IA) LTD AL MAJAL GROUP 4S FOR SE URITY AND SAFETY LL AL MAJAL SERVI E MASTER LL MOHAMMED BIN ABDOUD AL AMOUDI O FOR IVILIAN SE URITY SERVI ES PARTNERSHIP (ALMAJAL) G4S SE URE SOLUTIONS D.O.O. – G4S SE URE SOLUTIONS (SL) LTD GROUP 4 SE URI OR (S) PTE. LTD. G4S SE URITY SYSTEMS (S) PTE. LTD. G4S SE URE SOLUTIONS (SINGAPORE) PTE. LTD. Philippines Philippines Philippines Philippines Philippines Puerto Rico Romania Romania Romania Russia Russia Russia Russia Rwanda Saint Lucia Saudi Arabia Saudi Arabia Saudi Arabia Serbia Sierra Leone Singapore Singapore Singapore 100.0% 80.0% 99.9% 79.9% 79.8% 100% 100% 100% 31.9% 100.0% 100.0% 100.0% 59.0% 100.0% 100.0% 100.0% 100.0% 100.0% 75.0% 75.0% 100.0% 99% 99.0% 51.0% 49.0% 49.0% 0.0% 85.0% 100.0% 100.0% 100.0% 100.0% % owned by Group 100.0% % owned by plc Registered address PMB 384 PPP Box 1000, 96950 Saipan, Northern Mariana Islands P.O. Box 1625, 112, Ruwi Muscat, Oman P.O. Box 1625, 112, Muscat, Oman B-61, KDA Scheme 01, 7550 Karachi, Pakistan alle 41, 2-40 Bella Vista, Panama alle 41, 2-40 Bella Vista, Panama alle 41, 2-40 Bella Vista, Panama alle 41, 2-40 Bella Vista, Panama alle 41, 2-40 Bella Vista, Panama Marbella, Ave. Aquilino de la Guardia Ocean Business Plaza, Piso 17-1704, Panama ity, Panama alle 41, 2-40 Bella Vista, Panama Section 61, Allotment 13, Morata Street, Gordons, National apital District, Papua New Guinea / Sinton Spence hartered Accountants 2nd Floor Brian Bell Plaza Turmu St. Boroko, Boroko, Papua New Guinea PO Box 5392 Boroko N D, Papua New Guinea Nery Quevedo 315 Esq. Hipolito Garron, Asuncion, Paraguay Av. El Sol 916, Urbanización La ampiña., horrillos, Lima, Peru G4S House, 142 Pasig Blvd., Bagong Ilog, 1600 Pasig ity, Philippines G4S House, 142 Pasig Blvd., Bagong Ilog, 1600 Pasig ity, Philippines G4S House, 142 Pasig Blvd., Bagong Ilog, 1600 Pasig ity, Philippines G4S House, 142 Pasig Blvd., Bagong Ilog, 1600 Pasig ity, Philippines G4S House, 142 Pasig Blvd., Bagong Ilog, 1600 Pasig ity, Philippines Metro Manila, Philippines /O Unit 201 onservatory Bldg, 605 Shaw Blvd., Mandaluyong ity, Philippines G4S House, 142 Pasig Blvd., Bagong Ilog, 1600 Pasig ity, Philippines Unit 505, Pse Tower One & Exchange Plaza, 6767 Ayala Avenue, 1226 Makati ity, Philippines G4S House, 142 Pasig Blvd., Bagong Ilog, 1600 Pasig ity, Philippines 100 E. Rodriquez Avenue, Ugong Norte, 1552 Quezon ity, Philippines G4S House, 142 Pasig Blvd., Bagong Ilog, 1600 Pasig ity, Philippines arretera #1 Plaza Bairoa, Suite 211, aguas, Puerto Rico 15 harles de Gaulle Square, 12th floor, District 1, Bucharest, Romania 15 harles de Gaulle Square, 12th floor, District 1, Bucharest, Romania 15 harles de Gaulle Square, 12th floor, District 1, Bucharest, Romania 36 Dzerzhinskogo, 693000 Yuzhno Sakhalinsk, Russia 62A Amurskaya Str, Office 103, 693000 Yuzhno-Sakhalinsk, Russia Building 1, 4 Ukhtomsky Pereulok, 111020 Moscow, Russia 107023, M. Semenovskaya str., 9, bld, Moscow, Russia 5698 Nyarutarama, P.O. Box 7230, Kigali, Rwanda P.O. Box P 6098 onway Post Office, astries, Saint Lucia P.O. Box 31049, 21497 Jeddah, Saudi Arabia Post ode 6930, 21452 Jeddah, Saudi Arabia P.O. Box 2779, 21461 Jeddah, Saudi Arabia Bulevar Peka Dapcevica 32 Belgrade, Serbia 6 Spur Road, P.O Box, Freetown, Sierra Leone 8 ommonwealth Lane, #04-04 (Annex), 149555 Singapore 8 ommonwealth Lane, #04-04 (Annex), 149555 Singapore 8 ommonwealth Lane, #04-04 (Annex), 149555 Singapore 25.30% Integrated Report and Accounts 2017 G4S plc 195 Financial report Notes to the consolidated financial statements continued 43. etails of related undertakings of G4S plc continued Subsidiaries continued Company Name G4S IN ERNA IONAL LOGIS ICS (SINGAPORE) P E LIMI ED HILL & ASSOCIA ES RISK CONSUL ING (SINGAPORE) P E L D G4S SECURI Y SYS EMS (SK) S.R.O. G4S SECURE SOLU IONS (SK), A.S. G4S FIRE SERVICES (SK), S.R.O G4S ECHNOLOGY SOLU IONS (SK), S.R.O G4S DRUZBA ZA VAROVANJE D.O.O. (G4S D.O.O.) GROUP 4 FALCK (P Y) L D Country of Incorporation Singapore Singapore Slovak Republic Slovak Republic Slovak Republic Slovak Republic Slovenia % owned by Group 100.0% % owned by plc Registered address 158 Cecil Street, 069 545 #11-01 Singapore, 100.0% 100.0% 100.0% 100.0% 100.0% 96.2% 51 Cuppage Road, #10-18, 229469, Singapore Visnova 16, 831 01 Bratislava, Slovak Republic Visnova 16, 831 01 Bratislava, Slovak Republic Visnova 16, 831 01 Bratislava, Slovak Republic Visnova 16, 831 01 Bratislava, Slovak Republic Stegne 21, 1000 Ljubljana, Slovenia South Africa 100.0% G4S SECURI Y SERVICES (AFRICA) (P Y) L D South Africa 100.0% G4S SECURE SOLU IONS (SA) (P Y) L D South Africa 100.0% G4S AVIA ION SECURI Y (SA) (P Y) L D South Africa G4S IN EGRI Y ASSESSMEN (P Y) L D South Africa G4S IN ERNA IONAL LOGIS ICS (SOU H AFRICA) P Y. GRAY SECURI Y SERVICES (SA) (P Y) L D South Africa South Africa G4S CASH SOLU IONS (SA) (P Y) L D South Africa G4S INSURANCE (SA) L D South Africa ELWIERDA (GAU ENG) (P Y) L D South Africa CMS MICRO FINANCE (P Y) L D South Africa 49.0% 49.0% 100.0% 49.0% 74.9% 74.9% 74.9% 74.9% G4S EMPOWERMEN VEN URES (SA) (P Y) L D G4S CARE AND JUS ICE SERVICES (SOU H AFRICA) (P Y) L D G4S CORREC ION SERVICES (BLOEMFON EIN) (P Y) L D GSL REBOUND (P Y) L D South Africa 48.4% South Africa 100.0% South Africa 81.0% South Africa 100.0% SKYCOM (P Y) L D South Africa ACCESS AND BEYOND (P Y) L D South Africa 49.0% 49.0% IN EGRA ED SKY FORCE SOLU IONS (P Y) L D INDO BRI ISH GARMEN S PV . LIMI ED, EX ERNAL PROFI INVES MEN SURVEYS (P Y) L D South Africa 72.2% South Africa 100.0% South Africa 100.0% G4S DEPOSI A (RF) (P Y) L D South Africa G4S A M ENGINEERING (SA) (P Y) L D South Africa 74.9% 74.9% IN EGRA (P Y) L D South Africa 100.0% HE HA ECHNOLOGIES (P Y) L D South Africa 74.9% G4S AFRICA (PROPRIE ARY) L D South Africa 100.0% G4S SECURI Y SERVICES (PRIVA E) L D. ARMORGROUP SUDANESE CO L D GROUP 4 SYRIA LIMI ED LIABILI Y COMPANY G4S SECURE SOLU IONS ( AIWAN) L D aiwan Sri Lanka Sudan Syria G4S A M SOLU IONS ( AIWAN) L D aiwan G4S PROPER Y MANAGEMEN L D aiwan 60.0% 100.0% 29.4% 100.0% 100.0% 100.0% 196 G4S plc Integrated Report and Accounts 2017 Byls Bridge Office Park, Building 11, 13 Candela Street, Highveld Ext 73, 0157 Centurion, South Africa Byls Bridge Office Park, Building 11, 13 Candela Street, Highveld Ext 73, 0157 Centurion, South Africa Byls Bridge Office Park, Building 11, 13 Candela Street, Highveld Ext 73, 0157 Centurion, South Africa Byls Bridge Office Park, Building 11, 13 Candela Street, Highveld Ext 73, 0157 Centurion, South Africa Byls Bridge Office Park, Building 11, 13 Candela Street, Highveld Ext 73, 0157 Centurion, South Africa Unit 31, First Floor Waterford Office Park, Corner Witkoppen & Waterford Road, Fourways 1610, South Africa Byls Bridge Office Park, Building 11, 13 Candela Street, Highveld Ext 73, 0157 Centurion, South Africa Byls Bridge Office Park, Building 11, 13 Candela Street, Highveld Ext 73, 0157 Centurion, South Africa Byls Bridge Office Park, Building 11, 13 Candela Street, Highveld Ext 73, 0157 Centurion, South Africa Byls Bridge Office Park, Building 11, 13 Candela Street, Highveld Ext 73, 0157 Centurion, South Africa Byls Bridge Office Park, Building 11, 13 Candela Street, Highveld Ext 73, 0157 Centurion, South Africa Byls Bridge Office Park, Building 11, 13 Candela Street, Highveld Ext 73, 0157 Centurion, South Africa Byls Bridge Office Park, Building 11, 13 Candela Street, Highveld Ext 73, 0157 Centurion, South Africa Byls Bridge Office Park, Building 11, 13 Candela Street, Highveld Ext 73, 0157 Centurion, South Africa Byls Bridge Office Park, Building 11, 13 Candela Street, Highveld Ext 73, 0157 Centurion, South Africa Byls Bridge Office Park, Building 11, 13 Candela Street, Highveld Ext 73, 0157 Centurion, South Africa Byls Bridge Office Park, Building 11, 13 Candela Street, Highveld Ext 73, 0157 Centurion, South Africa Byls Bridge Office Park, Building 11, 13 Candela Street, Highveld Ext 73, 0157 Centurion, South Africa, 0157 Centurion Sorento Suite, 5 De Haviland Cresent, Ill Villaggio Persequor Pretoria, Gauteng, South Africa Byls Bridge Office Park, Building 11, 13 Candela Street, Highveld Ext 73, 0157 Centurion, South Africa Byls Bridge Office Park, Building 11, 13 Candela Street, Highveld Ext 73, 0157 Centurion, South Africa Byls Bridge Office Park, Building 11, 13 Candela Street, Highveld Ext 73, 0157 Centurion, South Africa Byls Bridge Office Park, Building 11, 13 Candela Street, Highveld Ext 73, 0157 Centurion, South Africa Byls Bridge Office Park, Building 11, 13 Candela Street, Highveld Ext 73, 0157 Centurion, South Africa Byls Bridge Office Park, Building 11, 13 Candela Street, Highveld Ext 73, 0157 Centurion, South Africa 21 Vauxhall Street, 2 Colombo, Sri Lanka 8 Mek Nimer Street, P.O. Box 47, Khartoum, Sudan Al-Aasar Building, near the Central Post office, Sinjikdar, Damascus, Syria 20F-1, No. 266, Sec 1, Wenhua 2nd Road, Linkou Dist, 24448 New aipei City, aiwan 20F-2, No. 266, sec 1, wun hua 2nd road, Linko Distt, 24448 aipei City, aiwan, 20F-1, No. 266, Sec 1, Wenhua 2nd Road, Linkou Dist, 24448 New aipei City, aiwan Coun ry of Incorpora ion Taiwan % owned by Group 100.0% % owned by plc Subsidiaries continued Company Name G4S SE UREWELL SE URE SOLUTIONS (TAIWAN) LTD G4S WEI FUNG SE URE SOLUTIONS (TAIWAN) LTD G4S SYSTEM ENGINEERING ORPORATION HILL & ASSO IATES (TAIWAN) LTD Taiwan Taiwan Taiwan G4S SE URITY SYSTEMS O. LTD Taiwan G4S SE URE SOLUTIONS (TZ) LTD Tanzania ARMORGROUP TANZANIA LTD G4S (THAILAND) LTD G4S SE URITY SERVI ES (THAILAND) LTD G4S HOLDINGS (THAILAND) LTD INTER-ASIAN ENTERPRISES (IAE) OMPANY LTD G4S INTERNATIONAL LOGISTI S HOLDING (THAILAND) LTD G4S INTERNATIONAL LOGISTI S (THAILAND) LTD ASIAN HOLDING INTERNATIONAL OMPANY LTD GUARDIAN ALARMS OMPANY LTD. Tanzania Thailand Thailand Thailand Thailand Thailand Thailand Thailand Thailand HILL RISK ONSULTING (THAILAND) O., LTD G4S HOLDINGS 4 (THAILAND) LIMITED Thailand Thailand G4S HOLDINGS 3 (THAILAND) LIMITED Thailand G4S HOLDINGS 2 (THAILAND) LIMITED Thailand G4S HOLDINGS 1 (THAILAND) LIMITED Thailand Turkey Turkey G4S HOLDINGS (TRINIDAD) LTD G4S SE URE SOLUTIONS (TRINIDAD) LTD G4S GÜVENLİK HİZMETLERİ ANONİM ŞİRKETİ G4S ELEKTRONİK SİSTEMLERİ ANONİM ŞİRKETİ G4S SE URE SOLUTIONS (UGANDA) LTD Uganda ALARM PROTE TION SERVI ES LTD Uganda US DEFENSE SYSTEMS LL (UGANDA) GROUP 4 SE URITAS LL Ukraine G4S SE URE SOLUTIONS (UKRAINE) LTD Ukraine Ukraine G4S SE URITY SOLUTIONS (UKRAINE) LTD G4S SE URE SOLUTIONS LL Uganda GROUP 4 FAL K SERVI ES LL G4S ASH SERVI ES LL GROUP 4 SE URI OR INFORMATION TE HNOLOGY UAE LL (G4S) GROUP 4 SE URI OR FA ILITY SERVI ES LL (G4S) SHAMS AGRI ULTURAL SERVI ES L.L. (G4S) FIRST SELE T UAE LL G4S ALARM MONITORING SERVI ES LL United Arab G4S INTERNATIONAL LOGISTI S (MIDDLE EAST) FZE G4S EVENTS SERVI ES UAE LL G4S INTERNATIONAL LOGISTI S (MIDDLE EAST) DM United Arab Emirates United Arab Emirates United Arab Emirates United Arab Emirates United Arab Emirates United Arab Emirates United Arab Emirates Emirates United Arab Emirates United Arab Emirates United Arab Emirates Trinidad & Tobago Trinidad & Tobago 100.0% 85.0% 100.0% 85.0% 100.0% 100.0% 73.5% 73.7% 73.4% 73.5% 100% 100% 72.0% 73.5% 49.0% 48.9% 48.9% 48.9% 48.9% 51.0% 51.0% 100.0% 100.0% 99.9% 100.0% 100.0% 99.4% 100.0% 100.0% 49.0% 49.0% 49.0% 48.5% 48.5% 48.5% 48.5% 24.5% 100.0% 48.5% 100.0% Regis ered address 20F-1, No. 266, Sec 1, Wenhua 2nd Road, Linkou Dist, 24448 New Taipei ity, Taiwan 20F-2, No. 266, sec 1, wun hua 2nd road, Linko Distt, 24448 Taipei ity, Taiwan 6F., No.320, Sec. 1, Neihu Rd., Neihu Dist., Taipei ity 11493, Taiwan (R.O. ), 22101 Taipei, Taiwan 20F-1, No. 266, Sec 1, Wenhua 2nd Road, Linkou Dist, 24448 New Taipei ity, Taiwan 16th Floor, Suite 1, No. 266, Sec. 1, Wen-Hwa 2nd Road, Linko Hsiang, Taipei, Taiwan, 22101 Taipei, Taiwan Plot No. 37, Ali Hassan Mwinyi Road, Kinondoni Municipality, P O Box 5555, Dar Es Salaam, Tanzania TDFL, 3rd Floor (Opposite Sheraton Hotel), Dar-es-Salaam, Tanzania 2922/205-206 harn Issara Tower II, 11th Floor, New Petchburi Road, Bangkapi, Huaykwang, 10310 Bangkok, Thailand 2922/205-206 harn Issara Tower II, 11th Floor, New Petchburi Road, Bangkapi, Huaykwang, 10310 Bangkok, Thailand 2922/205-206 harn Issara Tower II, 11th Floor,New Petchburi Road, Bangkapi, Huaykwang, 10310 Bangkok, Thailand 2922/205-206 harn Issara Tower II, 11th Floor, New Petchburi Road, Bangkapi, Huaykwang, 0310 Bangkok, Thailand 45/1 Silom 19 Building, 2nd Floor, Soi Silom 19, Silom Road, Silom, 10500 Bangrak, Bangkok, Thailand 45/1 Silom 19 Building, 2nd Floor, Soi Silom 19, Silom Road, Silom, 10500 Bangrak, Bangkok, Thailand 2922/205-206 harn Issara Tower II, 11th Floor,New Petchburi Road, Bangkapi, Huaykwang, 10310 Bangkok, Thailand 43/55 Moo 5, Wiset Rd., Rawai Sub District, Muang District, Phuket Province, Thailand 2922/205-206 harn Issara Tower II, 11th Floor, New Petchburi Road, Bangkapi, Huaykwang, 10310 Bangkok, Thailand 2922/205-206 harn Issara Tower II, 11th Floor, New Petchburi Road, Bangkapi, Huaykwang, 10310 Bangkok, Thailand 2922/205-206 harn Issara Tower II, 11th Floor, New Petchburi Road, Bangkapi, Huaykwang, 10310 Bangkok, Thailand 2922/205-206 harn Issara Tower II, 11th Floor, New Petchburi Road, Bangkapi, Huaykwang, 10310 Bangkok, Thailand 2922/205-206 harn Issara Tower II, 11th Floor, New Petchburi Road, Bangkapi, Huaykwang, 10310 Bangkok, Thailand 61-63 Edward Street, Port of Spain, Trinidad & Tobago 61-63 Edward Street, Port of Spain, Trinidad & Tobago, Ayazaga Mah. Ataturk ad Mezarlik Sok No 1 Ayazaga, Sariyer, Istanbul, Turkey Ayazaga Mah. Ataturk ad Mezarlik Sok No 1 Ayazaga, Sariyer, Istanbul, Turkey Plot 6, Nakasero Road, Kampala, Uganda Plot 53 Lumumba Avenue, Nakasero, Kampala, Uganda Plot 53 Lumumba Avenue, Nakasero, Kampala, Uganda 21A Moskovskij ave, 02073 Kiev, Ukraine 21A Moskovskij ave, 02073 Kiev, Ukraine 21A Moskovskij ave, 02073 Kiev, Ukraine hain Tower (Oriental Travel Building), First Floor, Muroor Street, P.O. Box 31859 Abu Dhabi, United Arab Emirates P.O. Box 32634, Dubai, United Arab Emirates P.O. Box 113400, Rsahidiya Dubai, United Arab Emirates P.O. Box 32634, Dubai, United Arab Emirates P.O. Box 32634, Dubai, United Arab Emirates P.O. Box 32634, Dubai, United Arab Emirates P.O. Box 32634, Dubai, United Arab Emirates P.O. Box 31859, Abu Dhabi, United Arab Emirates Unit 1-05, Street W B 4, Airport Free Zone, 54907, UAE, United Arab Emirates Dubai, 215634, United Arab Emirates Unit No. Al Mas 2 – D14, Al Mas Tower, Plot No. LT2, Jumeirah Lake Tower Dubai, United Arab Emirates Integrated Report and Accounts 2017 G4S plc 197 Financial report Notes to the consolidated financial statements continued 43. Details of elated unde takings of G4S plc continued Subsidia ies continued Company Name G4S REGI NAL MANAGEMENT C NSULTANCY ME DMCC G4S UK H LDINGS LTD G4S H LDINGS 3 (UK) LTD Count y of Inco po ation United Arab Emirates United Kingdom United Kingdom % owned by G oup 100.0% 100.0% 100.0% % owned by plc G4S TECHN L GY LTD United Kingdom 100.0% AMAG TECHN L GY LTD United Kingdom 100.0% G4S SECURITY SERVICES (UK) LTD United Kingdom 100.0% GR UP 4 LTD United Kingdom 100.0% G4S 084 (UK) LTD G4S GL BAL H LDINGS LTD United Kingdom United Kingdom 100.0% 100.0% 99.80% G4S H LDINGS 102 (UK) LTD United Kingdom 100.0% SECURIC R LTD United Kingdom 100.0% G4S INTERNATI NAL 105 (UK) LTD United Kingdom 100.0% G4S AMERICAS (UK) LTD United Kingdom 100.0% G4S AVIATI N SERVICES (UK) LTD United Kingdom 100.0% G4S AVIATI N (FRANCE) LTD United Kingdom 100.0% G4S INTERNATI NAL L GISTICS (UK) LTD G4S SECURE S LUTI NS (UK) LTD United Kingdom 100.0% United Kingdom 100.0% G4S CASH S LUTI NS (UK) LTD United Kingdom 100.0% G4S CASH CENTRES (UK) LTD United Kingdom 100.0% G4S CARE AND JUSTICE SERVICES (UK) LTD G4S SPV H LDINGS LTD G4S MP (UK) LTD United Kingdom 100.0% United Kingdom United Kingdom 100.0% 100.0% G4S N MINEES LTD United Kingdom 100.0% G4S INTERNATI NAL H LDINGS LTD United Kingdom 100.0% G4S G VERNMENT SERVICES LTD G4S TRUSTEES LTD* United Kingdom United Kingdom 100.0% 100.0% 100.0% G4S FINANCE LTD United Kingdom 100.0% 100.0% FIRST SELECT H LDINGS LTD United Kingdom 100.0% G4S P LICING S LUTI NS LTD G4S GURKHA SERVICES (UK) LTD United Kingdom United Kingdom 100.0% 100.0% G4S US H LDINGS LTD United Kingdom 100.0% G4S W RLDWIDE H LDINGS LTD United Kingdom 100.0% G4S DEFENCE SYSTEMS EURASIA LTD United Kingdom 100.0% G4S DSL H LDINGS LTD United Kingdom 100.0% G4S H LDINGS INTERNATI NAL (AG) LTD United Kingdom 100.0% * Pension trust not part of the consolidation. Registe ed add ess Unit no. 2403, JBC 5, Plot no. JLT-PH 2- W1A, Jumeirah Lake Towers, Dubai, United Arab Emirates Southside, 105 Victoria Street, London, SW1E 6QT, United Kingdom 5th Floor, Southside, 105 Victoria Street, London, SW1E 6QT, United Kingdom Challenge House, International Drive, Tewkesbury, Gloucestershire, GL20 8UQ, United Kingdom Challenge House, International Drive, Tewkesbury, Gloucestershire, GL20 8UQ, United Kingdom Sutton Park House, 15 Carshalton Road, Sutton, Surrey, SM1 4LD, United Kingdom 5th Floor, Southside, 105 Victoria Street, London, SW1E 6QT, United Kingdom Southside, 105 Victoria Street, London, SW1E 6QT, United Kingdom 5th Floor, Southside, 105 Victoria Street, London, SW1E 6QT, United Kingdom 5th Floor, Southside, 105 Victoria Street, London, SW1E 6QT, United Kingdom 5th Floor, Southside, 105 Victoria Street, London, SW1E 6QT, United Kingdom 5th Floor, Southside, 105 Victoria Street, London, SW1E 6QT, United Kingdom 5th Floor, Southside, 105 Victoria Street, London, SW1E 6QT, United Kingdom Sutton Park House, 15 Carshalton Road, Sutton, Surrey, SM1 4LD, United Kingdom 5th Floor, Southside, 105 Victoria Street, London, SW1E 6QT, United Kingdom Sutton Park House, 15 Carshalton Road, Sutton, Surrey, SM1 4LD, United Kingdom Sutton Park House, 15 Carshalton Road, Sutton, Surrey, SM1 4LD, United Kingdom Sutton Park House, 15 Carshalton Road, Sutton, Surrey, SM1 4LD, United Kingdom Sutton Park House, 15 Carshalton Road, Sutton, Surrey, SM1 4LD, United Kingdom Southside, 105 Victoria Street, London, SW1E 6QT, United Kingdom Southside, 105 Victoria Street, London, SW1E 6QT, United Kingdom 5th Floor, Southside, 105 Victoria Street, London, SW1E 6QT, United Kingdom 5th Floor, Southside, 105 Victoria Street, London, SW1E 6QT, United Kingdom 5th Floor, Southside, 105 Victoria Street, London, SW1E 6QT, United Kingdom Southside, 105 Victoria Street, London, SW1E 6QT, United Kingdom Sutton Park House, 15 Carshalton Road, Sutton, Surrey, SM1 4LD, United Kingdom 5th Floor, Southside, 105 Victoria Street, London, SW1E 6QT, United Kingdom 5th Floor, Southside, 105 Victoria Street, London, SW1E 6QT, United Kingdom Southside, 105 Victoria Street, London, SW1E 6QT, United Kingdom Sutton Park House, 15 Carshalton Road, Sutton, Surrey, SM1 4LD, United Kingdom 5th Floor, Southside, 105 Victoria Street, London, SW1E 6QT, United Kingdom 5th Floor, Southside, 105 Victoria Street, London, SW1E 6QT, United Kingdom 5th Floor, Southside, 105 Victoria Street, London, SW1E 6QT, United Kingdom 5th Floor, Southside, 105 Victoria Street, London, SW1E 6QT, United Kingdom 5th Floor, Southside, 105 Victoria Street, London, SW1E 6QT, United Kingdom 198 G4S plc Integrated Report and Accounts 2017 United Kingdom 100.0% Southside, 105 Victoria Street, London, SW1E 6QT, United Kingdom United Kingdom United Kingdom 100.0% 100.0% 100.0% Southside, 105 Victoria Street, London, SW1E 6QT, United Kingdom Southside, 105 Victoria Street, London, SW1E 6QT, United Kingdom Subsidiaries continued Company Name G4S H LDINGS UK (AG) LTD G4S FINANCE MANAGEMENT (AG) LTD G4S RISK MANAGEMENT LTD G4S SECURE S LUTI NS (IRAQ) LTD G4S RISK C NSULTING LTD G4S US INVESTMENTS LTD Coun ry of Incorpora ion United Kingdom % owned by Group 100.0% % owned by plc United Kingdom 100.0% United Kingdom United Kingdom United Kingdom United Kingdom United Kingdom G4S 308 (UK) LTD United Kingdom G4S 309 (UK) LTD G4S 182 (UK) LTD United Kingdom G4S REGI NAL MANAGEMENT (UK&I) LTD United Kingdom G4S H LDINGS 305 (UK) LTD United Kingdom G4S FACILITIES MANAGEMENT (UK) LTD United Kingdom United Kingdom G4S VERSEAS H LDINGS LTD United Kingdom G4S G VERNMENT AND UTS URCING SERVICES (UK) LTD STRATUS INTEGRATED SERVICES LTD G4S HEALTH SERVICES (UK) LTD ’ G4S CASH S LUTI NS EMPL YEES CRIMINAL ATTACK FUND LTD G4S RDNANCE MANAGEMENT LTD IBG H LDINGS (UK) LTD United Kingdom United Kingdom United Kingdom United Kingdom United Kingdom 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% Limited by guarantee 100.0% 100.0% G4S INTERNATI NAL FINANCE PLC United Kingdom 100.0% 100.0% G4S C RP RATE SERVICES LTD United Kingdom 100.0% 100.0% United Kingdom 100.0% G4S INVESTIGATI N S LUTI NS (UK) LTD G4S M NIT RING TECHN L GIES N .1 LTD G4S FINANCE (S UTH AFRICA) LIMITED G4S M NIT RING TECHN L GIES LTD G4S FINANCE (BRAZIL) LTD United Kingdom 100.0% 100.0% G4S INVESTMENT L ND N LTD United Kingdom 100.0% 100.0% G4S INTEGRATED SERVICES H LDINGS LTD G4S BULLI N S LUTI NS (UK) LTD United Kingdom 100.0% United Kingdom 100.0% G4S FIRE AND SECURITY SYSTEMS LTD United Kingdom 100.0% G4S H LDING NE INC G4S SECURE S LUTI NS (USA) INC G4S SECURE S LUTI NS INTERNATI NAL INC AMAG TECHN L GY INC TITANIA INSURANCE C F AMERICA TWC/FL/01 INC United States United States United States United States United States United States 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% TUHNECKCAW INC United States 100.0% Regis ered address 5th Floor, Southside, 105 Victoria Street, London, SW1E 6QT, United Kingdom 5th Floor, Southside, 105 Victoria Street, London, SW1E 6QT, United Kingdom Southside, 105 Victoria Street, London, SW1E 6QT, United Kingdom Southside, 105 Victoria Street, London, SW1E 6QT, United Kingdom Southside, 105 Victoria Street, London, SW1E 6QT, United Kingdom 5th Floor, Southside, 105 Victoria Street, London, SW1E 6QT, United Kingdom Southside, 105 Victoria Street, London, SW1E 6QT, United Kingdom Southside, 105 Victoria Street, London, SW1E 6QT, United Kingdom Southside, 105 Victoria Street, London, SW1E 6QT, United Kingdom Southside, 105 Victoria Street, London, SW1E 6QT, United Kingdom Southside, 105 Victoria Street, London, SW1E 6QT, United Kingdom Southside, 105 Victoria Street, London, SW1E 6QT, United Kingdom Southside, 105 Victoria Street, London, SW1E 6QT, United Kingdom Southside, 105 Victoria Street, London, SW1E 6QT, United Kingdom Southside, 105 Victoria Street, London, SW1E 6QT, United Kingdom Southside, 105 Victoria Street, London, SW1E 6QT, United Kingdom Sutton Park House, 15 Carshalton Road, Sutton, Surrey, SM1 4LD, United Kingdom Southside, 105 Victoria Street, London, SW1E 6QT, United Kingdom 5th Floor, Southside, 105 Victoria Street, London, SW1E 6QT, United Kingdom 5th Floor, Southside, 105 Victoria Street, London, SW1E 6QT, United Kingdom 5th Floor, Southside, 105 Victoria Street, London, SW1E 6QT, United Kingdom Southside, 105 Victoria Street, London, SW1E 6QT, United Kingdom 5th Floor, Southside, 105 Victoria Street, London, SW1E 6QT, United Kingdom 5th Floor, Southside, 105 Victoria Street, London, SW1E 6QT, United Kingdom Southside, 105 Victoria Street, London, SW1E 6QT, United Kingdom Sutton Park House, 15 Carshalton Park Road, Sutton, SM1 4LD, United Kingdom Site 16 Sydenham Business Park Airport Road West, BELFAST, BT3 9LN, United Kingdom 2711 Centerville rd, 19808 Wilmington, DE, United States 1395 University Blvd, 33458 Jupiter, FL, United States 1395 University Blvd, 33458 Jupiter, FL, United States 20701 Manhattan Place, -1829 Torrance, CA 90501, United States 156 College Street, 3rd Floor, 05401 VT, IS, United States 4200 Wackenhut Drive, Suite 100, Palm Beach Gardens, Florida, FL 33410, United States 900 Market Street, Suite 200, Wilmington, Delaware, DA 19801, United States Integrated Report and Accounts 2017 G4S plc 199 Financial report Notes to the consolidated financial statements continued 43. etails of related undertakings of G4S plc continued Subsidiaries continued Company Name AMERICAN UARD & ALERT INC Country of Incorporation United States % owned by Group 100.0% % owned by plc WACKENHUT U.S. PROPERTIES INC United States WACKENHUT FOREI N PROPERTIES INC United States United States 4S INTERNATIONAL LO ISTICS (USA), INC. VEBA TRUST United States WACKENHUT HOMELAND SECURITY, INC. United States United States United States SERVICE AND SUPPLY INTERNATIONAL, INC. 4S COMPLIANCE & INVESTI ATIONS, INC. 4S TECHNOLO Y HOLDIN S (USA) INC. United States United States 4S TECHNOLO Y SOFTWARE SOLUTIONS LLC US DEFENSE SYSTEMS LLC RONCO CONSULTIN CORPORATION 4S US INC. United States United States United States United States 4S SECURE INTE RATION LLC United States 4S UATEMALA HOLDIN , LLC 4S ELECTRONICA HOLDIN , LLC United States 4S UATEMALA FACILITY SERVICES, LLC United States United States 4S RETAIL SOLUTIONS (USA) INC United States RENAISSANCE CENTER MANA EMENT COMPANY ADESTA LLC 4S SECURE SOLUTIONS (URU UAY) S.A. Uruguay SETECSA DE VENEZUELA CA ROUP 4S SECURITY SERVICES YEMEN LTD 4S SECURE SOLUTIONS ZAMBIA LTD SAFETECH (COPPERBELT) LTD SAFETECH ZAMBIA LTD Zambia Zambia Zambia Venezuela Yemen United States 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 90.9% 100% 80.0% 30.0% 25.0% 100.0% 100.0% 100.0% Registered address 4200 Wackenhut Drive, Suite 100, Palm Beach ardens, Florida, FL 33410, United States 2711 Centerville rd, 19808 Wilmington, DE, United States 2711 Centerville rd, 19808 Wilmington, DE, United States Prologis Cargo Center 75, JFK International Airport, North Hangar Road, Suite 210 Jamaica 11430 New York, United States 1395 University Blvd., 33458 Jupiter, United States 4200 Wackenhut Drive, Suite 100, FL 33410 Palm Beach ardens, Florida, United States 701 Brazos, Suite 1050, 78701 Austin, Texas, United States 910 Paverstone Drive, 27615 Raleigh, NC, United States 21 North Avenue, Burlington, MA 01803, United States 21 North Avenue, Burlington, MA 01803, United States 2711 Centerville Road, Suite 400, Wilmington DE, United States 1209 Orange Street, DE 19801 Wilmington, Delaware, United States 4200 Wackenhut Drive, Suite 100, FL 33410 Palm Beach ardens, Florida, United States 1200 Landmark Center, Ste 1300, 68102 Omaha, NE, United States 1395 University Blvd., 33458 Jupiter, Florida, United States 1395 University Blvd., 33458 Jupiter, Florida, United States 1395 University Blvd., 33458 Jupiter, Florida, United States 2711 Centerville rd, 19808 Wilmington, DE, United States 601 Abbot Rd., 48823 Lansing, United States 1200 Landmark Center, Suite 1300, Omaha, NE 68102, United States Cufre 2320, Montevideo, Uruguay Los Ruices Sur, Calle Milan 1013, Caracas, Venezuela, Venezuela Off 50 Meter Road, Hadda, 11805 Sana’a, Yemen P.O. Box 32914, 10 H Kabulonga Road, Lusaka, Zambia Plot 3144, Mukwa Road, Lusaka, Zambia Plot 7305, Kambala Road, Lusaka, Zambia Holdings in other undertakings Entities listed below are joint ventures, where the economic interest has been divested and are therefore not included in the consolidation. Company Name 4S INVESTMENTS LTD 4S JOINT VENTURES LTD ACCOMMODATION SERVICES (HOLDIN S) LTD INTE RATED ACCOMODATION SERVICES PLC EAST LONDON LIFT ACCOMODATION SERVICES LTD EAST LONDON LIFT COMPANY LTD EAST LONDON LIFT INVESTMENT LTD EAST LONDON LIFT HOLDCO NO2 LTD EAST LONDON LIFT ACCOMMODATION SERVICES NO2 LTD EAST LONDON LIFT HOLDCO NO4 LTD EAST LONDON LIFT HOLDCO NO3 LTD ELLAS NO3 LTD ELLAS NO4 LTD 4S JOINT VENTURES (FAZAKERLEY) LTD FAZAKERLEY PRISON SERVICES LTD 4S JOINT VENTURES (ONLEY) LTD ONLEY PRISON SERVICES LTD Registered Address 3rd Floor, Broad Quay House, Prince Street, Bristol BS1 4DJ, United Kingdom 3rd Floor, Broad Quay House, Prince Street, Bristol BS1 4DJ, United Kingdom Challenge House, International Drive, Tewkesbury, L20 8UQ, United Kingdom Challenge House, International Drive, Tewkesbury, L20 8UQ, United Kingdom Challenge House, International Drive, Tewkesbury, L20 8UQ, United Kingdom Challenge House, International Drive, Tewkesbury, L20 8UQ, United Kingdom Challenge House, International Drive, Tewkesbury, L20 8UQ, United Kingdom Challenge House, International Drive, Tewkesbury, L20 8UQ, United Kingdom Challenge House, International Drive, Tewkesbury, L20 8UQ, United Kingdom Challenge House, International Drive, Tewkesbury, L20 8UQ, United Kingdom Challenge House, International Drive, Tewkesbury, L20 8UQ, United Kingdom Challenge House, International Drive, Tewkesbury, L20 8UQ, United Kingdom Challenge House, International Drive, Tewkesbury, L20 8UQ, United Kingdom 3rd Floor, Broad Quay House, Prince Street, Bristol, BS1 4DJ, United Kingdom 3rd Floor, Broad Quay House, Prince Street, Bristol, BS1 4DJ, United Kingdom 3rd Floor, Broad Quay House, Prince Street, Bristol, BS1 4DJ, United Kingdom 3rd Floor, Broad Quay House, Prince Street, Bristol, BS1 4DJ, United Kingdom % ordinary shares owned by Group 16.78 16.78 8.39 8.39 5.03 5.03 8.39 5.03 5.03 5.03 5.03 5.03 5.03 16.78 16.78 16.78 16.78 200 G4S plc Integrated Report and Accounts 2017 Holdings in other undertakings continued ompany Name OCHRE OLUTION (HOLDING ) LTD OCHRE OLUTION LTD NORTH WILT HIRE CHOOL LTD UK COURT ERVICE (MANCHE TER) HOLDING LTD UK COURT ERVICE (MANCHE TER) LTD WHITE HOR E EDUCATION PARTNER HIP LTD HULL MATERNITY DEVELOPMENT LTD HEALTHCARE PROVIDER LTD ALBION HEALTHCARE (OXFORD) HOLDING LTD ALBION HEALTHCARE (OXFORD) LTD LIFT HEALTHCARE INVE TMENT LTD BEXLEY BROMLEY & GREENWICH LIFT COMPANY LTD BBG HOLDCO LTD BBG LIFT ACCOMMODATION ERVICE LTD BBG LIFT HOLDCO (NO 2) LTD BBG LIFT ACCOMMODATION ERVICE (NO 2) LTD BHH LIFT COMPANY LTD BHH HOLDCO LTD BHH LIFT ACCOMMODATION ERVICE LTD HEALTHCARE IMPROVEMENT PARTNER HIP (WOLVERHAMPTON CITY AND WAL ALL) LTD WOLVERHAMPTON CITY AND WAL ALL HOLDCO LTD WOLVERHAMPTON CITY AND WAL ALL LIFT ACCOMMODATION ERVICE LTD WAL ALL HOLDCO LTD WAL ALL LIFT ACCOMMODATION ERVICE LTD LONDON LIFTCO P LTD Registered Address 3rd Floor, Broad Quay House, Prince treet, Bristol, B 1 4DJ, United Kingdom 3rd Floor, Broad Quay House, Prince treet, Bristol, B 1 4DJ, United Kingdom 3rd Floor, Broad Quay House, Prince treet, Bristol, B 1 4DJ, United Kingdom 3rd Floor, Broad Quay House, Prince treet, Bristol, B 1 4DJ, United Kingdom 3rd Floor, Broad Quay House, Prince treet, Bristol, B 1 4DJ, United Kingdom 3rd Floor, Broad Quay House, Prince treet, Bristol, B 1 4DJ, United Kingdom 3rd Floor, Broad Quay House, Prince treet, Bristol, B 1 4DJ, United Kingdom 3rd Floor, Broad Quay House, Prince treet, Bristol, B 1 4DJ, United Kingdom 3rd Floor, Broad Quay House, Prince treet, Bristol, B 1 4DJ, United Kingdom 3rd Floor, Broad Quay House, Prince treet, Bristol, B 1 4DJ, United Kingdom Challenge House, International Drive, Tewkesbury, GL20 8UQ, United Kingdom Challenge House, International Drive, Tewkesbury, GL20 8UQ, United Kingdom Challenge House, International Drive, Tewkesbury, GL20 8UQ, United Kingdom Challenge House, International Drive, Tewkesbury, GL20 8UQ, United Kingdom Challenge House, International Drive, Tewkesbury, GL20 8UQ, United Kingdom Challenge House, International Drive, Tewkesbury, GL20 8UQ, United Kingdom Challenge House, International Drive, Tewkesbury, GL20 8UQ, United Kingdom Challenge House, International Drive, Tewkesbury, GL20 8UQ, United Kingdom Challenge House, International Drive, Tewkesbury, GL20 8UQ, United Kingdom Challenge House, International Drive, Tewkesbury, GL20 8UQ, United Kingdom Challenge House, International Drive, Tewkesbury, GL20 8UQ, United Kingdom Challenge House, International Drive, Tewkesbury, GL20 8UQ, United Kingdom Challenge House, International Drive, Tewkesbury, GL20 8UQ, United Kingdom Challenge House, International Drive, Tewkesbury, GL20 8UQ, United Kingdom Challenge House, International Drive, Tewkesbury, GL20 8UQ, United Kingdom % ordinary shares owned by Group 3.36 3.36 16.78 16.78 16.78 16.78 16.78 16.78 4.19 4.19 2.85 1.71 1.71 1.71 1.71 1.71 1.71 1.71 1.71 1.71 1.71 1.71 1.71 1.71 2.82 Associated companies ompany Name G4 - JC LLC G4 PAR ON PACIFIC LLC Joint ventures ompany Name PARK EC LIMITED % owned by Group 20 20 Profit or loss not material not material Registered address 1395 University Blvd., 33458 Jupiter, Florida, United tates 7121 Fairway Drive, uite 301, 33418 Palm Beach Gardens, Florida, United tates PACIFIC BUILDING ERVICE MANAGEMENT LIMITED (JV) BRIDGEND CU TODIAL ERVICE LIMITED Challenge House, International Drive, Tewkesbury, GL20 Registered address Ent A, Level 1, Capital Business Centre, Triq ta-Zwejt, GN 3000 an Gwann, Malta Level 6, Era Rumana Building Champions Parade, Port Moresby, Papua New Guinea GROUP 4 ECURITY OLUTION CO. WLL P.O. Box 22063, 13081 afat, Kuwait AL MULLA ECURITY ERVICE CO WLL G4 QATAR .P.C BLOEMFONTEIN CORRECTIONAL CONTRACT (PTY) LIMITED POLICITY OPERATOR LIMITED FORBE G4 OLUTION PVT LTD – BU INE CA H CENTER .A. T.I. . TOTAL INTEGRATED ERVICE LTD FORBE G4 OLUTION Pvt LTD 8UQ, United Kingdom Byls Bridge Office Park, Building 11, 13 Candela treet, Highveld Ext 73, 0157 Centurion, outh Africa Virginia 1, Beit hemesh, Israel C-16, Community Centre, Janakpuri, Behind Janak Cinema, 110058 New Delhi, India P.O. Box 117, 13002 afat, Kuwait Villa no. 321, Corner of Abduallah Bin Rawaha treet, C Ring Road, P.O. Box 18592 Doha, Qatar Parc Industriel de la CFCIM, lot No63, Bouskoura, Casablanca, Morocco Diianiras 17, 2045 trovolos Nicosia, P.O. Box 23989 1687, Nicosia, Cyprus C16 Community Centre, Janakpuri, Behind Janak Cinema 110058 New Delhi, India % owned by Group undertakings 50.1 Factors on which joint management is based Joint venture agreement Date of last financial year if not 31/12 50 58.45 1 director appointed to the board Joint venture agreement 30th eptember 20 50 50 48.5 49 0 45.7 50 50 Joint venture agreement 30th eptember Joint venture agreement Joint venture agreement Joint venture agreement Joint venture agreement Joint venture agreement Joint venture agreement Joint Venture Agreement Joint Venture Agreement Integrated Report and Accounts 2017 G4S plc 201 Financial report Share capital £m 388 Share premium £m 258 Retained earnings £m 945 Hedging reserve £m – Reserve for own shares £m (13) Total equity £m 1,5 8 8 – – – – – – – – – – – – 388 – – – – – – – – – – – 258 – – 40 ( ) 120 (145) (11) – 9 (14 ) 918 388 258 1,102 – – – – – – – – – – 388 – – – – – – – – – – 258 122 – – (162) 21 (19) (145) (3) 10 (138) 945 – – – – – – 8 (4) 4 40 ( ) 120 – 11 (10) – 1 (12) (145) – (10) 9 (146) 1,552 (16) 1,732 – – – – – – 122 7 (7) (162) 21 (19) – 3 – 3 (13) (145) – 10 (135) 1,578 (4) 4 – – – – – – – – – – 7 (7) – – – – – – – – Parent company statement of changes in equity For the year ended 31 December 2017 t 1 January 2017 Comprehensive income: Profit for the year Other comprehensive (expense)/income: Change in fair value of cash-flow hedging financial instruments Cash-flow hedging fair value transferred to income statement Re-measurements relating to defined retirement benefit scheme Tax on items taken directly to equity Total comprehensive income Transactions with owners: Dividends paid Own shares awarded Own shares purchased Share-based payments At 31 December 201 t 1 January 2016 Comprehensive income: Profit for the year Other comprehensive (expense)/income: Change in fair value of cash-flow hedging financial instruments Cash-flow hedging fair value transferred to income statement Re-measurements relating to defined retirement benefit scheme Tax on items taken directly to equity Total comprehensive loss Transactions with owners: Dividends paid Own shares awarded Share-based payments t 31 December 2016 202 G4S plc Integrated Report and Accounts 2017 Parent company statement of financial position At 31 December 2017 ASSETS Non-current assets Intangible assets Investments in subsidiaries Trade and other receivables Retirement benefit surplus Deferred tax assets Current assets Trade and other receivables Cash and cash equivalents Total assets LIABILITIES Current liabilities Loan notes (unsecured) Current tax liability Trade and other payables Non-current liabilities Loan notes (unsecured) Retirement benefit obligations Total liabilities Net assets EQUITY Share capital Share premium Retained earnings1 Reserve for own shares Total equity otes 2017 m 2016 £m (d) (e) (f) (j) (k) (f) (g) (h) (g) (j) (l) (m) (n) 4 3,098 11 80 99 3,292 1,358 14 1,372 4,664 (210) (5) (1,964) (2,179) (603) (330) (933) (3,112) 7 3,045 32 75 118 3,277 1,660 1 1,661 4,938 (165) (5) (1,934) (2,104) (861) (395) (1,256) (3,360) 1,552 1,578 388 258 918 (12) 1,552 388 258 945 (13) 1,578 1. The profit for the financial year was £87m (2016: £122m). The parent company financial statements were approved by the board of directors and authorised for issue on 8 March 2018. They were signed on its behalf by: Ashley Almanza Director Tim Weller Director Integrated Report and Accounts 2017 G4S plc 203 Financial report Notes to the parent company financial statements (a General information G4S plc the ‘company’) is incorporated in the United Kingdom, registered in England and Wales, and domiciled in the UK. It is a public company, limited by shares. The company’s registered office is given on page 212. The company’s principal activities during the year have been as a holding company. The financial statements are presented in sterling, which is the company’s functional currency, and in millions of pounds. (b Statement of compliance These financial statements were prepared in accordance with Financial Reporting Standard ‘FRS’) 101- Reduced Disclosure Framework. (c Significant accounting policies Basis of preparation The financial statements have been prepared under the going concern basis and using the historical cost convention, except for the revaluation of certain financial instruments, in accordance with Companies Act 2006 and applicable United Kingdom Accounting Standards United Kingdom Generally Accepted Accounting Practice ‘UK GAAP’)). The principal accounting policies and measurement bases adopted are the same as those disclosed in note 3 to the consolidated financial statements, except as noted below, and have been applied consistently to all the years presented, unless stated otherwise. Judgments made by the directors in the application of these accounting policies which have a significant effect on the financial statements, and estimates with a significant risk of material adjustment, have been disclosed in note 4 to the consolidated financial statements. Going concern Pages 132 to 200 of the consolidated financial statements contain information on the performance of the Group, its financial position, cash flows, net debt position and borrowing facilities. Further information, including financial risk management policies, exposures to market and credit risk and hedging activities, is given in note 31 to the consolidated financial statements, ‘Financial risk’. After making enquiries, the directors have a reasonable expectation that the company has adequate resources to continue in operational existence for the foreseeable future. For this reason the directors consider it appropriate to adopt the going concern basis in preparing the financial statements. Exemptions In accordance with section 408 3) of the Companies Act 2006, the company is exempt from the requirement to present its own income statement. The company has taken advantage of certain disclosure exemptions in FRS 101, in part because its financial statements are included in the publicly-available consolidated financial statements of G4S plc. These disclosure exemptions relate to: • • – the requirements of IAS 7 Statement of Cash Flows; the statement of compliance with International Financial Reporting Standards adopted by the European Union; • new IFRSs that have been issued but are not yet effective and which have not been applied by the company; • comparative information for the movements from the beginning to the end of the year in respect of intangible assets and certain other additional comparative information; information on the assumptions used in the determination of fair value and recoverable amounts of cash-generating units containing goodwill and management’s approach to determining these amounts; financial instruments disclosures required by IFRS 7 Financial Instruments: Disclosures; – • • • disclosures required by IFRS 13 – Fair Value Measurement; • certain related-party disclosures on key management compensation and transactions entered into between two or more wholly- owned members of a Group; and • capital management disclosures. Investments in subsidiaries Investments in subsidiary undertakings are stated at cost less provisions for impairment. The accounting policy for impairments is disclosed in note 3 j) to the consolidated financial statements. Amounts owed by/to Group undertakings Amounts owed by/to Group undertakings are recognised initially at fair value and are subsequently stated at amortised cost. Finance income and expense are recognised in the income statement on an accruals basis using the effective interest method. Impairment of financial assets The company provides for impairments in financial assets when there is objective evidence of impairment as a result of one or more events that impact the estimated future cash flows of the financial assets. 204 G4S plc Integrated Report and Accounts 2017 Share-based payments The company ssues equ ty-settled share-based payments to certa n employees. The fa r value of equ ty settled share-based payments s determ ned at the date of grant and s e ther expensed or cap tal sed as an nvestment n the relevant subs d ary, w th a correspond ng ncrease n equ ty, on a stra ght-l ne bas s over the vest ng per od, based on the company’s est mate of the shares that w ll eventually vest. The amount expensed or cap tal sed s adjusted over the vest ng per od for changes n the est mate of the number of shares that w ll eventually vest, save for changes result ng from any market-related performance cond t ons. The company also ssues cash-settled share-based payments to certa n employees, wh ch are recogn sed as a l ab l ty at fa r value at the date of grant. The value of the l ab l ty s re-measured at each report ng date and at the date on wh ch the l ab l ty s settled. The fa r value of cash settled share-based payments s expensed n the ncome statement f t relates to employees of the company and cap tal sed as an nvestment n the relevant subs d ary f t relates to employees of a subs d ary company. Financial uarantees The company enters nto f nanc al guarantee contracts to guarantee the ndebtedness of other compan es w th n the Group. The company cons ders these to be nsurance arrangements and accounts for them as such. The company therefore treats such contracts as a cont ngent l ab l ty unless and unt l such t me as t becomes probable that the company w ll be requ red to make a payment under the guarantee. (d) Intan ible assets Cost At 1 January 2017 Wr te-off of fully amort sed ntang ble assets At 31 December 2017 Accumulated amortisation At 1 January 2017 Amort sat on charge Wr te-off of fully amort sed ntang ble assets At 31 December 2017 Carry ng amount At 1 January 2017 At 31 December 2017 (e) Investments in subsidiaries Subs d ary undertak ngs Shares at net book value: At 1 January Add t ons Contr but on through share-based payments At 31 December Software £m 15 (3) 12 (8) (3) 3 (8) 7 4 2017 £m 3,045 46 7 3,098 2016 £m 3,039 – 6 3,045 Full deta ls of all nvestments held by the parent company are d sclosed n note 43 to the consol dated f nanc al statements. Dur ng the year ended 31 December 2017 there were no mpa rment charges recorded n respect of the company’s nvestments n subs d ar es (2016: n l). Integrated Report and Accounts 2017 G4S plc 205 Financial report Notes to the parent company financial statements continued (f) rade and other receivables Within current assets Amounts owed y Group undertakings Other receiva les Derivative financial instruments at fair value (note (i)) Total trade and other receiva les included within current assets Within non-current assets Derivative financial instruments at fair value (note (i)) Total trade and other receiva les included within non-current assets 2017 £m 1,341 3 14 1,358 11 11 2016 £m 1,652 – 8 1,660 32 32 Amounts owed y Group undertakings are unsecured, interest-free or interest- earing ased on market rates, and repaya le on demand. (g) Loan notes (unsecured) The loan notes are repaya le as follows: On demand or within one year In the second year In the third to fifth years inclusive After five years Total loan notes 2017 £m 210 461 142 – 813 2016 £m 165 226 536 99 1,026 The company issued fixed-rate loan notes in the US Private Placement market totalling US$550m on 1 March 2007. US$100m of these notes matured and were repaid on 1 March 2014, US$ 200m of these notes matured and were repaid on 1 March 2017, and the remaining notes mature in March 2019 (US$145m) and March 2022 (US$105m). The company issued further fixed-rate loan notes in the US Private Placement market totalling US$514m and £69m on 15 July 2008. US$65m of these notes matured and were repaid on 15 July 2013, US$150m matured and were repaid on 15 July 2015, £25m matured and were repaid on 15 July 2016. The remaining notes mature in July 2018 (US$224m and £44m), and July 2020 (US$75m). The company issued its inaugural pu lic note of £350m using its European Medium Term Note Programme on 13 May 2009. The note matures in May 2019. The loan notes issued in July 2008 and May 2009 are stated at amortised cost. The loan notes issued in March 2007 are stated at amortised cost ut are designated in a fair-value hedge relationship which has a fair value adjustment in relation to the hedged interest- rate risk. Information on the significant assumptions underlying the valuation model used and the interest rates on the orrowings are disclosed in note (i). Derivatives relating to the loan notes, descri ed in note (i), have a fair value gain of £12m (2016: £16m). The management of currency risk and interest-rate risk is also descri ed in note (i). (h) rade and other payables Within current liabilities: Amounts owed to Group undertakings Other taxation and social security costs Accruals Other paya les Total trade and other paya les 2017 £m 1,927 2 30 5 1,964 2016 £m 1,913 2 15 4 1,934 Amounts owed to Group undertakings are unsecured, interest-free or interest- earing ased on market rates, and repaya le on demand. 206 G4S plc Integrated Report and Accounts 2017 (i) Derivative financial instruments The carrying alues of deri ati e financial instruments at the reporting date are presented below: Cross-currency swaps designated as cash-flow hedges Interest-rate swaps designated as fair- alue hedges Total Less: amount due for settlement within 12 months (shown under current assets and current liabilities): Cross-currency swaps designated as cash-flow hedges Interest-rate swaps designated as fair- alue hedges Amount due for settlement after 12 months 2 17 Assets £m 12 13 25 (12) (2) (14) 11 2016 Assets £m 16 24 40 (1) (7) (8) 32 2 17 Liabilities £m – – – 2016 Liabilities £m – – – – – – – – – – – The mark-to-market aluation of the deri ati es has decreased by £15m (2016: decreased by £5m), dealt with as follows: Cross-currency swaps designated as cash-flow hedges Interest-rate swaps designated as fair- alue hedges 2 17 Income statement £m – (11) (11) 2016 Income statement £m – (12) (12) 2 17 Comprehensive income £m (4) – (4) 2016 Comprehensi e income £m 7 – 7 Deri ati e financial instruments are stated at fair alue, measured using techniques consistent with Le el 2 of the aluation hierarchy (inputs other than quoted prices in acti e markets that are obser able for the asset and liability, either directly or indirectly). The source of the market prices is Bloomberg and in addition the third-party relationship counterparty banks. The rele ant currency yield cur e is used to forecast the floating-rate cash flows anticipated under the instrument, which are discounted back to the reporting date. This alue is compared to the original transaction alue, gi ing a fair- alue of the instrument at the reporting date. The fair alue of deri ati e financial instruments is calculated using a discounted cash flow approach and using inputs based on obser able market data. Judgment is used to determine the rele ant inputs, currency yield cur es and discount rates. Although these judgments, estimates and associated assumptions are based on management’s best knowledge of current e ents and circumstances, the actual results may differ. Currency risk and cross-currency swaps The Group conducts business in many currencies. The Group presents its consolidated financial statements in Sterling and as a consequence is subject to foreign exchange risk due to the translation of the results and net assets of its foreign subsidiaries. The company, together with its subsidiary G4S International Finance plc, hedges a substantial portion of the Group’s exposure to fluctuations in the translation into Sterling of the Group’s o erseas net assets by holding loans in foreign currencies and cross-currency swaps. On consolidation, translation adjustments arising on the translation of foreign currency loans and changes in the fair alue of the cross-currency swaps meeting hedge accounting criteria are recognised in equity to match translation adjustments on foreign currency equity in estments as they qualify as net-in estment hedges. Howe er, in the company’s own financial statements, translation adjustments arising on the translation of foreign currency loans are recognised in the income statement and are in part hedged by cross-currency swaps. Cross-currency swaps with a nominal alue of £25m are outstanding. These swaps were arranged to hedge the foreign currency risk on US$50m of the second US Pri ate Placement notes issued in July 2008, effecti ely fixing the Sterling alue on this portion of debt at an exchange rate of 1.9750. These swaps will mature in July 2018. Integrated Report and Accounts 2017 G4S plc 207 Financial report Notes to the parent company financial statements continued (i Derivative financial instruments continued Interest-rate risk and interest-rate swaps Borrowings issued at fi ed rates e pose the company to fair value interest-rate risk, which the company manages within policy limits approved by the directors. When fi ed/floating interest-rate debt in the preferred mi is unavailable directly from investors, interest-rate swaps are utilised to create the desired blend in accordance with Treasury policy, with the proportion of fi ed interest rate held reducing on a sliding scale over forward periods up to a ma imum of five years. The quantity of interest-rate swaps outstanding in the Company is e pected to continue to decline as treasury activity is increasingly conducted by G4S International Finance plc. The US Private Placement market is predominantly a fi ed-rate market, with investors preferring a fi ed-rate return over the life of the loan notes. At the time of the first issue in March 2007, the Group was comfortable with the proportion of floating-rate e posure not hedged by interest-rate swaps and therefore rather than take on a higher proportion of fi ed-rate debt it arranged fi ed-to-floating swaps, effectively converting the fi ed 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 fi ed-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 swaps with a nominal value of US$200m matured in 2017 with the remainder of US$145m maturing in 2019 and US$105m maturing in 2022. The interest on the US Private Placement notes issued in July 2008, and on the £350m public notes issued in May 2009, was initially kept at fi ed rate. In April 2014, the interest rate on £44m of the US Private Placement notes issued in July 2008, and on all of the £350m public notes issued in May 2009, was swapped from fi ed to floating for a period of three years using derivatives. These swaps matured in 2017. The £350m public notes have a coupon step-up of 1.25%, which is triggered should the credit rating of the company fall below investment grade. (j Retirement benefit obligations The company is the sponsoring company for the Group’s UK defined benefit pension scheme, to which it provides a guarantee over all payments to be made to the scheme by the operating companies. The following disclosures relate to the UK scheme only and are given because the disclosures in note 32 of the group financial statements refer to the consolidated Group position and include certain non-UK schemes. The amounts recognised in the statement of financial position and the various components of income, other comprehensive income and cash flow are as follows: Obligation £m (2,659 Assets £m 2,339 Deficit £m (320 (4 (65 (2 (71 32 (2 15 – 45 – 90 90 – 58 – 58 – – – (5 (5 43 (90 (47 (4 (7 (2 (13 32 (2 15 (5 40 43 – 43 (2,595 2,345 (250 2017 At 1 January 2017 Amounts recognised in income Current service cost (in cost of sales) Interest on obligations and assets (in finance costs) Administration costs paid from plan assets (in administration e penses) Total amounts recognised in income Re-measurements Actuarial loss change in financial assumptions – Actuarial gain change in demographic assumptions – Actuarial gain e perience – Return on assets in e cess of interest Re-measurement effects recognised in other comprehensive income Cash Employer contributions Benefits paid from plan assets Net cash At 31 December 20171 1. Retirement benefit surplus £80m and retirement benefit obligation £330m. 208 G4S plc Integrated Report and Accounts 2017 (j) Retirement benefit obligation continued 2016 At 1 January 2016 Amounts recogn sed n ncome Current serv ce cost ( n cost of sales) Interest on obl gat ons and assets ( n f nance costs) Adm n strat on costs pa d from plan assets ( n adm n strat on expenses) Total amounts recogn sed n ncome Re-measurements Actuar al loss change n f nanc al assumpt ons – Actuar al ga n change n demograph c assumpt ons – Actuar al ga n exper ence – Return on assets n excess of nterest Re-measurement effects recogn sed n other comprehens ve ncome Cash Employer contr but ons Benef ts pa d from plan assets Net cash At 31 December 20161 Obl gat on £m (2,218) Assets £m 2,029 (4) (82) (2) (88) (539) 82 22 – (435) – 82 82 – 76 – 76 – – – 273 273 43 (82) (39) Def c t £m (189) (4) (6) (2) (12) (539) 82 22 273 (162) 43 – 43 (2,659) 2,339 (320) 1. Ret rement benef t surplus £75m and ret rement benef t obl gat on £395m. Employer contr but ons n 2017 ncluded £40m (2016: £39m) of add t onal contr but ons n respect of the def c t n the UK scheme. (k) Deferred tax a et The reconc l at on of deferred tax assets s as follows: At 1 January 2017 Cred t/(charge) to the ncome statement Cred t to equ ty Charge to equ ty At 31 December 2017 change n tax rate – At 1 January 2016 Cred t/(charge) to the ncome statement Cred t to equ ty Charge to equ ty At 31 December 2016 change n tax rate – Intangible a et £m 1 – – – 1 Retirement benefit obligation £m 57 (6) (8) 1 44 Share-ba ed payment £m 2 – – – 2 Tax lo e £m 58 (9) – – 49 Other temporary difference £m – 2 1 – 3 – 1 – – 1 36 – 24 (3) 57 1 1 – – 2 – 58 – – 58 6 (6) – – – Total £m 118 (13) (7) 1 99 43 54 24 (3) 118 At 31 December 2017, the company had unut l sed tax losses of approx mately £271m (2016: £298m) potent ally ava lable for offset aga nst future prof ts. A deferred tax asset of £49m (2016: £58m) has been recogn sed n respect of approx mately £271m (2016: £298m) of gross losses based on expected/forecast prof tab l ty from approved budgets and bus ness plans. The recogn t on of deferred tax assets on tax losses s pred cated on the projected generat on of ncome n the company wh ch should result n the ut l sat on of the ava lable tax losses w th n a foreseeable per od. Th s ncome stream s dr ven by the current and future global results of the Group n l ne w th bus ness plans. The t m ng of recogn t on of the tax losses as a deferred tax asset n 2017 was supported by the mproved prof t prof le of the company, wh ch tself s underp nned by the cont nu ng progress of the Group’s transformat on strategy to generate future susta nable, prof table growth. As at 31 December 2017, the company has cap tal losses ava lable to carry forward of approx mately £2.5bn (2016: £0.14bn). These losses have no exp ry date and have not been agreed w th the relevant tax author t es. No deferred tax assets have been recogn sed n respect of these losses on the bas s that the l kel hood of the r future ut l sat on s cons dered to be remote. Integrated Report and Accounts 2017 G4S plc 209 Financial report Notes to the parent company financial statements continued (l Share capital Disclosures on the share capital o the company have been disclosed in note 35 to the consolidated inancial statements. (m Retained earnings Included in the Company’s retained earnings is £885m (2016: £918m) o distributable pro its. (n Reserve for own shares Disclosures on the reserve or own shares o the company have been disclosed in note 36 to the consolidated inancial statements. (o Auditor’s remuneration Fees payable to PricewaterhouseCoopers LLP or the audit o the company’s annual inancial statements have been disclosed in note 10 to the consolidated inancial statements. (p Staff costs and employees The average monthly number o employees, including executive directors, was: Average number o employees (corporate) The aggregate remuneration o employees, including executive directors, employed by the company comprised: Wages and salaries Social security costs Employee bene its Total sta costs 2017 Number 19 2016 Number 21 2017 £m 7 1 6 14 2016 £m 10 2 7 19 In ormation on directors’ remuneration, long-term incentive plans, pension contributions and entitlements is set out in the Directors’ Remuneration Report on pages 93 to 115. (q Share-based payments The Company has both equity-settled and cash-settled share-based payment schemes in place, being the conditional allocations o G4S plc shares. An Employee Bene it Trust established by the Group holds shares to satis y the vesting o conditional allocation awards. Share-based payments disclosures relevant to the company are presented within note 39 to the consolidated inancial statements. (r Related-party transactions Certain disclosures relevant to the company are presented within note 40 to the consolidated inancial statements. Company transactions with Group undertakings primarily consist o royalty charges, central service charges and loan transactions. There were no material transactions with non-wholly-owned Group undertakings or with other external related parties in 2017 (2016: none). (s Contingent liabilities To help secure cost-e ective inance acilities or its subsidiaries, the company issues guarantees to some o its inance providers. At 31 December 2017 guarantees totalling £466m (2016: £470m) were in place in support o such acilities. The company also guarantees the debt obligations o certain subsidiaries. At 31 December 2017 contingent liabilities on guarantees o £1,333m (2016: £1,367m) were outstanding in support o such debt obligations. (t Dividends Amounts recognised as distributions to equity holders o the company in the year have been disclosed in note 14 to the consolidated inancial statements. 210 G4S plc Integrated Report and Accounts 2017 Group fnancial record GROUP FINANCIAL RECORD Revenue* (£bn) Adjusted PBITA* (£m) 496 476 435 415 379 8 6 6.4 6.6 6.8 7.2 7.4 4 2 0 500 400 300 200 100 0 13 14 15 16 17 13 14 15 16 17 Revenue* at constant exchange rates £7.4bn G4S revenue has grown 17% since June 2013. Adjusted PBITA* at constant exchange rates £496m Adjusted PBITA defned as proft before interest, tax and amortisation and excluding specifc and other separately disclosed items, has increased 31% since 2013. Dividend (pence per share) Operating cash ˜ow (£m) Employees (’000) as at 31 December 2017 9.24 9.41 9.41 9.70 8.96 10 8 6 4 2 0 618 623 610 585 570 633 527 391 700 600 500 400 441 480 300 200 100 0 700 600 500 400 300 200 100 0 13 14 15 16 17 13 14 15 16 17 13 14 15 16 17 Dividend Operating cash fow* 9.70p The total dividend was increased 3.1% in 2017. £527m Operating cash fow has grown 20% since 2013. Employees as at 31 December 2017 570,000 (including joint ventures and businesses held for sale or closure) * Revenue, Adjusted PBITA and operating cash fow relate to the Group’s core businesses excluding results from businesses held for sale or closure, onerous contracts and specifc and other separately disclosed items. A reconciliation between results from core businesses and statutory results is provided on page 44. Integrated Report and Accounts 2017 G4S plc 211 General information General information Financial calendar Results announcements Q1 Trading update – May Half-year results – August Q3 Trading update – November Final Results – March Dividend payment Interim paid – 13 October 2017 Final payable – 15 June 2018 Annual General Meeting 15 May 2018 Corporate addresses Registered offce 5th Floor Southside 105 Victoria Street London SW1E 6QT Telephone +44 (0)207 963 3100 Registered number 4992207 Auditor (since 2015 AGM) PricewaterhouseCoopers LLP 1 Embankment Place London WC2N 6RH Stockbrokers J.P. Morgan Cazenove 25 Bank Street Canary Wharf London E14 5JP Citigroup Global Markets Limited Citigroup Centre Canada Square, Canary Wharf London E14 5LB Financial advisors J.P. Morgan Cazenove 25 Bank Street Canary Wharf London E14 5JP Barclays Capital 5 The North Colonnade Canary Wharf London E14 4BB Legal Entity Identifer code 549300L3KWKK8X35QR12 G4S website g4s.com 212 G4S plc Integrated Report and Accounts 2017 General shareholder information Registrars and transfer offce All enquiries relating to the administration of shareholdings should be directed to: Link Asset Services The Registry 34 Beckenham Road Beckenham Kent BR3 4TU Telephone: within the UK 0871 664 0300 (calls cost 12p per minute plus your phone company’s access charge. If you are outside the UK call +44 (0)371 644 0300. Calls from outside the UK will be charged at the applicable international rate) Fax: +44 (0) 1484 600 911 Email: enquiries@linkgroup.co.uk Secure shareholder portal: www.signalshares.com Please note that benefcial owners of shares who have been nominated by the registered holder of those shares to receive information rights under section 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. Link shareholder portal Signal shares is an online facility provided by the company’s registrars, Link Asset Services, for shareholders to manage their holding securely online reducing the need for paperwork. By registering for a free portal account, shareholders are able to access a range of online facilities 24 hours a day including those described below. View account holding details Allows shareholders to access their personal account, shareholding balance, share transaction history, indicative share valuation and dividend payment history. It also enables shareholders to buy and sell shares. Change of address, bank mandates, downloadable forms Allows shareholders to update their postal address and complete, change or delete bank mandate instructions for dividends. A wide range of shareholder information, including downloadable forms such as stock transfer forms, is also available. Dedicated helpline Link Asset Services also has a helpline to help users with all aspects of the service. The numbers are noted above. Lines are open 8.30am to 5.30pm Monday to Friday. Printed by Park Communications on FSC® certifed paper. Park is an EMAS certifed company and its Environmental Management System is certifed to ISO 14001. 100% of the inks used are vegetable oil based, 95% of press chemicals are recycled for further use and, on average 99% of any waste associated with this production will be recycled. This document is printed on FSC® certifed paper. Designed and produced by Black Sun Plc. www.g4s.com G4S plc 5th Floor Southside 105 Victoria Street London SW1E 6QT United Kingdom Telephone: +44 (0) 207 963 3100 Email: investor@g4s.com Registered in England No. 4992207 

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