Securing Your World
Integrated Solutions in
a Connected World
Integrated Report and Accounts 2018
The world is increasingly connected and
this trend is set to continue, driven by
the global investment in infrastructure,
communications, technology and data.
At G4S we are investing in the
resources and capabilities to provide
customers with industry-leading
solutions that enable them to operate
securely, reliably and efficiently in a
connected world.
This year, we have included an
extended market review, identifying
some of the key trends facing our
industry and outlining how G4S is
developing and delivering solutions
in both our Security and Cash
businesses that add value to G4S
and our customers.
The Sustainable Development Goals (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 examples where G4S is helping to advance the Goals
through our programmes and operations.
For more information about the social and economic areas where
G4S supports the realisation of the Goals and makes a positive
difference to society and communities around the world, see
page 37.
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HIGHLIGHTS AND CONTENTS
HIGHLIGHTS
STATUTORY RESULTS
UNDERLYING RESULTSb
REVENUEa
£7.5bn-4.0%
(2017: £7.8bn)
ADJUSTED PBITAa, c
£460m-6.5%
(2017: £492m)
EPSa
5.3p-65.4%
(2017: 15.3p)
REVENUE
£7.3bn+1.1%
(2017: £7.2bn)
ADJUSTED PBITAc
£474m
(2017: £474m)
ADJUSTED EPS
16.7p
(2017: 16.7p)
OPERATING CASH FLOW
£413m-15.4%
(2017: £488m)
OPERATING CASH FLOW
KPI
£453m-12.2%
(2017: £516m)
DIVIDEND PER SHARE
9.70p
(2017: 9.70p)
NON-FINANCIAL KPI
HEALTH AND SAFETY
67%
Reduction in road traffic fatalities
since 2013
KPI
Visit: g4s.com for more information.
The Chief Financial Officer’s review is
on pages 43 to 56.
a. During 2017 and 2018, the Group sold/exited 24
businesses which contributed revenues of £105 million
in 2018 (2017: £304 million) and are reflected in the
year-on-year change in statutory results but excluded
from underlying results.
b. Underlying results are Alternative Performance
Measures (APMs) as defined and described on page
40 and exclude results from disposed businesses and
onerous contracts and specific and other separately
disclosed items. Underlying results are reconciled to
statutory results on page 56.
c. Adjusted PBITA is an Alternative Performance
Measure as described on page 41.
STRATEGIC REPORT
Overview
Highlights
Strategy & Business Review
Chief Executive’s review
G4S overview
Business overview – Secure Solutions
Business overview – Cash Solutions
Stakeholder engagement
Our strategy
Key performance indicators
CSR performance
Alternative Performance Measures
Chief Financial Officer’s review
Regional and service line review
Risk management and our principal risks
KPI
KPI
KPI
GOVERNANCE REPORT
Chairman’s statement
Board of directors
Executive committee
Corporate governance report
Audit committee report
Directors’ remuneration report
Directors’ report
Directors’ responsibilities
FINANCIAL REPORT
Independent auditor’s report
Consolidated income statement
Consolidated statement
of comprehensive income
Consolidated statement of changes
in equity
Consolidated statement of
financial position
Consolidated statement of cash flows
Notes to the consolidated
financial statements
Parent company statement of changes
in equity
Parent company statement
of financial position
Notes to the parent company
financial statements
Shareholder information
Group financial record
General information
1
2
6
8
12
16
18
34
38
40
43
57
64
72
74
76
78
98
105
128
131
132
144
145
146
147
148
149
217
218
219
227
228
KPI
Financial KPI.
KPI
Other financial and non-financial KPIs.
Please see pages 38 to 39 for a
description of the Group’s financial and
non-financial KPIs and how they link to
the Group’s strategic priorities.
Integrated Report and Accounts 2018 G4S plc 1
CHIEF EXECUTIVE’S REVIEW
ASHLEY ALMANZA,
Group Chief Executive Officer
“Since 2013, underlying revenues have
grown by 18% and Adjusted EPS
by 56%, while we have generated
operating cash flow of nearly £3 billion.
The Group’s strong cash generation
has enabled us to invest in technology
and pay dividends of more than £850
million. At the same time, we have
invested in the successful development
of products and services for our
customers and strengthened the
Group’s balance sheet.
The Group is reviewing separation
options for the Global Cash Division.
We believe that a separation has the
clear potential to enhance the focus and
success of both the Secure Solutions
and the Cash Solutions businesses and
to unlock substantial shareholder value.”
2 G4S plc Integrated Report and Accounts 2018
INTEGRATED
SOLUTIONS IN A
CONNECTED WORLD
Our Secure Solutions business delivered underlying revenue
growth of 3% and profit margins rose from 6.2% to 6.5%
reflecting the benefits of commercial discipline, service innovation
and productivity gains. As expected, this was offset by the effect
of challenging trading conditions in a number of Cash Solutions
markets and a strong comparative performance in Retail Cash
Solutions in 2017. Overall, the Group delivered underlying
earnings in line with the previous year.
Our sales wins in the second half of 2018 have underpinned
a good start to the year and this, together with growing
technology-enabled services in both our cash and security
businesses, supports a positive outlook for 2019.
£7.3bn
Underlying revenue in 2018
546,000
Employees
90+
Countries of operation
across six continents
STRATEGIC CONTEXT
Our customers operate in an increasingly
connected world and this trend is set to continue
driven by global investment in infrastructure,
communications, technology and artificial
intelligence and data applications. The rapid
growth in connectivity brings substantial social and
economic benefits. It also creates complex risks
and threats for our customers and we continue to
invest in the people, skills and technology needed
to provide our customers with the industry-leading
solutions that help them to operate safely, reliably
and efficiently in a connected world.
Central to our customer value proposition is our
understanding of our customers’ objectives and
our assessment of their opportunities, risks and
threats. Over the past five years we have invested
in the skills and organisational capacity required to
provide professional assessments that provide the
foundation for the innovative solutions that we
design and deliver in both Secure Solutions and
Cash Solutions.
We believe that G4S has considerable competitive
advantage in our increasingly connected world.
G4S possesses the scale, resources and capabilities
necessary to develop and deliver the innovative
solutions needed by our customers, and our
unique global market positions enable us to
offer this to customers on a consistent basis
across the globe. We are not complacent about
our competitive advantage and have continued
to invest in the people, skills and technology
needed to be an industry leader and to offer and
deliver an outstanding value proposition to our
customers. I’m pleased to say that, despite tough
trading conditions in 2018, these investments are
delivering benefits for customers and shareholders
STAKEHOLDER CONSIDERATIONS FOR THE SEPARATION REVIEW
In evaluating the rationale for the separation, the directors will consider the potential benefits to all
stakeholders including customers, employees, shareholders and the communities in which we operate.
We believe that separation would produce enhanced strategic, commercial and operational focus and
that this has the potential to strengthen innovation, customer service and margins.
Our aim is to create two strong independent companies each being an exciting, rewarding and fulfilling
business in which to work.
in many of our key markets. The board and executive
team are excited by our plans to extend these
services across the Group as a whole.
PROGRESS WITH THE GROUP’S
TRANSFORMATION
The transformation programme we launched at the
end of 2013 has continued to deliver substantial
benefit in a number of important areas:
■ Values and Culture: We have established and
promoted simple and clear corporate values
that build a culture based on Integrity, Respect,
Safety, Security, Service Excellence, Innovation
and Teamwork. Our regular management
and employee engagement surveys show that
employees positively identify with these G4S values
(see page 6).
■ Health & Safety: We have invested in people,
training and systems and the Group’s fatalities
have significantly reduced over the past six years.
Any fatality is one too many and zero harm
remains our goal.
■ Focus: The implementation of our portfolio
programme has improved our strategic,
commercial and operational focus and produced
over £560 million proceeds.
■ Financial performance: Since 2013 the Group’s
underlying revenues have increased by 18% and
underlying earnings per share have increased
by 56%.
■ Financial strength and dividends: The balance
sheet has been strengthened and £850 million
in dividends have been paid to shareholders.
■ Innovation: We have developed new products
and services which integrate our security
personnel, risk consulting, technology and data
analysis to provide our customers with innovative,
industry leading solutions that address their
security or cash management needs. The Group’s
technology-enabled revenues have grown over
the past six years to £2.8 billion for 2018. This
is having a positive impact on our revenue mix,
more than offsetting the effects of competition
in manned security services.
■ Organisational capability: We developed the
strength and depth of organisational resource,
capability and controls in each of Secure Solutions
and Cash Solutions that enabled us to create the
Global Cash Division and to consolidate Secure
Solutions into four regions in January 2018. This
paved the way for the separation review that we
announced in December 2018.
SEPARATION REVIEW
Following the establishment of our Global Cash
Solutions division on 1 January 2018, the board
announced in December 2018 that the company
is reviewing options for the separation of the Cash
Solutions business from the Group. The company has
appointed accounting, legal, tax, financial and other
advisors and is evaluating a wide range of separation
options, both public and private, with the aim of
maximising shareholder value, having due regard for
the interests of customers, employees, pensioners,
partners and other key stakeholders.
In parallel with the review, the company is taking
steps to enable it to commence the process of
separation in the second half of the year. A final
decision on separation may be subject to approval
by shareholders following a recommendation by the
board. The date of a potential shareholder meeting
is yet to be fixed and is subject to the timing and
completion of a number of key work-streams.
The company expects to provide a detailed update at
the half year results in August.
In the event of separation, we believe that the
successor security and cash management businesses
will be very well positioned to sustain their leading
market positions by investing in growth plans for
their core products, services and solutions. The
separation review will therefore include potential
portfolio actions to further improve the focus and
financial flexibility of the successor Groups in the
event of separation.
Since announcing the separation review, the Group
has received unsolicited expressions of interest in
acquiring the Global Cash Solutions and/or Retail
Cash Solutions businesses. Whilst all credible
proposals will be evaluated by the board, no
assurance can be provided at this stage that any of
these expressions of interest will lead to a proposal or
transaction and the Group will continue to vigorously
pursue all strategic options.
Integrated Report and Accounts 2018 G4S plc 3
CHIEF EXECUTIVE’S REVIEW CONTINUED
SECURE SOLUTIONS – STRATEGY,
PERFORMANCE AND OUTLOOK
CASH SOLUTIONS – STRATEGY,
PERFORMANCE AND OUTLOOK
STRATEGY:
STRATEGY:
Our purpose is to create sustainable value by
delivering industry leading, technology-enabled
security solutions and outstanding service for
our customers.
Our strategy is to provide industry leading software,
hardware, systems and services that improve the
security, control and efficiency of our customers’ cash
management. We deliver services including:
■ Cash Technology services comprising:
■ Cash technology focused on the efficient
management of cash, including Retail
Cash Solutions, the leading software and
service solution for large retail formats in
North America.
■ Deposita, CASH360 and G4S Pay solutions for
medium and small retail formats.
■ Bank process automation.
■ Conventional Cash services including Cash in
transit (CIT), cash processing and automated teller
machine (ATM) services.
In order to achieve economies of scale, we have built
number one or number two positions in 41 of the 44
countries in which we operate. In all of these markets,
a very large share of the overall cash handling and
cash management market remains in the hands of
banks, retailers and other businesses whose primary
function is not cash handling. We believe that these
banks and businesses will continue to outsource cash
management services to G4S.
Our improving unit economics, the strength of
our market positions and our innovative cash and
payment technology give us confidence that G4S
Cash Solutions is well positioned to play a leading role
in the next wave of cash management outsourcing.
We have a market leading position in the large
retailer segment in the United States and we are one
of the market leaders globally in the small and mid-
size business market segments.
Our technology is delivering significant savings
for our customers and provides a valuable higher
margin annuity revenue stream for G4S. Market
penetration is low at this stage and we therefore see
substantial potential for further growth. Indeed we
believe that our cash technology services have the
clear potential to produce profits greater than the
profits from the Group’s conventional cash services in
the medium term.
Our Secure Solutions strategy addresses the positive,
long-term demand for security services. We do this
by designing and delivering industry leading security
solutions including:
■ Risk consulting.
■ Premium on-site, mobile and remote security
professionals.
■ Investigations.
■ Integrated security systems: design, build, operate
and maintain.
■ Monitoring and response security operations.
■ Data analytics and pre-emptive & predictive
security operations.
We operate in over 90 countries around the
world, providing our customers with unmatched
global coverage.
PERFORMANCE AND OUTLOOK
During 2018, our Secure Solutions business delivered
organic revenue growth of 3.0%. Despite tightening
labour supply and intense competition in manned
security services in some geographies, our commercial
discipline, productivity programmes, growing
technology-enabled security revenues meant that we
strengthened our Adjusted PBITA margin in all four
regions and the overall Secure Solutions Adjusted
PBITA margin rose from 6.2% to 6.5%.
4 G4S plc Integrated Report and Accounts 2018
The Group has continuously updated its standard
operating procedures in California and there are
no other significant labour claims in California or
elsewhere in the United States. A more detailed
review of the statutory results can be found on
page 44, and a reconciliation to underlying results is
provided on page 50.
OUTLOOK
Our sales wins in the second half of 2018 have
underpinned a good start to 2019. Our growing
technology-enabled services in both our cash
and security businesses, support the Group’s
positive outlook.
We believe the potential separation of the Cash
Solutions business could provide G4S with the
strategic, commercial and operational focus needed
for the next stage of successful development of
both the Cash Solutions and the Secure Solutions
businesses. Combining technology with our
established security offerings is strengthening our
sales mix and contract retention, whilst the rapid
development of our cash technology business has
the clear potential to deliver profits greater than the
global profits of our traditional cash business in the
medium term.
Our business plan reflects our commitment to remain
soundly financed with operating cash flow conversion
of more than 100% of Adjusted PBITA and net
debt to EBITDA of below 2.5x in the medium term.
Priorities for excess cash will be investment, dividends
and, in the near term, further leverage reduction.
The board has proposed to maintain the final
dividend at 6.11p (DK 0.5321). Our policy is to
increase the dividend in line with the long-term
growth in earnings.
CUSTOMERS AND EMPLOYEES
Our customers and our colleagues are at the core
of G4S. I would like to thank our customers for
continuing to place their trust in G4S and to pay
tribute to our 546,000 colleagues who serve our
customers every day.
ASHLEY ALMANZA
Group Chief Executive Officer
PERFORMANCE AND OUTLOOK
During 2018, we continued to experience very
good demand for our cash solutions technology and
the number of bank and business locations that we
serve grew from 19,800 locations to 23,300 locations.
In North America, our operational scale grew in
Retail Cash Solutions, resulting in our Adjusted
PBITA margin growing to c.15% (2017: 11%) for
this business.
In 2017, the Retail Cash Solutions business posted
very strong revenue growth as we mobilised a large
cash technology and services contract in North
America. Whilst we had a number of significant
contract wins in 2018, we did not have a similar
mobilisation to that in 2017, leading to a reduction
in Cash Solutions revenues of 9.3%. Adjusted PBITA
fell by 17.1% reflecting the impact of ATM and bank
branch closures in a number of markets and higher
security costs in Africa (principally South Africa),
partially offset by a £5 million benefit from the early
completion of a bullion centre contract in the UK.
Excluding Retail Cash Solutions, Cash Solutions
revenues grew by 0.5%.
With the trends highlighted above, we believe good
growth opportunities exist in all of our markets where
we possess the infrastructure, technology, licenses
and track record of reliable and efficient delivery, for
banks and retailers to outsource more of their cash
management activity to G4S. In addition, we expect
our network and operational efficiency programmes
to be accretive to profits through 2019 and 2020.
GROUP – PERFORMANCE AND OUTLOOK
PERFORMANCE
Underlying results
Group revenues increased 1.1% and Adjusted PBITA
was in line with the prior year at £474 million.
The Group’s adjusted earnings per share was
unchanged at 16.7 pence per share. Operating
cash flow in 2018 was 96% of Adjusted PBITA
(2017:107%). The Group’s net debt to Adjusted
EBITDA at the year end was 2.7x (2017: 2.4x).
Statutory results
Revenue declined by 4.0% and earnings per share
was down by 65.4%. In January 2019, we announced
that we had reached settlement of a class action
suit relating to claims for meal and rest breaks
under California law, covering approximately 13,500
employees over the period 2001 and 2010. A
provision and specific item for £100 million addressing
the California claim has been reflected in the 2018
results. The cash outflow in respect of the settlement
is expected to be made in the second half of 2019.
Integrated Report and Accounts 2018 G4S plc 5
G4S OVERVIEW
INTEGRATED SOLUTIONS
FOR A CONNECTED WORLD
Who we are
G4S is the world’s leading global, integrated
security company. We offer a broad range
of security services delivered on a single,
multi-service or integrated basis across
six continents. We have been investing
in technology, software and systems.
The Group’s technology-related security
revenues were £2.8 billion* in 2018
(2017: £2.45 billion).
What we do
G4S plays a valuable and important role
in society. As a major global employer
we 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 (CSR). See page 36 for
more information on our CSR approach
and impact on society.
Our values
Our people and values underpin everything
we do.
Countries of operation using
G4S technology
Other countries of operation
90+
COUNTRIES
OUR GLOBAL FOOTPRINT
With 546,000 people, G4S is one of the world’s
largest private sector employers.
Our employees touch the lives of others every
day, providing crucial services to keep them safe
and secure. Our success is underpinned by the
way we lead and engage with our people.
* Revenues from manned security contracts enhanced through G4S software, hardware and security systems.
6 G4S plc Integrated Report and Accounts 2018
OUR BUSINESS
SECURE SOLUTIONS
85%*
CASH SOLUTIONS
15%*
78% SECURITY SOLUTIONS incorporating risk consulting,
on-site, mobile and remote security, technology-enabled
monitoring and response, software and systems and integrated
security solutions combining some or all of these services
7% CARE & JUSTICE SERVICES including custody detention,
education, rehabilitation and transportation.
G4S operates an integrated security business in more than
90 countries across the globe. The global security market has
structural growth qualities (see page 10 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.
We have the market positions, products and services to
capitalise on these trends.
The Group's Care & Justice services businesses are concentrated
in the UK and Australia where we have built significant
knowledge and expertise.
Secure Solutions strategy:
To create more secure and efficient security solutions
for customers:
We aim to differentiate our services by emphasising
our global expertise as an integrated security provider
across more than 90 countries, in six continents
around the world
Through continuous improvement we aim to operate
efficient and effective businesses with a positive
culture and embedded values underpinned by a
strong safety culture
* % of Group underlying revenues.
CASH TECHNOLOGY services comprising of:
■ Cash technology focused on the efficient management of cash
including Retail Cash Solutions, the leading software and service
solution for large retail formats in North America.
■ Deposita, Cash360 and G4S Pay solutions for medium and small
retail formats.
■ Bank process automation.
CONVENTIONAL CASH services - cash in transit (CIT), cash
processing and automated teller machine (ATM) services.
G4S Cash Solutions is one of a small number of large, global
cash businesses and is the market leader or number two
in most of its 44 markets. Each market is highly regulated,
often by central banks, and the business requires significant
infrastructure and expertise. G4S competes with local, national
and a small number of international competitors. Cash volumes
in most developed markets are flat or gradually declining at an
aggregate market level and are growing in emerging markets.
At the end of 2018, G4S announced that the board was
looking at separation options for the cash businesses from the
rest of the Group (see page 2).
Cash Solutions strategy:
Safe and secure operations for our people and valuables
in our cash businesses in 44 countries
Continuously improve the efficiency of our conventional
cash business network of vehicles, vaults and cash
centres serving banks and retailers to encourage them
to outsource more of their cash management activities
and grow our market share
Drive growth through the expansion of our Cash
Technology activities which offer tremendous value to
all retail and banking partners through lower costs and
increased ease in handling cash. These services have low
penetration and strong growth potential in both existing
markets such as the United States and new markets
Integrated Report and Accounts 2018 G4S plc 7
BUSINESS OVERVIEW:
SECURE SOLUTIONS
8 G4S plc Integrated Report and Accounts 2018
A CONNECTED
WORLD MEANS
COLLECTIVE
CHALLENGES
Our strategy anticipates and addresses global
security challenges and trends and ensures
G4S is well positioned in an industry expected
to grow 4 - 6% per annum from 2017 to 2027.*
With our global footprint in more than 90
countries, an attractive range of products and
services, and security expertise, we are well
positioned to meet this increased demand.
We continue to develop innovative industry-
leading solutions that integrate consulting,
technology, people and data analytics to
deliver solutions that are relevant, valuable
and effective for our customers.
We are investing in an efficient and effective
organisation with strong values and a positive
embedded safety culture.
* Freedonia Security Services Report, October 2018.
Integrated Report and Accounts 2018 G4S plc 9
Our values in action – Department of Work & Pensions, UK
In April 2018, G4S commenced the integrated security
contract for over 790 properties in the UK, including job
centres, for the Department of Work & Pensions (DWP).
The contract will run for an initial period of five years, with
the potential for a two year extension thereafter.
The DWP’s objective was to procure a security service
supportive of their transformation programme which aims
to reduce costs, whilst maintaining safety of the users of
its properties. We will be modernising the way security
is provided using an Effects-Based Methodology "Security
Threat Risk Assessment" which has been aligned with the
Centre for the Protection of National Infrastructure 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.
The contract, one of the largest integrated security contracts
to be awarded in the UK, will combine G4S’s security
technology with professionally trained G4S security officers
across the DWP estate, providing an innovative and cost
effective solution to meet the customer’s needs. This is
consistent with our values of Security, Service Excellence,
Innovation and Teamwork.
SDGs:
BUSINESS OVERVIEW:
SECURE SOLUTIONS
G4S – A WORLD LEADER IN
INTEGRATED SECURITY
MARKET AND SOCIETAL TRENDS
HOW WE ARE POSITIONED
Demand for security is increasing across the globe
International and domestic crime remains a significant threat
to society, requiring not only protective security, but also
heightened intelligence and analysis of risk and response.
This heightened awareness provides support for growth in
demand for security services. Barriers to entry in basic manned
security are low, which can result in intense competition in some
markets. The barriers to entry are much higher for integrated
security where G4S has significant, and growing capability which
stems from our scale and resources.
4-6%
Growth per annum
for security services
between 2017-2027*
Global footprint
90+ COUNTRIES
G4S is a market leader and 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.
Customers’ buying processes
are increasingly complex
Globalisation and the increasing use of technology
creates a complex set of security risks and threats which
means that the procurement of security services is a
critical activity in an increasing number of customers’
organisations. The global market for security systems
integration is projected to be $80bn by 2021.**
$80bn
market value for security
systems integration**
Deep understanding
100 YEARS’ HERITAGE
We support our knowledge of global security trends
with a deep understanding of our customers’ unique
needs. We have an enviable heritage with more than
100 years in the security industry.
Resource scarcity and population growth
The world’s population is growing, becoming more
urbanised and increasingly prosperous, placing significant
strains on raw materials, energy resources and food and
water supplies.
Technology-enabled security
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,
these trends are reshaping the security industry. Advances
in technology, such as drones, cloud and artificial
intelligence, are influencing the development of solutions
by G4S to deliver services.
Industry consolidation
In certain security markets we have seen some market
consolidation and trends whereby large competitors
aim to provide multi-service bundled and integrated
solutions, sometimes to differentiate away from the more
commoditised manned security market. Technology-
enabled solutions is a less commoditised market than
traditional manned security, with a lower number of
capable suppliers as it offers more bespoke solutions
to customers.
* Freedonia Security Services Report, October 2018.
** IHS Markit Report, October 2017.
10 G4S plc Integrated Report and Accounts 2018
4%
Global GDP growth per
annum 2018 to 2022
(Source: IMF October
2018)
t
s
o
C
Labour
Technology
Time
Security professionals and expertise
514,000 COLLEAGUES
We recruit, screen and deploy almost 200,000 new
colleagues each year. We have around 514,000
colleagues in the Secure Solutions business.
Technology and innovation
£2.8BN TECHNOLOGY-ENABLED
SECURITY REVENUE
We continue to invest in technology to meet the
growing demand for integrated solutions and to
drive the development of innovative new solutions
for customers.
6.8%
CAGR in integrated
security systems market
predicted between 2017
and 2022*
Customer service
49,000 CUSTOMER SURVEYS
Service excellence is one of our core values, an area
in which we continue to invest significantly and during
2018, our businesses received feedback from nearly
49,000 (2017: 24,000) customer surveys using Net
Promoter Score with positive results.
SECURE SOLUTIONS – OUR BUSINESS MODEL –
ANTICIPATING OUR CUSTOMERS' NEEDS
We are investing in the resources, skills and capabilities needed to
market, design, build, operate and maintain technology-enabled integrated
security solutions.
This approach provides our customers with industry-leading services and
solutions that enable them to operate efficiently in an increasingly connected
and complex world. In turn it enables G4S to earn a higher margin on these
valuable services.
Risk
Assessment
Operate/
Optimise
S T E D
U
T R
G4S
Build &
Service
CUSTOMER
R S HIP
PA R T N E
Conceptual
Design
Options
Integrated
Solution
Design
G4S
PEOPLE
G4S
TECHNOLOGY
Risk Consultants
Technologists/Engineers
+
+
Security Officers
Security Technology and Software
+
Global Security Operations Centres
+
Security and Data Analysts
THE VALUE
WE CREATE
FOR OUR
STAKEHOLDERS
SOCIETY
G4S delivers a broad range of
social and economic benefits to the
communities in which we work,
many of which are helping to realise
the United Nations Sustainable
Development Goals (see page 37).
CUSTOMERS
90+
Serving customers in more than 90
countries across six continents.
SHAREHOLDERS
56%
At 85% of Group underlying revenues
and 77% of Adjusted PBITA, Secure
Solutions has made a large contribution
to the Group's 56% growth in underlying
EPS since 2013.
EMPLOYEES
514,000
Colleagues employed by G4S Secure
Solutions businesses around the world.
SUPPLIERS
26,500
G4S Secure Solutions businesses source
services and products from 26,500
suppliers around the world.
Integrated Report and Accounts 2018 G4S plc 11
BUSINESS OVERVIEW:
CASH SOLUTIONS
12 G4S plc Integrated Report and Accounts 2018
PROVIDING
CASH
SOLUTIONS
In order to achieve economies of scale,
we have built number one or number two
positions in 41 of the 44 countries in which we
operate. In all of these markets, a very large
share of the overall cash handling and cash
management market remains within banks,
retailers and other businesses whose primary
function is not cash handling. We believe that
these banks and businesses will continue to
outsource cash management services to G4S.
Our improving unit economics, the strength of
our market positions and our innovative cash
and payment technology give us confidence
that G4S Cash Solutions is well positioned to
play a leading role in the next wave of cash
management outsourcing. We have a market
leading position in the large retailer segment
in the United States and we are one of the
market leaders globally in the small and mid-
size business market segments.
Our technology is delivering significant savings
for our customers and provides a valuable
higher margin annuity revenue stream for G4S.
Market penetration is low at this stage and we
therefore see substantial potential for further
growth. Indeed we believe that our cash
technology services have the clear potential to
produce profits greater than the profits from
the Group’s CIT and cash processing business
in the medium term.
Integrated Report and Accounts 2018 G4S plc 13
Our values in action – Geldmaat, Netherlands
Geldmaat (previously known as GSN) is a cash ‘utility’
organisation founded by ABN AMRO Bank, ING Bank and
Rabobank in the Netherlands in 2011.
Since 2011, G4S has been in a strategic partnership with
Geldmaat and the contract was renewed in 2018 for a
further two years. Under the partnership, G4S ensures
cash availability and affordability, as well as providing cash
transport, ATM servicing and maintenance of 70% of
GSN’s bank branches and ATMs across the Dutch market.
The main benefits of using an integrated cash solution
provided by G4S are service continuity, efficiency gains,
and reduced operational costs, and improved quality
of service.
SDGs:
BUSINESS OVERVIEW:
CASH SOLUTIONS
G4S CONNECTING
CASH SOLUTIONS
In January 2018, the Group established the Global Cash
Solutions division and in December 2018, the board
announced it was reviewing options for the separation of
the Group’s Cash Solutions businesses from the Group.
The board believes that a separation of Cash Solutions has
the clear potential to enhance the focus and success of both
businesses and unlock substantial shareholder value.
MARKET AND SOCIETAL TRENDS
HOW WE ARE POSITIONED
Global cash-usage trends
Cash usage is typically driven by country-specific
legislation, domestic non-cash payment initiatives and
sovereign currencies. Across all markets, the availability of
cash is important for the financial inclusion of all groups
in society including those who do not have ready access
to non-cash means of payment, including un-banked
individuals and groups.
2bn
People globally don’t
have bank accounts
Global footprint
44 COUNTRIES OF OPERATION
We have a unique portfolio of market leading cash
management businesses serving customers.
Network consolidation
The importance of maintaining strong unit cost economics
has encouraged network rationalisation and we believe
that 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,
whereas our priority has been to consolidate market share
organically by stimulating the next wave of outsourcing
and by deploying more efficient technology to maximise
our market share.
Retail and non-bank opportunities
In many markets, retailers and businesses 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 offer a compelling commercial
proposition to retailers by enabling a step-change in the
efficiency of their cash operations.
$19bn
Global value of Cash-
in-Transit and related
services in 2017*
Market leading positions
1 OR 2 IN 41 COUNTRIES
We have focused our business into key markets with
stronger growth potential and are number one or two
in 41 out of the 44 countries we have cash businesses.
75-80%
Reduction in labour costs
Market leading Retail Cash Solutions technology
23,300 LOCATIONS
Our cash software is deployed at 23,300 (2017:
19,800) locations across North America, Europe, Asia
Pacific and Africa including at some of the world’s
largest retailers. Global market penetration of this type
of cash management software is at an early stage and
we believe that our technology has significant growth
potential.
Technology and innovation
We have been developing integrated technology to
improve efficiency combining hardware, proprietary
cash management software, real-time banking
integration, same day credit and customer service and
support. See page 28.
Bank branch automation and
outsourced cash processing
Banks and financial institutions are also under pressure
to be more efficient, lower the cost of cash handling
and reduce their branch network whilst maintaining
customer access and service. We have developed market
leading integrated technology to address these areas
which combines hardware, proprietary cash management
software, real-time banking integration, same day credit
and customer service and support.
80%
Up to 80% idle cash
freed up when retailers
use Retail Cash Solutions
technology
* Freedonia Security Services Report, October 2018.
14 G4S plc Integrated Report and Accounts 2018
CASH SOLUTIONS – OUR BUSINESS MODEL –
TRANSFORMING THE WAY CASH IS MANAGED
■ We provide cash solutions and services that materially improve the control and
efficiency of our customers’ cash handling.
■ We continue to invest in innovative products and services such as Retail Cash
Solutions, CASH360, Deposita and bank branch automation.
■ We believe that we have a significant opportunity to extend and grow our new
technology and services across our global markets.
Productivity
enhancements
and service
Product and
service investment
and innovation
Investment
in industry-
shaping
proprietary
software
and services
S T E D
U
T R
G4S
CUSTOMERS
R S HIP
PA R T N E
Strong sales pipeline
in technology-
enabled cash
solutions
Expanding
into new
markets
#1 OR 2 MARKET LEADING
POSITIONS IN 41 OF 44 COUNTRIES
G4S Network
G4S People
G4S Technology
THE VALUE
WE CREATE
FOR OUR
STAKEHOLDERS
We believe that the profits generated
from new cash technology could exceed
those from traditional cash services in the
medium term.
SOCIETY
>$5tn
More than $5 trillion cash is in circulation,
according to the Bank for International
Settlements. Cash is used around the
world and we are helping to ensure
cash payments are cost effective. The
availability and sustainable usage of cash is
important to provide choice for customers
and for the financial inclusion of vulnerable
groups, such as the elderly and people
with disabilities or those living in rural
areas.
G4S’ Retail Cash Solutions technology
results in 40-60% fewer journeys by cash
transportation vehicles saving on fuel costs
and helping reduce traffic congestion and
carbon emissions.
CUSTOMERS
£25bn
We estimate that the addressable market
for smart safes and recycling solutions is
around £25bn per annum.
EMPLOYEES
32,000
Over 32,000 colleagues are employed by
our Cash Solutions businesses.
SHAREHOLDERS
2-3x
Cash and payment technology has the
potential to grow to be two to three
times larger in the medium term.
Integrated Report and Accounts 2018 G4S plc 15
STAKEHOLDER ENGAGEMENT
ENGAGING TO
DELIVER VALUE
Our key stakeholders are those who most materially impact our strategy, or are directly
impacted by it. Engagement with stakeholders is essential for G4S, given our role in
society, the global nature of our business and our substantial workforce.
KEY STAKEHOLDERS
HOW WE ENGAGE
SOCIETY
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 pages 36 and 85)
■ Community engagement programmes
■ Substantial tax and economic contributions
■ Government relationships and parliamentary engagement
■ NGO and UN agency engagement
■ Industry forums
CUSTOMERS
Through understanding our
customers’ needs we offer value
added, innovative, cost effective
security solutions and build
enduring relationships.
■ Consultative approach to selling and bidding for contracts
■ Proactive relationship management
■ Bidding processes
■ Customer service
■ Net promoter score
SHAREHOLDERS
The company actively seeks to
engage with shareholders on a
regular basis.
■ 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 and ad-hoc meetings
■ CSR updates with the Chair of the CSR committee
■ Annual General Meeting
EMPLOYEES
With 546,000 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.
■ HR core standards set the framework for employee engagement
■ Onboarding, induction and refresher training
■ Local and global meetings
■ Biennial global all-employee and senior management engagement surveys
■ Trade unions, works councils and employee representative forums
■ Newsletters, videos, employee self-service portals, and intranets
■ Specific campaigns on health & safety, our values and Speak Out whistleblowing
arrangements
■ Values recognition schemes
SUPPLIERS
We have a responsible
purchasing policy consistent with
our business ethics.
■ We purchase goods and services from more than 40,000 suppliers
■ Contract and relationship management
■ Supplier Code of Conduct
■ Purchase to Pay process
16 G4S plc Integrated Report and Accounts 2018
16 G4S plc Integrated Report and Accounts 2018
Understanding stakeholders’ interests helps us define our strategic priorities
and guide our initiatives and remuneration policies. We run a formal exercise
every two years to identify our material CSR priorities (see pages 36 and 85).
KEY AREAS OF
INTEREST
■ People and Values
■ Ethical and sustainable
business practice including:
■ Health & safety
■ Human rights
■ Anti-bribery
& corruption
■ Employee standards
and behaviour
■ Quality and price
of service delivery
■ Expertise innovation
■ Health & safety
■ Business ethics
■ Financial performance
■ Strategic direction and
coherence
■ Governance and
risk management
■ Company performance
and plans
■ Compensation and
benefits
■ Training and career
development
■ Health & safety
■ Human rights
■ Values, CSR
and recognition
OUR RESPONSE AND KPIS
LINKS TO STRATEGY
Strategy
People and Values
Customers and service excellence
Technology and innovation
Operational excellence and
productivity
Financial and commercial discipline
Remuneration Policy
Annual bonus scheme – financial
performance measures and personal/
non-financial measures (see page 109)
Long term incentive plan – based on
EPS, operating cash flow and total
shareholder returns (see page 109)
CSR Policies
Please see page 39
■ Slavery and Human Trafficking Statement
■ UN Global Compact: Communication on Progress
■ Global employee engagement survey (see page 23)
■ Values awareness and training programmes
■ Engagement with Parliamentary committees
■ Industry forums including: International Security Ligue, British
Security Industry Association, Confederation of British Industry
■ MP engagement and site visits, especially to custodial detention
facilities
■ 1.1% underlying revenue growth in 2018
■ Almost 49,000 customers surveyed using net promoter score in
2018, with positive results in all markets (2017: 24,000)
■ Feedback from unsuccessful contract bids
■ CEO and CFO met with shareholders representing
over 67% of the share register and 163 institutions
(see page 86 for more information)
■ 1.1% underlying revenue growth in 2018
■ £474 million underlying Adjusted PBITA in 2018
■ £453 million underlying operating cash flow in 2018
■ Dividend of 9.70p per share in 2018
■ Implemented action plans based on responses from
428,000 employees who competed the
global engagement survey in 2017
■ 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 25.3% in 2017 to 24.7% in 2018
■ Fatalities due to road traffic and workplace incidents down
around 67% since 2013
■ 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
Integrated Report and Accounts 2018 G4S plc 17
OUR STRATEGY
Our strategy addresses the
long-term positive demand for
security and related services
and our enduring strategic aim
is to demonstrate the values
and performance that makes
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 detail on
page 36.
Strategic priorities
Underpinned by corporate culture
based on Group Values and
commitment to corporate social
responsibility.
Key risks
See Principal risks
pages 64 to 71.
KPI
See page 34 for more detail and the
progress in the Group’s financial and
non-financial KPIs and how they link
to the Group’s strategic priorities.
STRATEGIC AND
PERFORMANCE
OVERVIEW
PEOPLE AND VALUES
CUSTOMER FOCUS AND SERVICE
EXCELLENCE
We recruit, develop and deploy the best
people in the industry
We build long-term customer
relationships based upon trust and
understanding of customers’ businesses
and objectives
■ Embed the right culture; promote our
G4S values and sustain strong employee
identification with those values
■ Positive demand for security services
driving revenue growth of 4-6% p.a. in
the medium term
■ Embed health and safety behaviours
■ Talent acquisition, development and
succession planning
■ Engage to ensure best performance
■ Incentivise and recognise success
■ 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 adverse impact on
customer service or those in our care
■ Negative impacts on our employees’
health and safety
■ Investment in risk consulting expertise
to lead initial customer engagement
and develop excellent service and
solution design
■ Investment in technical and project
management capability
■ Investment in sales, marketing, account
management teams, SalesForce CRM,
embed G4S way of selling and contract
retention programmes
■ Failure to understand customers’
changing needs or falling short of
customer expectations
67%
Reduction in road traffic fatalities
since 2013
£1.4bn
Annual contract value of new business won
in 2018 (2017: £1.4bn)
COMMITMENT TO CORPORATE SOCIAL
18 G4S plc Integrated Report and Accounts 2018
TECHNOLOGY AND
INNOVATION
OPERATIONAL EXCELLENCE
AND COST LEADERSHIP
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 continue to invest in the resources,
skills and capabilities to develop and
deliver technology-enabled security and
cash management solutions:
■ Secure Solutions – expand and upgrade
technology-integration capability
■ Cash Solutions – leading bank and retail
cash technology
We have safe, secure, reliable and
efficient operations
We manage risk effectively and
ensure we provide profitable, cash
generative services
■ Deliver £70-£80m annual operational
cost savings programme by 2020
■ Operational excellence and efficiency:
implement lean, automated processes
■ Continue to improve health & safety
awareness and performance
■ Improved risk management, including
contract risk management
■ Established and embedded rigorous
capital investment appraisal processes
■ Portfolio programme
■ Driving improved cash flow
■ Capital allocation
■ Failure to market or deliver our services
and technology effectively or failure to
deliver adequate value for money
■ Failure to comply with our standards
results in harm, loss of expertise or
investment fails to deliver benefit
■ Inefficient capital management and
failure to comply with Group risk
management standards
45%
Of security revenues were
technology enabled in 2018 (2017: 42%)
30bp
Improvement in Secure Solutions Adjusted
PBITA margin in 2018 compared with
2017
£20m
Reduction in annual finance costs through
refinancing achieved
RESPONSIBILITY UNDERPINS THE STRATEGY
Integrated Report and Accounts 2018 G4S plc 19
OUR STRATEGY CONTINUED
PEOPLE
AND VALUES
With 546,000 colleagues, 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.
Organise – creating the right organisation
and culture
Our values are core to shaping the culture of our
organisation, helping to guide, unite, differentiate and
sustain us. They are integral to everything we do.
In 2017 we launched scenario-based values training
materials for our front-line employees including
flashcards, presentations and online training modules.
Together with online management training launched
in 2018, these materials are now being widely used
and form part of our employee’s experience from
recruitment and induction, through to training and
appraisal. We are continuing to update our induction
and training materials and to find innovative ways
to share and embed them so that, regardless of
where they work and what they do, our employees
understand the behaviours that are expected of them
in line with our values.
Acquire – attracting and recruiting the best people
With a tightening labour market in some countries
we face cyclical challenges attracting and retaining
employees who may have other employment options.
Whilst the interesting and varied nature of the work
we offer enables us to retain our core employee
base (73% of our employees have more than a year’s
service), we have also streamlined our recruitment
processes to speed up the time taken to process new
employee applications. A strong brand and reputation
as a fair employer also differentiate us in a competitive
market place. Over a number of years we have
focused on improving retention which has meant our
labour turnover continues to reduce, even in tight
labour markets such as in parts of Europe, where our
turnover rates are now below 20%. Overall we saw a
further reduction in labour turnover for the Group at
24.7%, down from 25.3% in 2017.
Protect – putting safety first – CSR priority area
The safety of our employees and those in our care
is our first priority. Our goal is zero harm. This focus
enables us to secure our customers’ worlds and
the communities we serve. It is our responsibility
to ensure that our colleagues return home from
work safely every day and we believe that setting
the highest standards for health and safety across
our industry builds loyalty and commitment to G4S
among our employees.
PERFORMANCE THROUGH PEOPLE
Globally we align our HR strategy to six key work streams which focus on the activities integral to driving
sustainable business performance:
Protect
Do we put the
safety of our
employees and
those in our care
first?
Develop
Do our
employees have
the capability
to deliver?
Acquire
Do we have
the right people
in the right places?
Engage
Are our employees
committed to doing a
good job?
Organise
Are we organised
as efficiently and
effectively as
possible?
PERFORMANCE
THROUGH
PEOPLE
Reward
Do our incentives
support sustainable
performance?
20 G4S plc Integrated Report and Accounts 2018
OUR VALUES IN ACTION -
INVISIBLE WALLS WALES
G4S CUSTODIAL & DETENTION: UK
An innovative programme developed by G4S and Barnardo’s
Cymru aims to reduce the number of prisoners reoffending, cut
the risk of intergenerational offending and improve the quality of
life and community inclusion for families.
Recognising that connections to family are an important element
in the successful rehabilitation of offenders, the programme,
initially developed and implemented at HM Prison Parc in South
Wales, works with the families of prisoners who are experiencing
difficulties. Each prisoner taking part in the programme is
allocated a mentor, who also works together with the prisoner’s
family, children, partners and parents, to help sustain and rebuild
connections. The family will receive tailored support for up to
a year prior to the prisoner’s release, and then for another six
months following release.
During its first five years, Invisible Walls Wales has helped to:
1. Reduce unemployment rates for prisoners from 80% to 25%
and for their family members reduced unemployment rates
from 69% to 46%.
2. Increase prisoners’ engagement in education, training, or
volunteering from 0% to 10% and for their family members,
from 2% to 14%.
3. Decrease the number of prisoners’ children experiencing
attainment or attendance issues at school from 43% to 12%.
4. Halve the number of prisoners’ children considered by social
services to be “at risk”, from 16% to 7%.
5. Reduce the number of prisoners that were misusing alcohol
and/or drugs from 89% to 20%, and for their family members
reduce the number from 15% to 5%.
The success of the programme has led to the model being
replicated in other prisons across the UK and overseas.
Further information is available at g4s.com/invisiblewalls
SDGs:
Integrated Report and Accounts 2018 G4S plc 21
OUR STRATEGY CONTINUED
Having put the necessary processes in place over
recent years, we have now seen a very significant
reduction in the number of serious incidents.
Compliance is monitored through audits and reviews
of risk and performance at regional, group and board
level, via the CSR committee, and further details of
these assurance processes can be found on page 67.
During 2018, 24 of our colleagues sadly lost their lives
in work related accidents, including five colleagues
who died in a terror attack in Afghanistan. This
loss is not acceptable and our thoughts are with
their families. This is nevertheless a reduction from
25 fatalities in 2017 and solidifies the step change
we saw that year when the number of fatalities
halved compared with our longer-term experience.
We continue to make progress in road safety and
road traffic fatalities have decreased by 67% since
2013 when we first launched the improvement
programme.
Mitigating the levels of violence associated with
attacks on our Cash Solutions business remains
a significant priority. Initiatives taken by G4S and
other operators in South Africa, working with law
enforcement agencies, began to have a positive
impact in the second half of 2018 and this remains a
priority for 2019.
We continue to reduce our injury rate. During 2018
the Group Lost Time Injury incidence rate was 6.6
per 1,000 employees, compared with a rate of 6.7
in 2017. The change is due to improvements in the
Care & Justice Services business, partially offset by the
number of injuries sustained during attacks in Global
Cash Solutions.
There were nine non-natural deaths in G4S custody
in 2018. All deaths in custody are investigated by the
relevant authorities to determine the cause of death.
Five of these deaths in 2018 were due to self harm,
three were related to substance abuse and one was
a homicide. The relevant coroner pronounced that
a death that occurred in 2017 and was previously
disclosed as non-natural, was actually due to
natural causes.
Develop – building a capable workforce
As the skills we need in our global business constantly
change in anticipation of market dynamics and new
technology, ensuring we have capable and confident
people is vital. In 2018, we extended the scope
of our talent review process, enabling us to reach
further into the organisation and identify employees
with the potential to become future leaders earlier in
their careers.
Our leadership programme continues to offer global
development for high potential employees and this
year the number of employees participating in the
programme doubled. In 2019, we plan to undertake a
review of the programme and benchmark it externally
to ensure it remains cutting edge and focused on our
business strategy.
Whilst developing high performers will always be a
business imperative, we want to offer all employees
the opportunity to increase their skills and knowledge
at work. We encourage employees to take
responsibility for their own learning on an on-going
basis using the extensive range of materials available,
and using technology platforms to share training and
learning paths more effectively. For example, during a
16 week on-line development programme concluded
in 2018, over 41,000 employees completed learning
modules with very positive feedback. For our front-
line operational staff, continued development is no
less important, and our use of on-line training is being
extended where possible as it enables businesses to
reach wider audiences efficiently and give employees
access to learning at times to suit them.
Each year, we also introduce specific learning
materials to support business needs or to meet new
customer and legislative requirements. This year
was no exception with further health and safety
training produced in pursuit of our goal of zero harm
and an array of materials developed to support
the introduction of the General Data Protection
Regulations (GDPR), ensuring everyone understands
their role and responsibilities in safeguarding data.
Employees by region 2018
Employee gender diversity in 2018 %
22 G4S plc Integrated Report and Accounts 2018
Secure Solutions Africa 21% Americas 21% Asia 32% Europe 20%Cash Solutions Cash Solutions 6%020406080100TotalemployeesSeniormanagementBoard858317153070 Female Male OUR VALUES IN ACTION -
SECURING HEALTHCARE
IN FRAGILE STATES
G4S RISK MANAGEMENT: AFGHANISTAN,
IRAQ, SIERRA LEONE, SOUTH SUDAN
Delivering medical care in fragile and conflict affected states is
complex and fraught with challenges. G4S provides integrated
security solutions and wider support functions to healthcare
services in challenging environments such as Afghanistan, Iraq,
Sierra Leone and South Sudan.
In 2018, G4S carried out security risk assessments of the
French Medical Institution for Mothers and Children, a non
profit hospital in Kabul providing medical care and working
towards improvements in health services in Afghanistan. Despite
its aims, the hospital attracts a high threat profile due to its
connections to the Afghan government, western NGOs and
focus on the empowerment of women. G4S made a number
of recommendations to enhance security at the hospital,
without greatly hindering access for staff, patients and visitors,
and a programme of increased resilience is currently being
implemented.
During the Ebola Crisis, G4S supported the UK Department for
International Development by managing and maintaining their
vehicle fleet in Sierra Leone – an essential service that ensured
that their aid and healthcare workers could reach affected
communities. To help us ensure the ongoing sustainability of the
programme, we implemented accredited training and mentoring
for our locally employed staff.
Alongside our security operations at Baghdad International
airport, G4S has a medical clinic that provides a 24/7 medical
service to G4S staff and international clients. The clinic offers
emergency and primary care services, complemented by
diagnostic care. Paramedics are available to provide many types
of treatment, from simple procedures to dealing with more
serious conditions or to stabilise a critically ill or injured person
before an evacuation.
SDGs:
Engage – creating an inclusive and
engaging workplace
With scope to access the perspectives and
experience of employees in over 90 countries we
rarely struggle for ideas. Diversity of thinking helps us
innovate and stay ahead in the marketplace, creating
long-term value for all our stakeholders. Ensuring
everyone can contribute to their full potential is
therefore a key area of focus. In line with our diversity
and inclusion strategy and commitments in the UK
gender pay gap report (visit g4s.com/genderpaygap),
we have been conducting employee research into
barriers, both perceived and real, that impact our
ability to develop a more diverse workforce and a
more inclusive workplace.
Our plans for 2019 will be shaped by the research
findings. In the meantime, we have developed
recruitment case studies to showcase the diverse
career opportunities and to challenge the
stereotypical views of the industry. We have also
aligned our recruitment suppliers with our aims by
ensuring they are reaching out to more diverse talent
pools and providing shortlists of diverse candidates.
Giving all employees the opportunity to comment on
what they think and feel about working for G4S is a
cornerstone of our engagement strategy. We seek
feedback from representative channels such as unions
and works councils at a local, regional and global level,
giving updates on business performance and in return
receiving information on the issues that are affecting
our employees on a day to day basis.
Integrated Report and Accounts 2018 G4S plc 23
Integrated Report and Accounts 2018 G4S plc 23
2018 ACHIEVEMENTS
428,000
Colleagues participated
in our survey in 2017
with over 84% favourable
responses. In 2018, we
identified any issues and
developed action plans
OUR STRATEGY CONTINUED
We also invest significant time and energy in
conducting a global employee survey. In the last
survey, conducted in 2017, 428,000 employees
responded. Their feedback was resoundingly positive
with over 84% of participants rating the company
favourably. Throughout 2018, the focus has been on
understanding the issues where the responses were
less favourable and implementing actions arising from
survey feedback. In 2019, we will issue our next global
survey, refreshing the approach and the questions we
ask to align with the relevant issues in the business.
We will also take the opportunity at our leadership
conference and through our senior management
survey to seek feedback about the issues that matter
most to them such as strategy, culture and incentives.
Reward – incentivising and recognising success
Recognition and praise is vital in an industry where
employees go to extraordinary lengths to deliver,
sometimes in challenging and hostile environments.
Businesses have developed separate approaches to
recognition awards and they all link to our values and
the behaviours which underpin them. Across our
senior management team, we offer bonus plans
which incentivise high performance while upholding
our values. For many operational employees we
negotiate terms and conditions with trade unions
operating across the industry, which helps ensure our
pay is competitive with market rates. We seek out
a wide range of benefits which offer good value for
our employees, and where possible, support for their
families too.
Anti-Bribery & Corruption – CSR priority area
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 suspected of not
upholding those standards, we undertake swift,
thorough and impartial investigations and take
appropriate action. Where unacceptable behaviour
has taken place we learn from such instances and
enhance our safeguards to prevent similar issues
arising in the future.
We have invested time, effort and resource to
promote the use of Speak Out, our anonymous
whistleblowing system available to employees globally.
During 2018, 519 cases were raised by colleagues
via Speak Out. Our efforts during 2017 and 2018
to create a culture in which people feel confident
to speak out and raise ethical concerns using our
whistleblowing channels has resulted in a 73%
increase in the number of reports made via Speak
Out during 2018.
The majority of matters raised via Speak Out are
HR grievances which are managed by the relevant
HR department where they remain best placed
to investigate and resolve these matters promptly.
Where appropriate, concerns regarding operational
procedures are investigated by local management to
ensure that relevant standards are being followed.
Internal Audit and other assurance functions may also
assess operational compliance.
Investigations relating to other matters, such as alleged
bribery, ethical or financial issues are conducted
by our internal network of investigators or by
independent experts.
Matters of a potentially serious nature are investigated
at a senior and independent level, with 105
investigations completed during 2018.
The Group Ethics Steering Committee has continued
to oversee implementation of our whistleblowing
policy and conducts regular reviews of serious cases,
investigation progress and resulting actions.
Total number of whistleblowing cases
IF YOU SEE OR SUSPECT
WRONGDOING…
…do the right thing and speak out!
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
* Speak Out launched
24 G4S plc Integrated Report and Accounts 2018
24 G4S plc Integrated Report and Accounts 2018
010020030040050060018171615*1465158402300519 2018 Actions
Engage
Launch management values training materials, embed front-line materials and complete update
of HR policies and processes to reflect G4S values
Implement action plans from global employee engagement survey and address actions from
management survey
Review opportunities to improve gender balance
Develop
Continue the delivery of regional leadership programmes and promote development paths
and learning opportunities for employees at different levels
Protect - CSR Priority Area
Continue to implement the revised front-line health and safety induction training
Introduce updated controls for security officers working at entrance gates
Share and adopt best practice across the Group in managing critical health and safety risk areas
Develop action plans for businesses which have had multiple fatalities, as well as monitoring
their implementation
Anti-Bribery & Corruption - CSR priority area
Continue to increase awareness of Speak Out and create an environment in which colleagues
are confident they may raise concerns confidentially and without fear of retribution
Status
complete
on-going
Status
Status
Status
Status
Implement actions arising from the employee research conducted on diversity and inclusion
2019 ACTIONS AND PLANS
Engage
■ Conduct sixth global employee engagement survey using the previous response rates and favourable scores as a benchmark
■
Develop
■ Review and refresh the regional leadership programme and extend the offering of development materials to a wider internal audience
Protect - CSR priority area
■
■ Conduct a thematic review of High Potential Incidents in high priority businesses
Improve controls related to attacks on employees
■
■
Introduce additional training on road safety
Anti-Bribery & Corruption - CSR priority area
■ Continue to increase awareness of Speak Out and increase the confidence of employees to raise concerns through available channels
Improve health, safety and security risk assessments processes
Integrated Report and Accounts 2018 G4S plc 25
OUR STRATEGY CONTINUED
CUSTOMERS
AND SERVICE EXCELLENCE
We build long-term customer
relationships based upon trust and
understanding of our customers’
businesses and objectives. Through
those customer relationships and
connections we look to deliver
sustainable long-term growth in
revenues, earnings and cash flow.
Positive demand for security services
We believe that the long-term demand trends for
our services remain 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 have more
than replenished our sales pipeline with an improved
quality of opportunities over the next two years.
Large diversified customer base and sales pipeline
One of the strengths of the Group is the diversified
nature of our contracts and sales pipeline by service,
geography and customer. We have a diverse
customer base spread across many countries and
customer segments. At the end of December 2018,
we had won new business with an annual contract
value of £1.4 billion (2017: £1.4 billion) and total
contract value of £2.4 billion (2017: £2.4 billion).
Our sales pipeline has grown despite an increased
emphasis on pipeline qualification, ensuring we focus
on the best opportunities and improve our contract
win rate. As the Group has invested in innovative
products and services, we also see an improvement
in the quality of the sales pipeline with more
technology-related, longer-term, higher-value-added
opportunities. We aim to maintain an appropriate
sales pipeline to fulfil our growth opportunities.
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 unified sales management
and CRM 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 - see the
RISK360 case study opposite.
We have also invested in capturing global customer
opportunities, which has delivered success by winning
new work or new customers.
26 G4S plc Integrated Report and Accounts 2018
In 2018, following great success in Europe and North
America we implemented a global sales coaching
programme training more than 100 managers across
57 business units.
In addition we launched new online learning plans
geared to reinforming our solution sales methodology
and have enrolled over 500 sales people into the
programme to date.
2018 ACHIEVEMENTS
£1.4bn
Annual contract value
of new business won
Detailed manuals and crib cards help sales people
with the following:
■ Understanding the different G4S sales processes
and when to apply them.
£2.4bn
Total contract value
of new business won
>100
Managers across 57
business units completed
a global sales coaching
programme
■ Applying elements of social media and other
enabling technologies in selling.
■ Using modern approaches to planning and
demand creation.
■ Demonstrating techniques for conducting
consultative sales conversations.
■ Describing how to position differentiation
and value to customers and how to address
competitive selling situations.
■ Techniques for gaining access to decision makers
and methods for controlling sales cycles and
mitigating buyer risk.
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 2018, using a variety of survey
tools, we doubled the number of surveys conducted,
compared to 2017, with almost 49,000 surveys
performed, including our top 20 customers in most
countries. All markets show positive NPS results
with significant year on year improvements in North
America, Asia and Europe.
ACTIONS FOR 2019
■ Improve contract win rate
■ Continue to implement the sales coaching
initiative
■ Improve contract retention
■ Improve net promoter scores
SAVING CUSTOMERS
MONEY, WHILST
DELIVERING MODERN
SECURITY
RISK360
SDGs:
Saving customers money, whilst delivering
modern security better than ever before.
G4S developed RISK360, bringing security
into the 21st century. It combines various
security resources to provide customers with
an integrated solution and by doing this we
become risk management partners to our
customers, addressing their enterprise wide
risk management.
Our risk experts use this tool to better
understand and map the customer’s risk
environment. Our solutions architects
lead multi-skilled teams to design bespoke,
integrated solutions, and manage the
implementation and operation of these
solutions.
RISK360 enables us to have centralised
command and control over multiple
operations in our Global Security Operations
Center (GSOC). From the GSOC we
can perform remote site supervision and
vehicle surveillance and, by integrating
standard operating procedures into the
system, manage incidents centrally. Through
automated workflows we escalate and
communicate professionally and can deploy
tactical intervention teams and emergency
services.
The system equips management with
real time dashboards and management
reports. Operational KPIs such as proof of
presence, security officer patrol monitoring
and occurrence reporting are automated,
resulting in more accurate reporting and
data collection. Our analyst uses the system
to enhance insight into threats facing the
customer’s business. It gives us hot-spot
trending and early warning which frees up
resources and helps to protect lives.
The customer uses RISK360 to have peace
of mind that their risk solution is working.
Using the system, the customer can measure
its effectiveness, and shape their solution to
fit an ever changing landscape. Addressing
enterprise wide risk through bespoke
integrated solutions, means we save our
customers money, whilst delivering modern
security, better than ever before.
Integrated Report and Accounts 2018 G4S plc 27
OUR STRATEGY CONTINUED
TECHNOLOGY
AND INNOVATION
G4S is a leader in integrated security,
connecting 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.
Secure Solutions – Integrated Security
G4S is a security systems integration company.
Please see page 6 for the map of countries where we
have technology capability. Our businesses with the
most embedded integrated security approach are in
North America, UK and Denmark. We believe we
can deepen penetration of technology with existing
customers and new customers in these markets and
are looking to build expertise more widely across
the Group.
Ensuring we are well positioned for 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.
A number of our services and technology solutions,
which have commercial momentum in key markets,
are featured in this report.
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.
■ Proprietary security systems such as Symmetry
Connect access control systems and visitor
management systems.
Cash Solutions – Retail Solutions and bank-branch
automation
For our financial and retail customers, we
have developed a number of innovative and
efficient services.
■ Automated cash solutions for retailers – we have
over 23,300 (2017: 19,800) cash technology
installations, often combined with our software
and managed service and have a strong and
growing pipeline. 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 (see case
study opposite).
■ Automated bulk-teller solution for banks – the
Deposita solution of hardware, proprietary
software and managed service is also being used
in bank branches.
2018 ACHIEVEMENTS
£2.8bn
Technology-enabled
security revenues
23,300
Customer locations where
cash technology deployed
for banks and retailers at
the end of 2018.
14%
Increase in proportion
of technology-enabled
security revenues
* c.7% of our work for Government is Care & Justice services. The
remainder is embassy security, local government, support for disaster
relief, charity and NGO work, border protection and landmine
clearance.
28 G4S plc Integrated Report and Accounts 2018
Revenue by customer type in 2018 (%)Major corporates & industrials 35%Government* 21%Financial institutions 16%Retail 9%Private energy/utilities 6%Consumers 6%Ports & airports 3%Transport & logistics 2%Leisure & tourism 2% ■ 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 fleet of our traditional cash-in-transit business.
■ G4S Pay is a new service launched in the
Netherlands, which enables retailers with our
Retail Cash Solution to process not only cash
payments, but electronic payments with the same
software platform.
ACTIONS FOR 2019
■ 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 efficient
services for customers
■ Cross-selling and up-selling within and
across markets
■ Continued investment in people, technology,
software and systems
G4S TECHNOLOGY -
TRANSFORMING RETAIL
CASH MANAGEMENT
RETAIL CASH SOLUTIONS,
NORTH AMERICA
In May 2018, G4S won a new, five year, Retail Cash Solutions
contract with a major US retailer. The contract was mobilised
in the second half of 2018. Under this initial contract, G4S
implemented and managed an integrated cash management
system using G4S’ proprietary software and service model in
more than 500 stores.
In November 2018, the retailer awarded around another 600
stores to G4S. Based on positive implementation and operational
delivery and cost effectiveness, a third tranche of around 250
stores, was awarded in January 2019. Implementation of both of
these further awards began in March 2019.
The benefit of using G4S Retail Cash Solutions are substantial for
large retail customers both in terms of reducing cash handling
costs (labour, banking fees and transportation) and in providing
better working capital management, freeing up to 80% of cash
that was previously trapped in the cash processing system.
Integrated Report and Accounts 2018 G4S plc 29
OUR STRATEGY CONTINUED
OPERATIONAL
EXCELLENCE AND PRODUCTIVITY
2018 ACHIEVEMENTS
£70-80m
p.a.
On track to deliver £70-
80m annualised operational
cost savings by 2020
30bp
Improvement in Secure
Solutions Adjusted PBITA
margin in 2018 compared
with 2017
70%
of UK suppliers are SMEs
Our productivity programmes have
generated material savings since 2016.
Until 2017, most of the productivity
savings were reinvested in sales and
business development, technology and
innovation and better systems and
processes. During 2018, we started to
see efficiencies come through in lower
administration costs and we believe that
there remain many more opportunities
to be a more efficient organisation. We
are on track to deliver the recurring
operating efficiencies of £70 million to
£80 million per annum by 2020 which
we set as our goal in 2017.
More focused business – cultural change
Historically a significant 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 similar services in a large number of
countries, this resulted in an inefficient organisation,
with many management layers built up over time,
resulting in inefficiency and lack of accountability.
The Group is now more focused, on two core
business segments, Secure Solutions and Cash
Solutions and the board believes that a separation
of Cash Solutions has the clear potential to enhance
the focus and success of both businesses and thus to
unclock substantial shareholder value.
Reinvesting for growth
A significant proportion of the gains we have made
from our efficiency programmes have been reinvested
in the business to improve risk management, increase
the opportunities for growth as well as in processes
to drive further efficiency. We have increasing
confidence in being able to deliver further efficiencies
and we are starting to see benefits increasingly flow
through to the bottom line.
Efficient organisation design and
management de-layering
Since benchmarking 130 business units across
90 countries in 2017, we have invested £31 million in
2018 in restructuring and continued delayering of the
management structures in the business and are now
working to have more efficient regional, functional
and operational frameworks.
30 G4S plc Integrated Report and Accounts 2018
The consolidation of the Secure Solutions business
into four regions, the creation of the Global Cash
Solutions division and clustering of countries for
management purposes is enabling efficiencies through
rationalisation of organisation design above business
unit level.
Procurement
In 2018, the procurement team continued its
on-going development of the G4S supply base,
targeting sustained cost reduction and supplier
performance improvement.
G4S supply chain is a critical part of the Group value
proposition with over 40,000 suppliers providing
goods and services around the world. With the
supplier review and reset programmes around the
world there has been a material reduction in the
number of suppliers used by G4S. For example in
the UK the supply base has reduced from 10,000
suppliers in 2014 to 4,000 in 2018 with 70% of UK
suppliers being SMEs.
2018 was a year in which G4S expanded its global
approach to buying across several new categories to
enable countries to leverage the Group’s scale and
buying power. These areas included fleet, travel, fire &
security products and uniforms (please see case study
opposite).
It is expected that the renewed focus on targeted
global leverage, complemented with local
procurement market focus, will yield sustained cost
reductions over the coming three years.
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
manned security business based on the best working
practices and processes from across G4S. Javelin
replaces and demonstrably improves our previous
systems and processes for recruitment, HR, talent
management, procurement, finance, contract
management, payroll, billing, scheduling, tele-contact,
interactive voice response platform and operational
control systems with a single Cloud-based platform.
The pilot for Javelin was launched in Ireland in
November 2017. The pilot programme allowed us
to learn how to best deliver this complex change
programme within our business, identified areas of
our combined processes that work well and captured
areas for improvement before further roll out.
ACTIONS FOR 2019
■ Continue with restructuring and
organisational efficiency programmes
■ Continue embedding Javelin in the UK and
commence roll out in North America
■ Continue to focus on consolidating
the supplier base, standardisation
of procurement processes, demand
management and delivering savings
The enhanced version of Javelin reflecting the lessons
learned, was deployed into Ireland during 2018
and commenced implementation in the UK in early
2019 for over 22,000 employees serving over 700
customers. The implementation into North America
will commence later in the year and we are reviewing
plans for further country roll outs to drive the
programme across the Group.
A safe operating environment
The wellbeing and safety of our employees and those
in our care remains a key priority for the Group.
We work in an inherently hazardous industry, with
many colleagues trained and deployed to protect our
customers and their property. As a result, road traffic
accidents and criminal attacks are inherent risks we
face in delivering some of our services. Our safety
goal is zero harm. We have invested in many new
processes in recent years and have seen a marked
reduction in serious incidents. Please see page 20 for
more details.
OUR VALUES IN ACTION -
SOURCING OF UNIFORMS
EFFICIENT AND ETHICAL
G4S is one of the world’s largest users of uniforms
which are traditionally sourced locally, resulting in spend
fragmentation. For example there are over 200 suppliers
of uniforms in Europe. 2018 saw the first phase of a global
sourcing programme to target lifecycle cost reduction
through combined buying, range optimisation, and waste
reduction.
In parallel with the commercial aspect of the selection,
a new enhanced ethical supplier evaluation process was
developed to ensure that suppliers demonstrated their
sustained compliance with the ethical standards required by
G4S and its customers.
SDGs:
Integrated Report and Accounts 2018 G4S plc 31
OUR STRATEGY CONTINUED
FINANCIAL AND
COMMERCIAL DISCIPLINE
Through a continued focus on cash management, we aim to
reduce net debt/Adjusted EBITDA from 2.7x at the end of
2018 to below 2.5x over the medium term.
2018
ACHIEVEMENTS
£20m
Debt refinancing in 2018
to underpin £20 million
reduction in the interest
charge by 2020
£48m
Gross disposal proceeds
in 2018
2.5x
Net debt to EBITDA
medium term target
Operating cash flow
Underlying operating cash flow in 2018 was £453
million, down from £516 million in 2017 as expected.
Our 2018 cash flow conversion performance of 96%
of Adjusted PBITA followed a strong performance
in 2017 of 107%. Our medium-term guidance is that
average operating cash flow conversion (defined as
net operating cash flow before tax and restructuring
spend as a percentage of Adjusted PBITA) will be
more than 100%.
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 30), 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.
CAPITAL ALLOCATION POLICY
■ Net debt/Adjusted EBITDA of below 2.5x in
medium term
■ Priority uses of any surplus cash flow:
■ Investment in growth and productivity
■ Dividend growth
■ Leverage reduction
Strengthening collections performance
■ Updated incentive plans since 2016 with greater
emphasis on cash-flow generation.
■ Improved management information to increase
accountability and influence behaviour.
■ Weekly calls with finance and operations to drive
cash collection.
Managing accounts payable
■ The Group’s days’ payable outstanding is 39 days
(2017: 42 days) which is shorter than days’ sales
outstanding of 55 days (2017: 52 days). This shows
that there is still an opportunity to improve.
■ 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 benefits of the project in line with the
Group values and whether the commercial risks are
acceptable, are also considered.
We intend to remain soundly financed with average
operating cash flow conversion of more than100% of
Adjusted PBITA and a net debt to Adjusted EBITDA
ratio of less than 2.5x in the medium term. Priorities
for excess cash will be investment, dividends and,
in the near term, further leverage reduction.
32 G4S plc Integrated Report and Accounts 2018
Portfolio management
The Group’s portfolio management programme is
substantially complete. The programme has greatly
improved the Group’s strategic focus and has also
realised over £560 million in disposal proceeds in
relation to the 49 businesses sold. This includes gross
proceeds of £48 million relating to disposals in 2018
(2017: £166 million) including the disposal of the
Group’s businesses in Hungary, its archiving business
in Kenya and the Cash Solutions businesses in the
United Arab Emirates, Saudi Arabia and Colombia.
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. Portfolio
review remains an important part of capital discipline
and each business has to continue to earn its place in
the Group’s portfolio.
Pension deficit repair plan
G4S operates a wide range of retirement benefit
arrangements including funded defined contribution,
multi-employer and funded and un-funded defined
benefit schemes. The UK defined benefit scheme
(which is largely closed for future accrual) accounts
for approximately 60% (2017: 65%) of the Group’s
net defined benefit pension deficit for accounting
purposes of £302m (2017: £318m) net of
applicable tax.
During the year, the Group contributed £41m
(2017:£40m) of scheduled deficit repair contributions
to its UK schemes. The triennial valuation of the
Group’s main UK pension scheme is underway as a
result of which future deficit-repair contributions are
subject to review. For more details of the Group’s
pension arrangements, see page 49.
Debt refinancing
G4S had gross debt of £2.7 billion (2017: £2.5 billion)
and net debt of £1.6 billion at the end of 2018 (2017:
£1.5 billion). Around £570 million of the £1 billion
debt which matures in 2018/2019 is subject to post-
hedging average interest rates of between 6.90% and
7.75% (see page 47). The Group has good access
to capital markets and a diverse range of finance
providers and as a result began to refinance its debt
at much lower rates in 2017 which continued into
2018 and will result in a material reduction in the
Group’s interest charge from 2019 onwards.
G4S CONTRACT RISK MANAGEMENT
AND GOVERNANCE MODEL
Contract risk management
Our contract risk management model was implemented in 2014, and aims to
ensure we sign contracts that we can deliver efficiently and effectively and is
shown in the pie chart below:
Risk
Committee
The Risk Committee will
undertake a review of a
major contract at each
of its meetings.
Bid risk
assessment
Based on financial, legal,
reputational and operational
risk criteria. Referred to the
region, Group Executive
Committee or board as
appropriate for review
and approval.
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.
Contract
mobilisation
Key contractual
requirements and
risk mitigation strategies, based
on complexity and risk profile
of mobilisation, are mapped
to accountable
contract managers.
On-going
contract assurance
Contracts subject to
on-going scrutiny at
regional or Group level
based on commercial
scale and level
of risk.
Group
internal audit
Internal audit
conducts audits
of selected
contracts.
FINANCIAL OUTLOOK
■ Average organic revenue growth of 4-6% per annum
■ Restructuring and efficiency programmes to deliver £70m-80m annual
costs savings from 2020 and around £20m of finance cost reduction
(before the impact of IFRS16) per annum by 2020
■ Compounding benefit of investment, growth and productivity to deliver
strong earnings growth
■ Underlying operating cash flow 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
■ Achieve and maintain net debt/Adjusted EBITDA below 2.5x in the
medium term
■ Dividends increasing in line with long term growth in earnings
Integrated Report and Accounts 2018 G4S plc 33
KEY PERFORMANCE INDICATORS
KEY PERFORMANCE
INDICATORS
KPI
Our progress in
implementing
our strategic
objectives is
measured using
key performance
indicators aligned
to those objectives
and to the Group
values:
Description
FINANCIAL – UNDERLYING RESULTS
£7.3bn +18%
Revenue1 (£bn) growth since 2013
£474m +35%
Adjusted PBITA1 (£m) growth since 2013
7.2
7.3
7.0
6.4
6.6
6.2
8
7
6
5
4
3
2
1
0
474
474
444
395
376
351
500
400
300
200
100
0
13
14
15
16
17
18
13
14
15
16
17
18
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.
The Group has implemented a number of
productivity programmes that are now driving
efficiency and operational improvement across the
Group. These include efficient organisation design,
management de-layering, lean operating processes,
efficient reporting and assurance processes, upgraded
IT systems and efficient procurement.
Performance
in 2018
In 2018, revenues grew 1.1% to £7.3bn (2017:
£7.2bn), with Secure Solutions organic growth of
3.0%, reflecting strong growth in Africa, Asia and
the Americas.
In 2018, Adjusted PBITA was unchanged compared
with 2017 at £474m. Secure Solutions grew 6.9%
whilst Cash Solutions declined 17.1%. See pages 57 to
62 for more detail.
Cash Solutions revenue decreased by 9.3% reflecting
the mobilisation of a very large Retail Cash Solutions
contract in North America in 2017.
Link to strategic
objectives
Link to remuneration
34 G4S plc Integrated Report and Accounts 2018
OTHER FINANCIAL AND NON-FINANCIAL
KPIS
In addition to the financial KPIs, the Group has a
set of other 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 and summarised on pages 38 and 39.
£453m +9%
16.7p +56%
Operating cash flow1 (£m) growth since 2013
Adjusted EPS1 (pence per share) growth since 2013
800
700
600
500
400
300
200
100
0
611
516
453
445
416
357
16.7
16.7
15.5
13.0
11.4
10.7
18
15
12
9
6
3
0
13
14
15
16
17
18
13
14
15
16
17
18
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.
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.
Link to strategic objectives
People and values
Customers
and service excellence
Technology
and innovation
Operational excellence
and productivity
Financial and
commercial discipline
Link to remuneration
Long term incentive plan
Annual bonus scheme
Operating cash flow was £453m (2017: £516m),
down 12.2% as expected following a higher than
normal cash generation in 2017. The cash conversion
rate was 96% (2017: 107%). Good cash flow and
working capital management performances were
delivered across most of the Group except the
Americas region which was negatively impacted by
the US Federal Government shutdown and Europe
& Middle East which was affected by contract phasing.
Adjusted earnings increased by 0.4% to £259m
(2017: £258m) in 2018.
Adjusted EPS was unchanged at 16.7p (2017: 16.7p).
1. For details of the basis of preparation of underlying results and an explanation of Alternative Performance Measures (APMs) used, see page 40.
Underlying results are reconciled to statutory results on page 50.
2. For more details on the Group’s strategic priorities please see pages 18 to 33. For more detail on 2018 financial performance please see the Chief
Financial Officer’s review on pages 43 to 55.
Integrated Report and Accounts 2018 G4S plc 35
CSR PERFORMANCE
SOCIAL IMPACT AND
CSR PERFORMANCE HIGHLIGHTS
We play an important role in society – our 546,000 employees deliver services that create a safer
and better environment in which millions of people live and work. Through these services and our
organisation, G4S delivers a broad range of significant and far reaching social and economic benefits to
the communities in which we live and work, many of which are helping to realise the United Nations
Sustainable Development Goals.
OUR CSR PRIORITY AREAS
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 is undertaken every two years. The most recent assessment, completed in December 2017, confirms our
three core CSR priority areas during 2018 and 2019. For more information on the assessment see page 85.
HEALTH
AND SAFETY
HUMAN
RIGHTS
The safety of our employees and those in
our care is one of our corporate values
and is a priority for the Group (see pages
20 to 25).
Our respect for human rights is core to
the sustainable success of the business and
continues to by an important part of our
risk assessment and mitigation process.
Respecting Human
Rights – CSR priority area
We are proud of the role G4S and its’
employees play in society and the positive
contribution they make to the protection of
human rights through our range of services
and the standards which we apply.
However, we are clear that, as a business
we have a responsibility to ensure that
we are not at risk of violating human
rights through the services we provide,
the customers with whom we work, the
suppliers we use, or through the treatment
of our colleagues and others in our care.
G4S’ human rights policy and its related
framework are based upon the United
Nations 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 United Nations Sustainable
Development Goals through the creation
of employment opportunity, the global
improvement of industry standards and
by helping to create secure and stable
communities around the world.
During 2018, we have:
■ Conducted human rights training
and awareness sessions for senior
management across the Group.
■ Revised our human rights control self-
assessment process and completed
48 self-assessments in high risk
countries and a further 48 assessments
in other countries.
■ Conducted internal audits of human
rights controls in 15 countries.
■ Assessed operational and other business
issues against our ‘risk universe’, such as
human rights and other CSR risks.
■ Reviewed and updated our human
rights heat map assessment process, and
conducted a review of human rights risks
to generate the 2019 human rights heat
map. The review identified 23 countries,
in which G4S has operations, as being
high or very high risk environments for
human rights.
■ Enhanced our supplier code of conduct
and reviewed our approach to risk
assessment for modern slavery.
36 G4S plc Integrated Report and Accounts 2018
ANTI-BRIBERY
AND CORRUPTION
We will continue to develop and
encourage a workplace culture in which all
employees are clear about the company’s
standards of ethics and feel confident that
they may raise ethical concerns (see pages
20 to 25).
■ Published our second slavery and human-
trafficking statement, setting out the
actions we have taken to help prevent
modern slavery within our business and
supply chain.
■ Implemented the recommendations
made by the independent review
of Brook House Immigration
Removal Centre.
ACTIONS FOR 2019
■ Continue to build awareness of
human rights responsibilities across
the Group
■ Conduct human rights control
self-assessments in all businesses
operating in high-risk countries
and continue the programme of
internal audits
■ Complete implementation of
enhanced supplier code of conduct
risk assessment and due-diligence
approach in the UK
SUSTAINABLE DEVELOPMENT GOALS
The United Nations Sustainable Development Goals (SDGs) call upon business to advance sustainable development through the
investments they make, solutions they develop and the practices they adopt. We have identified fifteen social and economic impacts where
G4S supports the broad realisation of the Goals and makes a positive difference to society and communities around the world. Within
these, we have a specific focus on Goal 8 (Decent Work and Economic Growth) with ‘Health and wellbeing’ and ‘Job creation’ and Goal 16
(Peace, Justice and Strong Institutions) with ‘Prevention of crime’ which closely align with our strategy and operational expertise.
Social-economic impact
Supporting criminal justice system
Providing care
Privacy vs security balance
Protection of assets
Employee wages and benefits
Consulting on risks
People development
Support in post-conflict zones
Health and wellbeing
Taxes paid
Support of economic reconstruction
Job creation
Interest and dividends paid
Raising industry standards
Prevention of crime
LOW
MEDIUM
Priority sustainable development goals for G4S
HIGH
Relevant significance
Health and Wellbeing
The nature of G4S’ work and the
environment in which we operate may
become hazardous. Mitigating this risk so
that our people and those in their care
can remain safe and secure every day is
a strategic priority for the Group. G4S is
investing in safety awareness training
and intervention as part of an ongoing
programme to enhance the safety culture
of the company and security industry and
achieve its goal of zero harm.
Job Creation
G4S provides direct employment to
546,000 people around the world. Through
its supply chain and employee expenditure,
G4S indirectly supports the creation of
hundreds of thousands of further jobs
worldwide. In helping to create safer
environments in which businesses may
prosper, G4S can also contribute to the
attractiveness of investment by businesses
into new communities and the creation of
further employment opportunities.
Prevention of Crime
G4S delivers a wide range of specialist
security services that mitigate the risk or
impact of criminal behaviour and help to
create safer communities. A key focus of
our Care & Justice Services operations is to
confront and address offender behaviour
and work towards their rehabilitation and
positive reintegration in the community.
Integrated Report and Accounts 2018 G4S plc 37
CSR PERFORMANCE CONTINUED
KEY CSR INDICATORS, PRINCIPAL RISKS, NON-FINANCIAL
INFORMATION STATEMENT AND CSR POLICIES
KEY INDICATOR
KPI
EMPLOYEES
PAGES 20-25
Number of employees
Percentage of female managers
Percentage of front-line female
employees
Coverage by collective agreements
Voluntary turnover
GOAL
–
Increase the number of female
managers in the Group
–
–
Reduce global levels of employee
turnover
2018
546,000
22.5%
2017
570,000
22.8%
2016
585,000
25.5%
2015
610,000
23.4%
14.3%
14.2%
13.6%
13.4%
33%
24.7%
31%
25.3%
32%
27.6%
33%
29.4%
Bienniel Global Survey – Response rate Increase the response rate to the
global survey
Bienniel Global Survey – Overall
favourable response
Increase the overall favourable
response rate to the global survey
Work related fatalities
Zero harm
SAFETY
PAGES 20,22,25
HUMAN RIGHTS
PAGE 36
Attack
Non-attack
Road traffic incident
Lost time incidents
(per 1k employees)
Non-natural deaths in custody
(UK/Australia)
Number of human rights control
self assessments
SPEAK OUT:
WHISTLEBLOWING
PAGES 24-25
Number of human rights audits in
high-risk countries
Number of cases raised via Speak Out
Employees “feel able to speak up
on unethical behaviour”
Reduce the LTI rate
Zero harm
Assess all businesses operating in
high-risk countries
Increase number of businesses
completing control self
assessments in lower-risk
countries
_
Increase the confidence of
employees to raise concerns
through available channels
n/a
n/a
24
14
3
7
6.6
9
48
73%
84%
25
8
6
11
6.7
3
65
n/a
n/a
47
20
10
17
7.7
9
54
73%
82%
46
17
9
20
8.5
2
n/a
48
n/a
n/a
n/a
15
519
37
300
n/a
n/a
402
158
n/a
84%
n/a
80%
ENVIRONMENTAL
PAGES 129-130
GHG emissions per £m revenue
t/CO2e
Reduce carbon intensity 3.5% per
annum
59.5
61.2
62.8
66.0
Total GHG emissions t/CO2e
Decrease total carbon emissions
Scope 1 t/CO2e
Scope 2 t/CO2e
Scope 3 t/CO2e (Air Travel)
455,310
271,471
96,833
17,147
472,019
276,493
101,506
17,693
472,748
268,107
107,297
15,114
461,262
276,594
96,449
15,926
SOCIAL MATTERS
Business overview (pages 6-15)
Stakeholder engagement
(pages 16-17)
Geopolitical risks (page 70)
Tax strategy
Supplier code of conduct
38 G4S plc Integrated Report and Accounts 2018
RELEVANT POLICIES
■ Business Ethics Policy – g4s.com/ethics
■ Ethical Employment Partnership – g4s.com/EEP
■ HR Core Standards – g4s.com/HRstandards
■ Gender Pay Gap Report (UK) – g4s.com/genderpaygap
OUR IMPACT
AND RELATED PRINCIPAL RISKS PAGE
■ Stakeholder Engagement
16-17
■ People & Values
■ CSR Materiality Assessment
■ Health & Safety (Principal Risk)
■ Culture & Values (Principal Risk)
■ People (Principal Risk)
■ Geopolitical (Principal Risk)
■ CSR Committee
36, 85
93-95
20-25
70
67
67
68
■ Business Ethics Policy
■ Human Rights Policy – g4s.com/humanrights
■ Slavery and Human Trafficking Statement – g4s.com/modernslavery
■ Business Ethics Policy
■ Whistleblowing Policy – g4s.com/whistleblowing
■ Human Rights Policy
■ Health and Safety (Principal Risk)
67
■ People & Values
■ CSR Materiality Assessment
■ Culture & Values (Principal Risk)
■ Laws & Regulations (Principal Risk)
■ Geopolitical (Principal Risk)
■ CSR Committee
■ People & Values
■ CSR Materiality Assessment
■ Laws & Regulations (Principal Risk)
■ Culture & Values (Principal Risk)
20-25
36, 85
67
69
70
93-95
20-25
36, 85
69
67
■ Business Ethics Policy
■ Environmental Policy – g4s.com/environment
■ CSR Materiality Assessment
■ Greenhouse Gas Emissions
36, 85
129-130
■ Business Ethics Policy
■ Supplier Code of Conduct – g4s.com/suppliercode
■ Tax Strategy – g4s.com/tax
■ Whistleblowing Policy
■ Stakeholder Engagement
■ People & Values
■ CSR Materiality Assessment
■ Laws & Regulations (Principal Risk)
■ Geopolitical (Principal Risk)
16-17
20-25
36, 85
69
70
Integrated Report and Accounts 2018 G4S plc 39
ALTERNATIVE PERFORMANCE MEASURES (APMS)
ALTERNATIVE
PERFORMANCE
MEASURES (APMs)
The Group applies the basis of preparation for its
statutory results shown on page 149. To provide
additional information and analysis which enables
a full understanding of the Group’s results and
to identify easily the performance of the Group’s
on-going businesses, the Group also makes use of
a number of Alternative Performance Measures
(APMs) in the management of its operations and
as a key component of its internal and external
reporting. Those APMs are prepared and presented
in accordance with the following basis of preparation.
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.
Adjusted results
In order to allow a full understanding of its results,
the Group separately discloses the effects on profit
of strategic restructuring activities, acquisition-related
amortisation, goodwill impairments and profits
or losses arising on the acquisition or disposal of
businesses (together, “separately disclosed items”).
The Group also discloses separately those items that
the Group believes need to be shown separately
to allow a more fulsome understanding of the
results for the year because of their size, nature or
incidence (“specific items”). The Group has separately
disclosed in 2018 the impact of the California class
action settlement and the impact of the guaranteed
minimum pension equalisation (page 45).
Adjusted measures of profit and earnings are stated
before the effects of separately disclosed and specific
items; the related tax effects; and tax-specific charges
or credits which have a material impact such as those
arising from changes in tax legislation.
Adjusted measures of profit are provided to allow the
trading results of the Group to be assessed separately
from the effects of corporate actions (such as
acquisitions, disposals and strategic restructuring) and
the effects of significant or unusual items.
A reconciliation of Adjusted PBITA to operating profit
is included on page 44.
40 G4S plc Integrated Report and Accounts 2018
Underlying results
To provide a better indication of the performance
of the Group’s on-going business at the year end,
the Group separately presents its underlying results.
Underlying results are defined as the adjusted results
of the Group (i.e. stated before the effect of specific
and separately disclosed items) excluding the results
of onerous contracts and businesses that have been
sold or closed in the current and comparative years.
Underlying results for the comparative year are
re-presented to remove the effect of businesses
disposed of or closed in the current year to enable a
like-for-like comparison of the results of the Group’s
on-going activities at the end of the most recent
reporting year.
A reconciliation of the underlying results to the
statutory results is included on page 50.
Constant currency results
In order to allow readers to assess the performance
of the Group’s business before the effect of foreign
exchange movements, the Group also presents
its comparative results (excluding cash flows)
retranslated to sterling using the average rates for the
current year. Cash flows are not retranslated but are
presented at historical exchange rates. Comparative
results for hyperinflationary economies are translated
at current period closing exchange rates when
presenting constant currency results. For 2018 the
only hyperinflationary economy in which the Group
operated was Argentina.
A reconciliation of the constant currency results for
the year to statutory results is included on page 57.
Revised presentation of APMs
In prior years, the Group separately reported the
results of its core businesses. Core businesses were
defined as the underlying business excluding portfolio
businesses (being the parts of the business that had
been identified for exit) and certain legacy onerous
contracts. The results of the portfolio businesses and
onerous contracts were reported separately. After the
completion of some minor disposals in the current
year, the portfolio programme is considered to be
substantially complete, and the Group manages the
former portfolio businesses as part of its underlying
business. Accordingly the Group has revised the
presentation of its prior year comparative APMs to
include portfolio businesses within underlying results
to enable the presentation of underlying results on a
like-for-like basis as described above.
b. Organic growth
Organic growth is calculated based on revenue
growth at constant currency, adjusted to exclude
the impact of any acquisitions during the current or
prior years.
c. Adjusted profit 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 financial performance
from the normal course of business and more
comparable year to year. Adjusted PBITA
excludes the effect of separately disclosed items
(being restructuring costs, goodwill impairment,
amortisation of acquisition-related intangible assets
and profits or losses on disposal or closure of
businesses) and specific items, which the Group
believes should be disclosed separately by virtue
of their size, nature or incidence, as explained on
page 42.
Restructuring costs
These costs relate to the wider strategic
transformation of the Group and are excluded from
Group and regional Adjusted PBITA since they
reflect Group decisions and are not considered to
be reflective of the underlying financial performance
of the individual businesses. This programme is of
a strategic nature and, as such, is monitored and
approved by the group executive committee. In
2017 the Group announced a three-year plan to
2020 to implement efficient 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 benefitting 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 financial position.
A reconciliation of the results from core businesses as
previously stated to the underlying results in included
on page 56.
Business reporting structure
In line with its strategy for managing the business, the
Group reports separately the underlying results of
its Cash Solutions and Secure Solutions businesses.
The results for the Secure Solutions business are
further divided geographically into the following regions:
■ Africa;
■ Americas (combining the Secure Solutions
businesses of the previously reported Latin
America and North America regions);
■ Asia (combining the Secure Solutions businesses
of the previously reported Asia Pacific region with
that of India and Bangladesh); and
■ Europe & Middle East (combining the Secure
Solutions businesses of the previously reported
Middle East & India, Europe, and UK & Ireland
regions but excluding that of India and Bangladesh).
The Group reports separately the results of onerous
contracts and the results of its disposed businesses,
being those that have been sold in the current or
prior years.
In prior years, the Group reported its APMs on a
largely geographical basis, split into the following seven
geographical regions: Africa, Asia, Middle East & India,
Europe, United Kingdom & Ireland, Latin America, and
North America. A reconciliation of the results from
core businesses (excluding onerous contracts and the
portfolio businesses) in the previous structure to the
results from core businesses in the new structure is
included on page 56.
These components, together with the impact
of restructuring costs, specific items and other
separately disclosed items 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 has not classified any operations
as discontinued in any of the years presented.
All amounts recorded as discontinued relate to
businesses sold prior to 1 January 2017.
Financial performance indicators
The key financial indicators 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 50:
a. Revenue
Statutory revenue arising in each of the
underlying, onerous contract and disposed
business components. Underlying revenue is a Key
Performance Indicator (KPI).
Integrated Report and Accounts 2018 G4S plc 41
ALTERNATIVE PERFORMANCE MEASURES (APMS) CONTINUED
Impairment and amortisation of goodwill and
acquisition-related intangible assets are excluded from
Adjusted PBITA as they relate to historical acquisition
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 profits earned from previously-acquired
businesses are, however, included within Adjusted
PBITA, and this treatment may differ from how other
groups present profits 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 reflect 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.
Specific items
These items are those that, based on management’s
judgment, need to be disclosed separately in
arriving at operating profit 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 financial performance of the business.
In determining whether an event or transaction
is specific, management considers quantitative as
well as qualitative factors such as the frequency or
predictability of occurrence.
All specific items are evaluated and approved by the
Group’s Audit Committee prior to being separately
disclosed. The Group seeks to be balanced when
reporting specific items for both debits and credits,
and any reversal of an excess provision previously
created as a specific item is recognised consistently as
a specific item. The associated tax impact of specific
items is recorded within the specific items tax charge.
In addition, tax-specific charges or credits, such as
those arising from changes in tax legislation which
have a material impact, and which are unrelated to
net specific items, are also included within the specific
items tax charge. Consistent with the treatment of
pre-tax specific items, significant tax charges or credits
that occur, which are not related to core businesses
but which would have a significant impact on the
Group’s tax charge, would also be classified as tax-
specific items.
42 G4S plc Integrated Report and Accounts 2018
Profits 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 reflective of
the underlying financial performance of the Group.
Further details regarding these excluded items can be
found in note 8 on page 163.
Underlying Adjusted PBITA is a KPI.
d. Operating cash flow
Net cash flow from operating activities before
tax. Underlying operating cash flow excludes
restructuring spend and is a KPI.
e. Operating cash flow conversion
Operating cash flow presented as a percentage of
Adjusted PBITA.
f. Earnings
Profit attributable to equity shareholders of G4S
plc. Underlying earnings is a KPI.
g. Earnings per share (EPS)
Profit attributable to equity shareholders of
G4S plc, per share, from continuing operations.
Underlying EPS is a KPI.
h. Net debt to Adjusted EBITDA
The ratio of total net debt (including investments,
finance lease liabilities and cash and overdrafts
reported within net assets of disposal groups held
for sale) to adjusted earnings attributable to equity
shareholders before interest, tax, depreciation and
amortisation (‘Adjusted EBITDA’). This ratio is a
factor in the board’s assessment of the financial
strength of the Group, and is a key measure of
compliance with covenants in respect of the
Group’s borrowing facilities.
Certain of these financial performance indicators in
respect of underlying results also form a significant
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 flow – 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.
CHIEF FINANCIAL OFFICER’S REVIEW
FINANCIAL
HIGHLIGHTS
TIM WELLER,
Group Chief Financial Officer
Our underlying results in 2018 were in
line with 2017 with improving revenue
momentum in the second half of the
year underpinning the positive outlook
for 2019.
STATUTORY RESULTSa
UNDERLYING RESULTSd
REVENUE
£7.5bn -4.0%
(2017: £7.8bn)
ADJUSTED PBITAb
£460m -6.5%a
(2017: £492m)
EARNINGSc
£82m -65.4%
(2017: £237m)
REVENUE
£7.3bn +1.1%
(2017: £7.2bn)
ADJUSTED PBITAb
£474m
(2017: £474m)
EARNINGSc
£259m +0.4%
(2017: £258m)
NET DEBT: ADJUSTED EBITDAb
2.7x
(2017: 2.4x)
OPERATING CASH FLOW
£453m -12.2%
(2017: £516m)
FINAL DIVIDEND
6.11p
(2017: 6.11p)
RESULTING IN A
TOTAL DIVIDEND OF
9.70p
(2017: 9.70p)
Chief Financial Officer’s review
Introduction
Revenue
Adjusted PBITAb
Adjusted PBITAb margin
Earningsc
Earnings per sharec
Operating cash flow
Statutory Resultsa
Actual foreign exchange rates
Underlying Resultsd
Constant foreign exchange rates
2018
£7,512m
£460m
6.1%
£82m
5.3p
£413m
2017
Restatede
£7,826m
£492m
6.3%
£237m
15.3p
£488m
%
(4.0)
(6.5)
(65.4)
(65.4)
(15.4)
2018
£7,289m
£474m
6.5%
£259m
16.7p
£453m
2017
Restatede
£7,213m
£474m
6.6%
£258m
16.7p
£516m
%
1.1
–
0.4
–
(12.2)
a. See page 149 for the basis of preparation of statutory results.
b. Adjusted PBITA and net debt: Adjusted EBITDA are Alternative Performance Measures as defined as explained on pages 40-42.
c. Earnings is defined as profit attributable to equity shareholders of G4S plc. Underlying earnings and underlying earnings per share (“EPS”) are adjusted to exclude specific and other
separately disclosed items, as explained on page 40, and are reconciled to statutory earnings and EPS on page 50.
d. Underlying results are Alternative Performance Measures as defined and explained on page 40. They are reconciled to the Group’s statutory results on page 50.
The underlying results are presented at constant exchange rates other than for operating cash flow which is presented at actual rates for both 2017 and 2018.
e. Restated for the adoption of IFRS 15 – Revenue from Contracts with Customers, see note 3(u) on page 155.
Integrated Report and Accounts 2018 G4S plc 43
CHIEF FINANCIAL OFFICER’S REVIEW CONTINUED
Basis of preparation
The following discussion and analysis on pages 44 to 57 is based on, and should be read in conjunction with, the consolidated financial
statements, including the related notes, that form part of this annual report. The consolidated financial statements have been prepared
in accordance with IFRS as adopted by the EU as explained on page 149.
Business Performance – statutory results
Statutory results at actual exchange rates
Revenue
Adjusted profit before interest, tax and amortisation (Adjusted PBITA)
Specific items - charges
Specific items - credits
Guaranteed Minimum Pension equalisation charge
California class action settlement
Restructuring costs
(Loss)/profit on disposal/closure of subsidiaries/businesses
Acquisition-related amortisation
Operating profit
Interest costs (net)
Profit before tax
Tax
Profit after tax
Profit/(loss) from discontinued operations
Profit for the year
Non-controlling interests
Profit attributable to equity holders of the parent (“statutory earnings”)
EPS
Operating cash flow
a. 2017 results have been restated for the effect of adopting IFRS 15 – see note 3(u).
2018
£m
7,512
460
(32)
10
(35)
(100)
(31)
(15)
(4)
253
(110)
143
(55)
88
2
90
(8)
82
5.3p
413
2017
Restateda
£m
7,826
492
(34)
–
–
–
(20)
74
(10)
502
(115)
387
(128)
259
(6)
253
(16)
237
15.3p
488
YoY
%
(4.0)
(6.5)
(5.9)
n/a
n/a
n/a
55.0
(120.3)
(60.0)
(49.6)
(4.3)
(63.0)
(57.0)
(66.0)
(133.3)
(64.4)
(50.0)
(65.4)
(65.4)
(15.4)
Revenue
Revenue decreased by 4.0% compared with the prior year statutory results. Of the decrease, 2.7% (£211m) was due to movements in
exchange rates caused by the relative strengthening of the average sterling exchange rates affecting the Group. Excluding the effects of
movements in exchange rates, revenue decreased by 1.4% mainly due to a £190m reduction in revenue in respect of businesses disposed
during the current and prior years including the Group’s businesses in Hungary and Israel and its Youth Services business in North America.
Revenue from onerous contracts is slightly higher than the prior year at £118m (2017: £107m). Excluding the effects of movements in
exchange rates, revenue from disposed businesses and onerous contracts, revenue grew by 1.1% at constant exchange rates.
Business performance is discussed in more detail by service line and region on page 57.
Adjusted PBITA
Adjusted PBITA of £460m (2017: £492m) was down 6.5%. Of the decrease, 2.0% (£10m) was due to movements in exchange rates.
Excluding the effect of movements in exchange rates, Adjusted PBITA decreased by 4.6%, reflecting Adjusted PBITA growth in Secure
Solutions offset by lower revenue and increased business development and operating costs in the Cash Solutions division, as well as a
reduction in Adjusted PBITA from disposed businesses of £17m. Excluding the effect of movements in exchange rates, Adjusted PBITA
from disposed businesses and onerous contracts, the Group’s Adjusted PBITA remained in line with the prior year.
Specific items - charges
The specific items charges of £32m (2017: £34m) include £12m related to additional provisions in Asia in respect of historical employee
gratuities and end of service benefits and £11m related to the reassessment of estimated settlement amounts in respect of historical
workers’ compensation claims in the Americas. Also included in specific item charges is a £9m onerous contract charge related to two
UK Care & Justice Services contracts, reflecting the estimated losses over their expected remaining terms.
Specific items charges incurred during the year ended 31 December 2017 of £34m included £19m primarily relating to the anticipated
total losses over the next 15 to 20 years in respect of certain UK government contracts, £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 disputes
in respect of prior years in the Americas.
44 G4S plc Integrated Report and Accounts 2018
Specific items - credits
The specific items credits of £10m (2017: £nil) include a £5m release of onerous contract provisions in the UK for which the related charges had
previously been created as specific items, following the implementation of operational efficiencies in the contracts leading to a reduction in expected
future losses. In addition, a further £5m related to successful court claims made by the Group in the Americas has been credited as a specific item.
Guaranteed minimum pension equalisation charge
Following the UK High Court Ruling in the case of Lloyds Banking Group Pension Trustees Limited v Lloyds Bank plc (and others) in
October 2018, the Group recorded a charge of £35m (2017: £nil) in respect of the equalisation of benefits for historical Guaranteed
Minimum Pension obligations between males and females in the UK.
California class action settlement
In January 2019, the Group agreed the settlement of a class action relating to claims for employee meal and rest breaks for the period
2001 to 2010 in California. This settlement is subject to the final approval of the Superior Court of the State of California. The amount to
be settled is between US$100m and US$130m with the precise amount to be determined during the settlement administration process.
A provision of £100m has been established in the accounts for the year ended 31 December 2018 representing management’s best
estimate of the amount of the class action settlement and any related costs.
Restructuring costs
The Group invested £31m (2017: £20m) in restructuring programmes during the year ended 31 December 2018, relating to the 2018-
2020 strategic productivity programme announced in 2017 which is being implemented across the Group, mainly in Europe & Middle
East, the Americas and Cash Solutions. In addition, the Group incurred non-strategic reorganisation costs of £9m (2017: £10m) which are
included within Adjusted PBITA. We expect to invest around £20m in restructuring the Cash Solutions business in 2019 and estimate that
the costs of the cash separation review and separation process will be between £25m and £50m.
(Loss)/profit on disposal and closure of subsidiaries/businesses
The Group recognised a net loss on disposal and closure of subsidiaries/businesses of £15m (2017: profit of £74m) relating to the disposal
of a number of the Group’s operations including its businesses in Hungary and the Philippines, its archiving business in Kenya and the Cash
Solutions businesses in the United Arab Emirates, Colombia and Saudi Arabia. Disposals in 2017 included the Group’s businesses in Israel
and Bulgaria and the Group’s Youth Services business in North America.
Acquisition-related amortisation
Acquisition-related amortisation of £4m (2017: £10m) is lower than the prior year as certain intangible assets recognised on a number
of legacy acquisitions became fully amortised in 2017.
Operating profit
Operating profit for the year of £253m (2017: £502m) was down 49.6% reflecting the 6.5% reduction in Adjusted PBITA together with
the additional charges in the current year in respect of the California class action settlement and the UK guaranteed minimum pension
equalisation charge; the loss on disposals in the year of £15m (2017: profit on disposal of £74m) and the other specific and separately
disclosed items described above.
Net interest costs
Net interest payable on net debt was £92m (2017: £92m). Net other finance costs were £7m (2017: £12m) and the pension interest
charge, related to the unwinding of the discount in relation to long-term pension liabilities, was £11m (2017: £11m), resulting in a total net
interest cost of £110m (2017: £115m).
Tax
The statutory tax charge of £55m (2017: £128m) for 2018 included a tax charge of £93m (2017: £89m) on the Group’s underlying profits, as
explained on page 51, a tax credit on onerous contracts of £nil (2017: £4m), a tax charge of £1m (2017: £10m) in respect of disposed businesses,
a tax credit of £7m (2017: £4m) in respect of restructuring costs and a net tax credit of £32m (2017: tax charge of £37m, which included £19m in
respect of the tax impact of the US tax reform) in respect of specific and other separately disclosed items.
The Group’s statutory tax charge represents an effective rate of 38% (2017: 33%) on profit before tax of £143m (2017: £387m). The effective
tax rate is a function of a variety of factors, with the most significant being (i) the geographic mix of the Group’s taxable profits and the respective
country tax rates, (ii) changes in the value, and recognition of, deferred tax assets and liabilities, (iii) permanent differences such as expenses
disallowable for tax purposes, (iv) irrecoverable withholding taxes, (v) the level of provision required for potential tax liabilities not agreed with tax
authorities, (vi) the impact of one-off items including tax claims, and (vii) the overall level of profit against which the preceding items are measured.
Integrated Report and Accounts 2018 G4S plc 45
CHIEF FINANCIAL OFFICER’S REVIEW CONTINUED
The higher effective tax rate compared with the prior year is primarily driven by (i) an increase in profits taxed at a higher rate, (ii) the relative amount
of non-deductible expenses, (iii) the reassessment of the recoverability of certain deferred tax assets, and (iv) the relative amount of irrecoverable
withholding taxes. This is offset by the one-off tax impact in 2017 of the US Tax Cuts and Jobs Act and changes in 2018 in the level of provision
required for potential tax liabilities not agreed with tax authorities.
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 filings, 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 finance teams and external
advisors, to ensure that the appropriate judgments are arrived at in establishing appropriate accounting provisions in relation to such disputes.
Non-controlling interests
Profit attributable to non-controlling interests was £8m in 2018, a decrease from £16m recorded in 2017, reflecting the non-controlling
partners’ share of profit of certain businesses in Europe & Middle East.
Profit for the year
The Group reported profit for the year attributable to equity holders of the parent (“statutory earnings”) of £82m (2017: £237m) which
reflects the lower Adjusted PBITA together with the loss on disposal and closure of subsidiaries/businesses in the current year compared
with the profit recognised in the prior year, and the additional charges in the current year in respect of the California class action settlement
and the UK Guaranteed Minimum Pension equalisation charge.
Earnings per share
Statutory earnings per share decreased to 5.3p (2017: 15.3p), based on the weighted average number of shares in issue of 1,547m (2017:
1,548m) shares in issue. A reconciliation of the Group’s statutory profit for the year to EPS is provided below:
Profit for the year
Non-controlling interests
Profit attributable to equity holders of the parent (earnings)
Average number of sharesa (m)
Statutory earnings per share
Earnings per share
Statutory 2017
at actual exchange
ratesb
£m
253
(16)
237
1,548
15.3p
Statutory
2018
£m
90
(8)
82
1,547
5.3p
Adjusted Statutory
2017 at constant
exchange rates
£m
249
(17)
232
1,548
15.0p
a. Stated net of the average number of shares held in the Employee Benefit Trust of 5m (2017: 4m).
b. Refer to page 40 for a definition of constant currency results.
REVIEW OF THE GROUP’S CONSOLIDATED STATEMENT OF FINANCIAL POSITION
Significant movements in the consolidated statement of financial position
Current loan notes reduced to £464m (2017: £655m), reflecting the net repayment of certain loan notes during the year, as explained on
page 47. In addition, non-current bank loans increased to £293m (2017: £5m) following the draw-down of the new US$350m committed
term loan facility in November 2018.
The following movements in the Group’s consolidated statement of financial position are set out elsewhere in this report, as follows:
■ cash, cash equivalents and overdrafts are explained on page 47;
■ retirement benefit obligations are explained in note 31;
■ provisions are analysed in note 32 on page 195; and
■ net debt is analysed in note 36.
Total equity
Total equity at 31 December 2018 was £783m (2017: £843m). The main movements during the year were: profit for the year of
£90m (2017: £253m), other comprehensive income of £44m (2017: losses of £47m) which included a re-measurement gain on defined
retirement benefit schemes of £38m (2017: £26m) as explained on page 49, an exchange gain on translation of foreign operations of
£45m (2017: loss of £125m) reflecting more favourable movements in currencies in the major countries in which the Group operates
against sterling, a loss from changes in the fair value of net investment hedging financial instruments of £42m (2017: gain of £56m), a gain
from changes in the fair value of cash flow hedging financial instruments of £11m (2017: £nil) and dividends paid in the year of £170m
(2017: £179m).
46 G4S plc Integrated Report and Accounts 2018
Review of the Group’s cash flow and financing
Consolidated statement of cash flow
Net cash flow from operating activities before tax was £413m (2017: £488m). Net cash inflow from operating activities was £315m (2017:
£402m) reflecting lower operating cash flow generation in the Americas and Europe & Middle East. Net cash used in investing activities was
£48m (2017: cash generated £81m), including £45m (2017: £156m) of net business disposal proceeds. Net cash outflow from financing
activities was £209m (2017: £570m with the difference compared with the prior year being mainly proceeds from borrowings of £761m
(2017: £437m)). Cash, cash equivalents and overdrafts at 31 December 2018 were £673m (2017: £571m), a net increase compared
with 31 December 2017 including the impact of exchange rate movements of £102m (2017: £101m). The Group’s statutory cash flow is
presented in full on page 148.
Net debt
The Group’s net debt as at 31 December 2018 was £1,558m (December 2017: £1,487m). The Group’s net debt to Adjusted EBITDA
ratio was 2.7x (2017: 2.4x) reflecting both the increase in net debt and the reduction in Adjusted PBITA as described above. A detailed
reconciliation of movements in net debt is provided on page 54. In light of the expected cash costs of the settlement of the California class
action, the costs of the Cash business separation review, spend in respect of onerous contracts and restructuring costs expected in 2019,
we expect the Group’s net debt to Adjusted EBITDA ratio to remain broadly unchanged during 2019. Notwithstanding this, the Group’s
business plan supports a reduction in the ratio to 2.5x or below over the medium term.
Net debt maturity
In April 2018, the Group’s credit rating was affirmed by Standard & Poor’s as BBB-; however the outlook was revised from negative
to stable. As at 31 December 2018 the Group had liquidity of £1,423m (2017: £1,571m) comprising cash, cash equivalents and bank
overdrafts of £673m (2017: £571m) and unutilised but committed facilities of £750m (2017: £1,000m).
During the year, the Group arranged a US$350m term facility, maturing in August 2021, which was fully drawn, and also amended the
available Revolving Credit Facility, reducing it to £750m while extending the maturity for a further one and a half years to August 2023.
As at 31 December 2018 there were no drawings from this facility. In May 2018 the Group issued a €550m Public Bond which matures in
May 2025 and pays an annual coupon of 1.875%. During the year the Group also repaid £44m of GBP private loan notes, US$224m of US
private loan notes and €500m of public Eurobonds.
The debt maturities in 2019 comprise the US$145m US Private Placement notes repaid in March 2019 and the £350m Public Bond due
in May 2019 which will be financed primarily by utilising a £300m bridge facility arranged in January 2019. The recent refinancings have
secured around £20m of annualised interest cost savings per annum by the end of 2019. The Group has good access to capital markets
and a diverse range of finance providers. Borrowings are principally in pounds sterling, US dollars and euros, reflecting the geographies of
significant operational assets and earnings.
The Group’s main sources of finance and their applicable rates as of 31 December 2018 are set out below:
Debt instrument/Year
of issue
US PP 2007
US PP 2007
US PP 2008
Public Bond 2009
Public Bond 2016
Public Bond 2017
Public Bond 2018
Term Loan Facility 2018
Revolving Credit
Facility 2018c
Issued
interest rate
5.96%
6.06%
6.88%
7.75%
1.50%
1.50%
1.88%
3.64%
Post-hedging
average
interest rate
3.17%
3.23%
6.88%
7.75%
2.23%
3.22%
2.78%
3.64%
Nominal
amounta
US$145m
US$105m
US$74.5m
£350m
€500m
€500m
€550m
US$350m
£750m
(multi-currency) Undrawn
–
2019
114
350
Year of redemption and amounts (£m)b
2020
2021
2022
2023
2024
2025
58
82
450
442
484
275
a. Nominal debt amount. For fair value carrying amount see note 30.
b. Translated at exchange rates prevailing at 31 December 2018, or hedged exchange rates where applicable.
c. The revolving credit facility matures in August 2023. As at 31 December 2018 there were no drawings from this facility.
The Group’s average cost of gross borrowings in 2018, net of interest hedging, was 3.9% (2017: 4.1%).
464
58
275
82
450
442
484
Total
114
82
58
350
450
442
484
275
–
2,255
Integrated Report and Accounts 2018 G4S plc 47
CHIEF FINANCIAL OFFICER’S REVIEW CONTINUED
Financing and treasury activities
The Group’s treasury function is responsible for ensuring the availability of cost-effective finance and for managing the Group’s financial risk arising
from currency and interest rate volatility and counterparty credit. Group Treasury is not a profit centre and is not permitted to speculate in financial
instruments. The treasury department’s policies are set by the board and the treasury function is subject to the controls appropriate to the risks it
manages, which are discussed in note 30 on pages 183 to 187.
To assist the efficient management of the Group’s interest costs, the Group operates a multi-currency notional pooling cash management
system with a wholly-owned subsidiary of an A-rated bank. The Group presents pooled cash and overdrafts gross in the consolidated
statement of financial position.
Other information
Significant exchange rates applicable to the Group
The Group derives a significant portion of its revenue and profits in the following currencies. Closing and average rates for these currencies
are shown below:
£/US$
£/€
£/South Africa Rand
£/India Rupee
£/Brazil Real
As at
31 December
2018
1.2746
1.1130
18.3288
88.8104
4.9461
Year to 31
December 2018
average rates
1.3336
1.1294
17.5598
90.9294
4.8621
As at
31 December
2017
1.3524
1.1250
16.7557
86.3531
4.4794
Year to 31
December 2017
average rates
1.2964
1.1453
17.3187
84.3570
4.1506
Applying December 2018 closing rates to the Group’s underlying results for the year to 31 December 2018 would result in an increase
in underlying revenue of 1.9% to £7,427m (for the year ended 31 December 2017: increase of 1.9% to £7,353m) and an increase in
underlying Adjusted PBITA of 2.1% to £484m (for the year ended 31 December 2017: increase by 2.1% to £484m).
Applying December 2018 closing rates to the Group’s statutory results for the year to 31 December 2018 would result in an increase in
statutory revenue of 1.9% to £7,653m (for the year ended 31 December 2017: decrease of 1.0% to £7,746m) and an increase in statutory
Adjusted PBITA of 2.2% to £470m (for the year ended 31 December 2017: no change, at £492m).
The strenghening of the average Sterling exchange rates compared with the prior year led to a decrease in statutory revenue of 2.7% and a
decrease in statutory Adjusted PBITA of 2.0%. The impact of exchange rate movements reduced the Group’s net debt by £32m 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.
The directors propose a final dividend of 6.11p (DKK 0.5321) per share (2017: 6.11p per share; DKK 0.5097) reflecting the board’s
confidence 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 0.2969) per share and the total dividend, if approved, will be 9.70p (DKK 0.8290) per share,
in line with 2017 (for the year ended 31 December 2017, the interim dividend was 3.59p; DKK 0.2948 and the total dividend was 9.70p;
DKK 0.8045).
The proposed dividend cover is 1.7x (2017: 1.8x) on underlying earnings.
48 G4S plc Integrated Report and Accounts 2018
Pensions
As at 31 December 2018 the net defined benefit pension obligation in the consolidated statement of financial position was £364m (2017:
£381m) of which £248m (2017: £283m) related to material funded defined benefit schemes. Net of related deferred tax balances, the
Group’s net pension obligation was £302m (2017: £318m).
The most significant of the Group’s pension schemes is in the UK and accounts for over 86% (2017: 88%) of the Group’s total material
scheme obligations. The scheme has approximately 26,000 members and further details of the make-up of the scheme are given in note 31
on page 187.
Scheme assets
Obligations
Net UK obligations
2018
£m
2,219
(2,432)
(213)
2017
£m
2,345
(2,595)
(250)
The UK scheme’s pension liabilities decreased compared with the prior year reflecting the payment of scheduled deficit-repair contributions
of £41m (2017: £40m) during the year, together with the impact of applying a higher discount rate assumption of 2.85% (2017: 2.55%)
to the valuation of scheme obligations and adopting the latest mortality base-rate tables. These decreases were offset by an increase
in the pension liabilities of £35m (2017: £nil) following the equalisation of historical guaranteed minimum pension obligations after a
recent UK court ruling. The net reduction in the pension liabilities was partially offset by a loss incurred on the revaluation of the pension
scheme assets.
The triennial valuation of the UK scheme is underway, during which we expect to agree the future deficit-repair contributions.
Interest-rate risk and interest-rate swaps
The Group’s investments and borrowings at 31 December 2018 were a mix of fixed rates of interest and floating rates of interest linked to
LIBOR and EURIBOR.
The March 2007 and July 2008 private placement notes and the May 2009, November 2016, June 2017 and May 2018 public notes
were all issued at fixed 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 maintain a proportion of the Group’s debt at fixed rates within the range 25% to 75%,
using the natural mix of fixed and floating interest rates emanating from the bond and bank markets and by utilising interest rate and cross-
currency swaps. As at 31 December 2018 this percentage is 69% (2017: 73%).
Part of the proceeds of the private placement and public notes have been swapped to floating interest rates, and accounted for as fair
value hedges, with a net loss in the hedges at 31 December 2018 of £6m (2017: £14m). The market value of the pay-fixed receive-variable
swaps and the pay-fixed receive-fixed cross-currency swaps outstanding at 31 December 2018, accounted for as cash flow hedges and net
investment hedges, was a net asset of £32m (2017: £73m).
Foreign currency hedging
The Group has many overseas subsidiaries and joint ventures, denominated in various different currencies. Treasury policy is to manage
significant 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 2018, the Group’s US dollar and Euro net assets were approximately 74% and 84% respectively, hedged by foreign
currency debt. As at 31 December 2018, net debt held in US dollars and Euros, and in those currencies officially pegged to these two
currencies, equated broadly to a ratio of 2.5x Adjusted EBITDA generated from these currencies (2017: 2.3x Adjusted EBITDA).
Tax policy
The Group’s tax policy is set out at g4s.com/tax.
Corporate governance
The Group’s policies regarding risk management and corporate governance are set out in the Risk management section on pages 64
to 71 and in the Corporate governance report on page 96.
Integrated Report and Accounts 2018 G4S plc 49
CHIEF FINANCIAL OFFICER’S REVIEW CONTINUED
Business performance – Alternative Performance Measures (APMs)
Summary Group results
Year ended 31 December 2018 (at 2018 average exchange rates)
£m
Revenue
Adjusted PBITAb
Profit before tax
Tax
Profit after tax
Earningse
EPSe
Operating cash flowf
Underlying
resultsa
7,289
474
365
(93)
272
259
16.7p
453
Year ended 31 December 2017 (at 2018 average exchange rates) – restatedg
£m
Revenue
Adjusted PBITAb
Profit before tax
Tax
Profit after tax
Earningse
EPSe
Operating cash flowf
Underlying
resultsa
7,213
474
362
(87)
275
258
16.7p
516
Year ended 31 December 2017 (at 2017 average exchange rates) – restatedg
£m
Revenue
Adjusted PBITAb
Profit before tax
Tax
Profit after tax
Earningse
EPSe
Operating cash flowf
Underlying
resultsa
7,415
484
370
(89)
281
263
17.0p
516
Onerous
contracts
118
(5)
(9)
–
(9)
(9)
(0.6)p
(11)
Onerous
contracts
107
–
(16)
4
(12)
(12)
(0.8)p
(12)
Onerous
contracts
107
–
(16)
4
(12)
(12)
(0.8)p
(12)
Disposed
businessesc Restructuring
Specific and
other separately
disclosed itemsd
105
(9)
(10)
(1)
(11)
(6)
(0.4)p
(3)
(31)
7
(24)
(24)
(1.6)p
(26)
(172)
32
(140)
(138)
(8.9)p
–
Disposed
businessesc Restructuring
Specific and
other separately
disclosed itemsd
295
8
8
(10)
(2)
–
–
3
(19)
4
(15)
(15)
(1.0)p
(19)
45
(36)
9
1
0.1p
–
Disposed
businessesc Restructuring
Specific and
other separately
disclosed itemsd
304
8
7
(10)
(3)
–
–
3
(20)
4
(16)
(16)
(1.0)p
(19)
46
(37)
9
2
0.1p
–
Statutory
7,512
460
143
(55)
88
82
5.3p
413
Constant
currencyh
7,615
482
380
(125)
255
232
15.0p
488
Statutory
7,826
492
387
(128)
259
237
15.3p
488
a. Underlying results are Alternative Performance Measures as defined and explained on page 40 and exclude the results from businesses disposed of during the current or prior year,
the effect of onerous contracts and specific and separately disclosed items.
b. Adjusted PBITA is an Alternative Performance Measure as defined and explained on page 41 and excludes specific and separately disclosed items.
c. Disposed businesses include the results of all businesses that have been sold or closed by the Group between 1 January 2017 and 31 December 2018 and are excluded from underlying
results to present current year and comparative underlying results on a like-for-like basis.
d. Other separately disclosed items include net (loss)/profit on disposal/closure of subsidiaries/businesses, the California class action settlement of £100m, the guaranteed minimum pension
equalisation charge of £35m and the results of discontinued operations. The associated tax impact is included within the tax charge within “other separately disclosed items”. In addition,
tax-specific charges or credits, such as those arising from changes in tax legislation which have a material impact, and which are unrelated to net specific items, are included within the tax
charge within “other separately disclosed items”. The accounting policy for specific and separately disclosed items is provided on page 42.
e. Earnings is defined as profit attributable to equity shareholders of G4S plc. Underlying Earnings and Underlying EPS exclude specific and other separately disclosed items as described on
page 40 and are reconciled to statutory earnings and statutory EPS above.
f. Operating cash flow is defined on page 42 as net cash flow from operating activities of continuing operations and is stated after pension deficit contributions of £41m (2017: £40m).
For the year ended 31 December 2017 it is presented at 2017 average exchange rates. Operating cash flow is reconciled to the Group’s movements in net debt on page 54.
g. Restated for the adoption of IFRS15 – see note 3(u).
h. Constant currency amounts show the 2017 statutory results retranslated at 2018 average exchange rates as described on page 40. Constant currency amounts should not be considered
as or used in place of the Group’s statutory results. Constant currency operating cash flow is translated at 2017 average exchange rates.
50 G4S plc Integrated Report and Accounts 2018
Basis of preparation of underlying results
The following review discusses the Group’s underlying results, which are an alternative performance measure as described on page 40 and
are reconciled to statutory results on page 50. Throughout this review, to aid comparability, 2017 prior year results are presented on a
constant-currency basis by applying 2018 average exchange rates, unless otherwise stated.
Underlying results
At 2018 average exchange ratesb
Revenue
Adjusted profit before interest, tax and amortisation (Adjusted PBITAa)
Adjusted PBITAa margin
Interest
Profit before tax
Tax
Profit after tax
Non-controlling interests
Earningsa (profit attributable to equity holders of the parent)
EPSa
Operating cash flowa,b
2018a
£m
7,289
474
6.5%
(109)
365
(93)
272
(13)
259
16.7p
453
2017a
Restatedc
£m
7,213
474
6.6%
(112)
362
(87)
275
(17)
258
16.7p
516
YoY
%
1.1
–
(2.7)
0.8
6.9
(1.1)
(23.5)
0.4
–
(12.2)
a. Underlying results, Adjusted PBITA, earnings, EPS and operating cash flow are Alternative Performance Measures (“APMs”) as defined and explained on page 40. They exclude the effect
of specific and other separately disclosed items, the results of onerous contracts and the results of businesses sold or closed since 1 January 2017, and are reconciled to the Group’s
statutory results on page 50.
b. 2017 comparatives are presented at 2018 average exchange rates as described on page 40, except for operating cash flow which is presented at 2017 average exchange rates.
c. The 2017 results have been restated for the effect of adopting IFRS 15 (see note 3(u)).
Revenue
The Group’s revenue increased by 1.1% year-on-year. Secure Solutions revenues were 3.1% higher than the prior year, as explained on
page 44. Cash Solutions revenue decreased by 9.3% reflecting the mobilisation of a large Retail Cash Solutions contract in North America
in 2017.
Adjusted PBITA
Adjusted PBITA of £474m (2017: £474m) was in line with the prior year. This reflects Adjusted PBITA growth of 6.9% in Secure Solutions
offset by lower revenue and increased business development and operating costs in Cash Solutions.
Interest
Net interest payable on net debt was £91m (2017: £90m). Net other finance costs were £7m (2017: £11m) and the pension interest
charge, related to the unwinding of the discount in relation to long-term pension liabilities, was £11m (2017: £11m), resulting in a total net
interest cost of £109m (2017: £112m).
Tax
A tax charge of £93m (2017: £87m) was incurred on profit before tax of £365m (2017: £362m) which represents an effective tax rate
of 25% (2017: 24%). The effective tax rate is a function of a variety of factors, with the most significant being (i) the geographic mix of the
Group’s taxable profits and the respective country tax rates, (ii) changes in the value of deferred tax assets and liabilities, (iii) permanent
differences such as expenses disallowable for tax purposes, (iv) irrecoverable withholding taxes, (v) the level of provision required for
potential tax liabilities not agreed with tax authorities and (vi) the impact of one-off items including tax claims.
Non-controlling interests
Profit attributable to non-controlling interests was £13m in 2018, a decrease from £17m in 2017, reflecting the non-controlling partners’
share of profit of certain businesses in Europe & Middle East.
Earnings
The Group generated profit attributable to equity holders (“earnings”) of £259m (2017: £258m) for the year ended 31 December 2018.
Integrated Report and Accounts 2018 G4S plc 51
CHIEF FINANCIAL OFFICER’S REVIEW CONTINUED
Earnings per share
Earnings per share was in line with the prior year at 16.7p (2017: 16.7p), based on the weighted average of 1,547m (2017: 1,548m) shares
in issue. A reconciliation of profit for the year to earnings per share is provided below:
Underlying earnings per share
Underlying profit for the year
Non-controlling interests
Underlying profit attributable to equity holders of the parent (earnings)
Average number of sharesa (m)
Underlying earnings per share
a. Stated net the average number of shares held in the Employee Benefit Trust of 5m (2017: 4m).
2017 at
constant
exchange
rates
£m
275
(17)
258
1,548
16.7p
2017 at
actual
exchange
rates
£m
281
(18)
263
1,548
17.0p
2018
£m
272
(13)
259
1,547
16.7p
Onerous contracts
The Group’s onerous contracts generated revenues of £118m (2017: £107m) for the year ended 31 December 2018. Adjusted PBITA
from onerous contracts of £(5) million for the year (2017: £nil) mainly represents the write down of the value of the assets and the
recognition of an onerous contract provision that were both individually below the threshold set to be classified as specific items, in respect
of two UK Care & Justice Services contracts.
During the year the Group recognised a net £4m additional onerous contract provision recorded as a specific item. This includes a £9m
charge related to two UK Care & Justice Services contracts, reflecting the estimated losses over the expected remaining contract terms.
In addition, a £5m credit has been booked as a specific item following the implementation of operational efficiencies in respect of certain
onerous contracts that has led to a reduction in expected future losses. It is expected that around 60% of the Group’s total provision for
onerous customer contracts of £51m will be utilised by the end of 2019.
In the year ended 31 December 2017 the Group recognised additional provisions of £19m, classified as specific items, primarily related to
the anticipated total losses over the next 15-20 years in respect certain UK government contracts.
Disposed businesses
Businesses disposed of during the year ended 31 December 2018, including the Group’s businesses in Hungary and the Philippines, an
archiving business in Kenya and the Cash Solutions businesses in the United Arab Emirates, Colombia and Saudi Arabia, generated revenue
of £105m and Adjusted PBITA of £(9)m in the year ended 31 December 2018 (year ended 31 December 2017: revenue £174m and
Adjusted PBITA £3m). Businesses sold during the year ended 31 December 2017 included the Group’s businesses in Israel and Bulgaria and
its Youth Services business in North America, and in total generated revenue of £121m and Adjusted PBITA of £5m for the year ended
31 December 2017.
Restructuring
The Group invested £31m (2017: £19m) in restructuring programmes during the year ended 31 December 2018, relating to the 2018-
2020 strategic productivity programme announced in 2017 which is being implemented across the Group, mainly in Europe & Middle East,
the Americas and Global Cash Solutions. In addition, the Group incurred non-strategic severance costs of £9m (2017: £8m) which are
included within Adjusted PBITA. We expect to invest around £20m in restructuring the Cash Solutions business in 2019 and estimate that
the costs of the cash separation review and separation process will be between £25-50m.
52 G4S plc Integrated Report and Accounts 2018
Specific and other separately disclosed items
Specific items - charges
Specific items - credits
Guaranteed minimum pension equalisation charge
California class action settlement
Net (loss)/profit on disposal/closure of subsidiaries/businesses
Acquisition-related amortisation
Specific and other separately disclosed items before tax
Tax credits/(charges) arising on specific and other separately disclosed items
Tax impact of the introduction of the US Tax Cuts and Jobs Act
Specific and separately disclosed items after tax
Profit/(loss) from discontinued operations
Non-controlling interests’ share of specific and other separately disclosed items
Total specific and other separately disclosed items – (charge)/credit to earnings
2017 at
constant
exchange
rates
£m
(18)
–
–
–
72
(9)
45
(17)
(19)
9
(6)
(2)
1
2017 at
actual
exchange
rates
£m
(18)
–
–
–
74
(10)
46
(18)
(19)
9
(6)
(1)
2
2018
£m
(23)
5
(35)
(100)
(15)
(4)
(172)
32
–
(140)
2
–
(138)
Specific items
The specific items charges of £23m (2017: £18m) include £12m related to additional provisions in Asia in respect of historical employee
gratuities and end of service benefits and £11m related to the reassessment of estimated settlement amounts in respect of historical
workers’ compensation claims in the Americas.
Specific items charges incurred during the year ended 31 December 2017 of £18m primarily comprised £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 disputes in respect of prior years in the Americas.
The specific items credit of £5m (2017: £nil) relate to successful court claims made by the Group in the Americas.
Guaranteed minimum pension equalisation charge
Following the UK High Court Ruling in the case of Lloyds Banking Group Pension Trustees Limited v Lloyds Bank plc (and others) in
October 2018, the Group recorded a charge of £35m (2017: £nil) in respect of the equalisation of benefits for historical guaranteed
minimum pension obligations between males and females in the UK.
California class action settlement
In January 2019 the Group agreed the settlement of a class action relating to claims for employee meal and rest breaks for the period
2001 to 2010 in California. This settlement is subject to the final approval of the Superior Court of the State of California. The amount to
be settled is between US$100m and US$130m with the precise amount to be determined during the settlement administration process.
A provision of £100m has been established in the accounts for the year ended 31 December 2018 representing management’s best
estimate of the amount of the class action settlement and any related costs.
Net (loss)/profit on disposal and closure of subsidiaries/businesses
During the year, the Group recognised a net loss of £15m (2017: profit of £72m) relating to the disposal of a number of its operations
including its businesses in Hungary and the Philippines, its archiving business in Kenya and the Cash Solutions businesses in the United Arab
Emirates, Colombia and Saudi Arabia. Disposals in 2017 included the Group’s businesses in Israel and Bulgaria and the Group’s Youth
Services business in North America.
Acquisition-related amortisation
Acquisition-related amortisation of £4m (2017: £9m) is lower than the prior year as certain intangible assets recognised on a number of
legacy acquisitions became fully amortised in 2017.
Integrated Report and Accounts 2018 G4S plc 53
CHIEF FINANCIAL OFFICER’S REVIEW CONTINUED
Tax credits/(charges) arising on specific and other separately disclosed items
Tax credits arising on specific and other separately disclosed items were £32m (2017: charges of £17m which related primarily to the
disposal of subsidiaries in the Americas region). The Group expects amounts owed to class members and their advisors under the proposed
California class action settlement to be deductible for US Federal and State tax purposes when paid and, in reognition of this, a deferred tax
asset has been established in the accounts for the year ended 31 December 2018.
Tax impact of the introduction of the US Tax Cuts and Jobs Act (“US tax reform”)
The Tax Cuts and Jobs Act introduced significant changes in US tax laws with effect from 1 January 2018. 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.
Reconciliation between statutory operating profit and net debt
A reconciliation between operating profit as presented in the Group’s consolidated income statement to movement in net debt is
presented below with 2018 amounts presented at actual rates for the year and the prior year amounts presented at 2017 average
exchange rates.
Operating profit
Adjustments for non-cash and other items (see page 148)
Net working capital movement
Net cash flow from operating activities before tax (page 148)
Adjustments for:
Restructuring spend
Cash flow from continuing operations
Analysed between:
Underlying operating cash flow
Disposed businesses
Onerous contracts
Investment in the business
Purchase of fixed assets, net of disposals
Restructuring spend
Disposal/closure of subsidiaries/businesses (see note 17)
Acquisition of subsidiaries (see note 16)
Net debt in disposed businesses
New finance leases
Net investment in the business
Net cash flow after investing in the business
Other uses of funds
Net interest paid
Tax paid
Dividends paid
Purchase of own shares
Transactions with non-controlling interests (see note 16)
Other
Net other uses of funds
Net (increase)/decrease in net debt before foreign exchange movements
Net debt at the beginning of the year
Effect of foreign exchange rate fluctuations
Net debt at the end of the year
1. Restated for the adoption of IFRS15 – see note 3(u).
54 G4S plc Integrated Report and Accounts 2018
2018
£m
253
240
(80)
413
26
439
453
(3)
(11)
(102)
(26)
45
(4)
(9)
(10)
(106)
333
(99)
(98)
(170)
(11)
(1)
7
(372)
2017
Restated1
£m
502
40
(54)
488
19
507
516
3
(12)
(104)
(19)
156
(1)
(11)
(3)
18
525
(78)
(86)
(179)
(10)
(16)
6
(363)
(39)
162
(1,487)
(32)
(1,558)
(1,670)
21
(1,487)
Movement in net debt during the year
Cash flow from continuing operations before restructuring spend was £413m (2017: £488m) after pension deficit-repair contributions of £41m
(2017: £40m) during the year. Cash outflow from businesses disposed of or closed was £3m (2017: £3m inflow), and cash outflow from onerous
contracts was £11m (2017: £12), both of which were excluded from underlying operating cash flow. Underlying operating cash flow reduced to
£453m (2017: £516m) and represents 95.6% (2017: 106.6%) of underlying Adjusted PBITA. The reduction compared with the prior year primarily
reflects a lower level of operating cash flow generation in the Americas region, which was impacted by the US Federal Government shutdown in the
run-up to the year-end, and in Europe & Middle East where the phasing of cash flows in respect of a small number of major contracts reduced cash
conversion in the year.
The Group invested £102m (2017: £104m) in net capital expenditure and received net proceeds of £45m (2017: £156m) from the disposal of
businesses. The Group made no significant acquisitions during the year.
Net cash inflow after investing in the business was £333m (2017: £525m). The Group’s net increase in net debt before foreign exchange movements
was £39m (2017: decrease of £162m) after net interest paid which increased to £99m (2017: £78m) primarily reflecting the initial annual interest
payment in respect of the EUR500m bond issued in June 2017, tax paid of £98m (2017: £86m) and dividends paid of £170m (2017: £179m).
The Group’s net debt as at 31 December 2018 was £1,558m (December 2017: £1,487m).
TIM WELLER
Group Chief Financial Officer
Integrated Report and Accounts 2018 G4S plc 55
CHIEF FINANCIAL OFFICER’S REVIEW CONTINUED
Reconciliation of prior period results from core businesses by segment to prior period underlying results by new segments – for the
year ended 31 December 2017
Year ended 31 December 2017 (£m)
Africa
Latin America
North America
Americas
Asia Pacific
Middle East & India
Europe
United Kingdom & Ireland
Europe & Middle East
Cash Solutions
Total before corporate costs
Corporate costs
Total
Year ended 31 December 2017 (£m)
Africa
Americas
Asia Pacific
Europe & Middle East
Cash Solutions
Total revenue
Africa
Americas
Asia Pacific
Europe & Middle East
Cash Solutions
Total before corporate costs
Corporate costs
Total Adjusted PBITA
Other financial KPIs (£m)
Profit before tax
Profit after tax
Earnings
Earnings per share – p
Operating cash flow
Revenue
Adjusted PBITAi
Core
businesses as
previously
reporteda
457
693
2,006
2,699
736
845
1,356
1,334
3,535
–
7,427
–
7,427
Cash
Solutionsb
(70)
(41)
(225)
(266)
(223)
(54)
(303)
(293)
(650)
1,209
–
–
–
Secure
Solutions
re-classificationc
–
–
–
–
358
(358)
–
–
(358)
–
–
–
–
Core
businesses
in new
structure
387
652
1,781
2,433
871
433
1,053
1,041
2,527
1,209
7,427
–
7,427
Core
businesses as
previously
reporteda
46
29
123
152
65
58
104
120
282
–
545
(49)
496
Cash
Solutionsb
(18)
(7)
(25)
(32)
(32)
–
(43)
(35)
(78)
160
–
–
–
Secure
Solutions
re-classificationc
–
–
–
–
27
(27)
–
–
(27)
–
–
–
–
Core
businesses
in new
structure
387
2,433
871
2,527
1,209
7,427
28
120
60
177
160
545
(49)
496
383
291
277
17.9
527
Re-classd
–
4
–
–
(4)
–
Portfolio
businessese
12
56
25
102
87
282
Onerous
contracts
–
–
–
12
–
12
Disposed
businessesf
(5)
(27)
(25)
(134)
(113)
(304)
–
3
–
–
(3)
–
–
–
–
–
–
–
–
1
–
–
4
(10)
(5)
–
(5)
(7)
(14)
(15)
(1.0)
(7)
–
–
–
–
–
–
–
–
–
–
–
–
(1)
(1)
(1)
–
(6)
–
(8)
–
(8)
(7)
3
–
–
(3)
Underlying
results
at actual
exchange
rates
394
2,466
871
2,506
1,178
7,415
IFRS 15g
–
–
–
(1)
(1)
(2)
Exchange
differencesh
(13)
(134)
(40)
(5)
(10)
(202)
–
–
–
1
–
1
–
1
1
1
1
0.1
–
28
122
60
176
147
533
(49)
484
370
281
263
17.0
516
(1)
(5)
(3)
–
(1)
(10)
–
(10)
(8)
(6)
(5)
(0.3)
–
Core
businesses
in new
structure
28
22
98
120
60
31
61
85
177
160
545
(49)
496
Underlying
results at
constant
exchange
ratesi
381
2,332
831
2,501
1,168
7,213
27
117
57
176
146
523
(49)
474
362
275
258
16.7
516
a. Results from core businesses as previously reported in the Group’s results for the year ended 31 December 2017. Segment results were presented geographically with segments
combining both Secure Solutions and Cash Solutions.
b. As reported in the 2017 Integrated Report and Accounts, in January 2018 the Group created a new ‘Cash Solutions’ division. This column shows the re-classification of the results from
the Cash Solutions businesses that were previously included in geographical segments into the new Cash Solutions division.
c. With effect from 1 January 2018, the Secure Solutions division was consolidated into four regions: Africa, Americas, Asia and Europe & Middle East. Following this reorganisation, the
results of certain businesses previously reported in the Middle East & India region (primarily India and Bangladesh) are now reported in the Asia region.
d. As part of the disposal of the Colombia Cash business in 2018, a small number of contracts that were previously reported in the Cash Solutions division were transferred to the Colombia
Secure Solutions business and integrated into their operations. Results from these contracts have been re-classified to be reported within the Americas region in the Secure Solutions
division and prior year comparatives have been restated accordingly.
e. The financial impact of portfolio businesses is no longer material and to simplify reporting moving forwards, the Group has ceased separate columnar disclosure of the results of
these businesses.
f. To present results on a consistent and comparable basis, the results from any businesses sold or closed in either the current or prior years are excluded from the underlying results in both
the current and prior years. These include the Youth Services business in North America, the children’s homes business in the UK and the Group’s businesses in Israel and Bulgaria that
were sold in 2017 and the archiving business in Kenya, the Group’s businesses in Hungary and the Cash Solutions businesses in the United Arab Emirates, Colombia and Saudi Arabia that
were sold in 2018.
g. With effect from 1 January 2018 the Group has adopted IFRS 15 – Revenue from Contracts with Customers, as explained in note 3(u) which has resulted in certain 2017 income
statement line items being restated.
h. The results for the year ended 31 December 2017 were presented at average exchange rates for the year ended 31 December 2017 as described on page 40. The comparative results
have been re-presented at average exchange rates for the year ended 31 December 2018.
i. Underlying results are an APM and are explained on page 40 and reconciled to the Group’s statutory results on page 50.
56 G4S plc Integrated Report and Accounts 2018
REGIONAL AND SERVICE LINE REVIEW
2018 REGIONAL AND SEGMENTAL REVIEW – UNDERLYING RESULTS
At 2018 average exchange rates
Africa
Americas
Asia
Europe & Middle East
Secure Solutions
Cash Solutions
Total Group before corporate costs
Corporate costs
Total Group
Revenue
2018
£m
405
2,443
881
2,501
6,230
1,059
7,289
-
7,289
Revenuea
2017
£m
381
2,332
831
2,501
6,045
1,168
7,213
-
7,213
Organic
growthb
%
6.3
4.8
6.0
(0.2)
3.0
(9.4)
1.0
-
1.0
Adjusted
PBITA
2018
£m
32
129
63
179
403
121
524
(50)
474
YoY
%
6.3
4.8
6.0
-
3.1
(9.3)
1.1
-
1.1
Adjusted
PBITAa
2017
£m
27
117
57
176
377
146
523
(49)
474
Adjusted
PBITA
margina
2017
%
7.1
5.0
6.9
7.0
6.2
12.5
7.3
Adjusted
PBITA margin
2018
%
7.9
5.3
7.2
7.2
6.5
11.4
7.2
YoY
%
18.5
10.3
10.5
1.7
6.9
(17.1)
0.2
2.0
-
6.5
6.6
a. Restated for the effect of IFRS 15 (see note 3(u)).
b. Organic growth is calculated based on revenue growth at 2018 average exchange rates, adjusted to exclude the impact of any acquisitions or disposals during the current or prior year.
During 2018 we successfully renegotiated the shareholder agreements for certain businesses in Europe & Middle East and Cash Solutions, increasing our control and economic interest in
those businesses with no incremental investment and the effect of this is excluded from organic growth.
Regional and service line financial performance
The Group’s business performance for internal
management reporting presents underlying results,
onerous contracts and disposed or closed businesses,
analysed between segments. The Group’s segmental
results are presented above, excluding onerous
contracts and disposed or closed businesses.
A reconciliation between underlying results and
statutory results by segment is presented below.
All commentary, results and tables on pages 57 to
62 are based on underlying results, with prior year
comparatives presented at constant exchange rates,
as described on page 40, unless stated otherwise.
Regional and segmental summary
(see pages 58 to 62)
During 2018, Group revenues grew 1.1% to £7.3bn,
with growth in Secure Solution of 3.1% offset by a
9.3% decline in Cash Solutions revenue.
Adjusted profit before interest, tax and amortisation
(Adjusted PBITA) was unchanged at £474m, with the
Adjusted PBITA margin 10 b.p. lower at 6.5% with
the reduced margin in Cash Solutions offsetting strong
performances in Secure Solutions.
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.
6.9%
Growth in Secure
Solutions Adjusted
PBITA in 2018
For the year ended 31 December 2018
For the year ended 31 December 2017
Statutory
results
£m
Disposed
businesses
£m
Onerous
contracts
£m
Underlying
results
£m
Statutory
results
£m
Disposed
businesses
£m
Onerous
contracts
£m
Underlying results
at 2017 average
exchange rates
£m
Exchange
movements
£m
Underlying results
at 2018 average
exchange rates
£m
Revenue
Africa
Americas
Asia
Europe & Middle East
Cash Solutions
Total Group revenue
Adjusted PBITA
Africa
Americas
Asia
Europe & Middle East
Cash Solutions
Total Group before
corporate costs
Corporate costs
Total Group
Adjusted PBITA
406
2,443
882
2,644
1,137
7,512
31
127
63
175
114
510
(50)
460
(1)
–
(1)
(25)
(78)
(105)
–
–
–
(118)
–
(118)
1
2
–
(1)
7
9
–
9
–
–
–
5
–
5
–
5
405
2,443
881
2,501
1,059
7,289
32
129
63
179
121
399
2,493
896
2,747
1,291
7,826
29
123
60
182
147
524
(50)
541
(49)
474
492
(5)
(27)
(25)
(134)
(113)
(304)
–
–
–
(107)
–
(107)
(1)
(1)
–
(6)
–
(8)
–
(8)
–
–
–
–
–
–
–
–
394
2,466
871
2,506
1,178
7,415
28
122
60
176
147
533
(49)
484
(13)
(134)
(40)
(5)
(10)
(202)
(1)
(5)
(3)
–
(1)
(10)
–
(10)
381
2,332
831
2,501
1,168
7,213
27
117
57
176
146
523
(49)
474
Integrated Report and Accounts 2018 G4S plc 57
REGIONAL AND SERVICE LINE REVIEW CONTINUED
SECURE SOLUTIONS
During 2018, our Secure Solutions business delivered organic revenue growth of 3.0%. Despite tightening
labour supply and intense competition in manned security services in some geographies, our commercial
discipline, productivity programmes and growing technology-enabled security revenues meant that we
strengthened our Adjusted PBITA margin in all four regions and the overall Secure Solutions Adjusted PBITA
margin rose from 6.2% to 6.5%.
AFRICA
SECURE SOLUTIONS – REGIONAL PRESIDENT MEL BROOKS
2018 HIGHLIGHTS:
UNDERLYING RESULTS
+6.3%
Organic growth
117,000
Employees
$8bn
Africa security
market in 2017*
18.5%
Adjusted PBITA growth
Revenue
£m
Adjusted PBITA
£m
2018
405
2017
381
YoY
6.3%
2018
32
2017
27
YoY
18.5%
* Freedonia Security Services Report, October 2018.
Key customer sectors – mining, oil and gas, retail, energy,
agriculture and financial services. G4S is the largest provider
of integrated security solutions in the region, with operations
in 24 African countries. The region’s largest countries by
revenue are South Africa and Kenya.
Revenue growth across our Africa region was 6.3% and Adjusted PBITA
increased by18.5%.
We made good progress developing and delivering integrated security
offerings and strengthening our monitoring and response services. Our remote
monitoring and response services for infrastructure are generating a positive
response in our key markets. Our new contract awards in the telecoms,
automotive and mining sectors provide us with positive momentum and we
believe that the business is well positioned to make commercial and financial
progress in 2019.
OUR VALUES IN ACTION - HELIOS TOWERS AND G4S
ENSURING TELECOMS CONNECTIONS IN AFRICA
G4S Africa is working with customers such
as Helios Towers, part of Helios Investment
Partners that is connecting international
capital and know-how to African talent
and enterprise.
Protecting mobile phone masts in remote
locations is an area of expertise for
G4S Africa.
Helios Towers owns and operates
telecommunications towers and passive
infrastructure in four high-growth
African markets. Their principal business
lies in building, acquiring and operating
telecommunications towers that are capable
of accommodating and powering the
needs of multiple tenants. Using a solution
combining video monitoring with real time
surveillance, G4S is providing a service that
results in a reduction in theft and vandalism,
real time monitoring of equipment status
and fuel levels in the generators with
significant cost savings and improved uptime
of mobile phone towers.
SDGs:
58 G4S plc Integrated Report and Accounts 2018
AMERICAS
SECURE SOLUTIONS – REGIONAL CEO JOHN KENNING
2018 HIGHLIGHTS:
UNDERLYING RESULTS
+4.8%
Organic growth
117,000
Employees
$65bn
Americas security
market in 2017*
10.3%
Adjusted PBITA growth
Revenue
£m
Adjusted PBITA
£m
2018
2,443
2017
2,332
YoY
4.8%
2018
129
2017
117
YoY
10.3%
* Freedonia Security Services Report, October 2018.
G4S North America Secure Solutions is the Group’s largest
integrated security business. Key customer sectors – financial
services, extractive, retail, government, embassies and
manufacturing. In Latin America, G4S is a leading integrated
Secure Solutions provider for commercial and government
customers across 18 countries, with Brazil, Colombia and
Peru our largest markets by revenue.
Revenues in our Americas region grew by 4.8% and Adjusted PBITA increased
by 10.3% with the impact of tight labour markets more than offset by an
improving revenue mix and the positive impact of our productivity programme.
Our Secure Solutions revenues in North America grew more than 5%, as our
consultative approach to designing and delivering integrated security solutions
continues to gain traction with large enterprise customers. We saw strong
demand for our risk and security consulting services, security analytics, executive
protection and investigative services. The United States remains close to full
employment and our rate of revenue growth in North America was self-
constrained as we continued to exercise appropriate commercial discipline.
In Latin America we continued to be disciplined in our bidding and our
revenues increased by 2.8%.
Our on-going investment in sales, business development and customer service
has enabled G4S to develop a substantial pipeline in the Americas, which
provides good support for our commercial momentum in 2019.
SDGs:
OUR VALUES IN ACTION - G4S WINS FIVE YEAR CONTRACT
TO SECURE PORT OF JACKSONVILLE - PROVIDING VITAL
CONNECTIONS TO THE SOUTHERN UNITED STATES
This is G4S Secure Solutions USA’s
largest maritime operation, with the
potential to influence the regional market
and further substantiate why G4S is
the company of choice for the critical
infrastructure sector.
In 2018, G4S won a new five-year contract
for the Port of Jacksonville, Florida.
Approximately 100 G4S security personnel
secure the port, which is one of the
largest in the southern United States, and
is considered to be critical infrastructure
for the US government, moving more than
one million containers per year. The local
knowledge of the team in Jacksonville,
together with the subject matter expertise
and leadership from the regional team
located in Jupiter, Florida, allowed us to
navigate successfully a challenging and highly
competitive bid process.
Integrated Report and Accounts 2018 G4S plc 59
REGIONAL AND SERVICE LINE REVIEW CONTINUED
ASIA
SECURE SOLUTIONS – REGIONAL CEO SANJAY VERMA
2018 HIGHLIGHTS:
UNDERLYING RESULTS
+6.0%
Organic growth
172,000
Employees
$55bn
Asia Pacific security
market in 2017*
10.5%
Adjusted PBITA growth
Revenue
£m
Adjusted PBITA
£m
2018
881
2017
831
YoY
6.0%
2018
63
2017
57
YoY
10.5%
* Freedonia Security Services Report, October 2018.
Key customer sectors are banking, retail, manufacturing,
government and energy. G4S is the leading security
provider in the Asia region with operations in 16 countries.
Our largest countries by revenue are India, Australia
and Thailand.
Revenue growth in Asia was 6.0% with growth across all of our major security
markets, including India, and Adjusted PBITA for the region increased by 10.5%.
We secured new and renewed contracts across a broad range of sectors
including multinationals, property services, technology and transport and
logistics. Across the region we have a diverse and substantial set of new
business opportunities that supports a positive outlook for this region in 2019.
OUR VALUES IN ACTION - G4S WINS NEW INTEGRATED
SECURITY CONTRACT IN SINGAPORE FOR ONE OF THE
WORLD’S LEADING PHARMA COMPANIES
In 2018, G4S Singapore started providing
manned security to Roche, one of the world’s
top pharmaceutical manufacturers, under a new
two-year contract.
We won the contract because of our integrated
security offering, getting the basics right
(attendance and appearance) and emphasising our
values, especially integrity and audit compliance.
SDGs:
60 G4S plc Integrated Report and Accounts 2018
EUROPE AND MIDDLE EAST
SECURE SOLUTIONS – REGIONAL CEO GRAHAM LEVINSOHN
2018 HIGHLIGHTS:
UNDERLYING RESULTS
-0.2%
Organic growth
108,000
Employees
$41bn
European security
market in 2017*
1.7%
Adjusted PBITA growth
Revenue
£m
Adjusted PBITA
£m
2018
2,501
2017
2,501
YoY
-0.2%
2018
179
2017
176
YoY
1.7%
* Freedonia Security Services Report, October 2018.
SDGs:
Key customer sectors – automotive, energy, financial services,
aerospace, defence, chemicals, biotechnology, food, aviation
and retail. G4S Europe Secure Solutions has activities in
the UK & Ireland, Denmark, Benelux, Southern Europe and
Eastern Europe. G4S Middle East Secure Solutions is the
leading security provider in the Middle East, with operations
in 11 countries.
Revenue in our Europe & Middle East region was broadly unchanged with good
growth in UK & Ireland security and revenue stabilisation in the Middle East,
offset by lower revenues in the Netherlands and Belgium, where we exited a
number of large contracts, some of which no longer offer an appropriate risk-
adjusted margin.
In the UK, we managed the COMPASS contract within existing provisions and
we are making good progress towards an exit from this contract in August 2019.
The Adjusted PBITA margin improved to 7.2% (2017: 7.0%) reflecting the
benefit of our productivity programme across the region.
Our Europe & Middle East pipeline has a large number of opportunities across
a diversified range of customer segments including manned security and security
systems contracts for the healthcare, government, multi-lateral agency and
airlines sectors.
Our focus for 2019 is on restoring revenue momentum whilst maintaining
commercial discipline.
OUR VALUES IN ACTION - G4S ACADEMY DENMARK
CONNECT SECURITY WITH CUSTOMERS’ CORE
BUSINESS STRATEGY
Initiatives such as the G4S Academy, which
has produced a cadre of integrated security
experts, have resulted in the G4S Denmark
business now generating two-thirds of its
revenues from security systems and one-
third from manned security. The foundation
of the Danish business was a consumer
alarms business upon which, in recent years,
we have very successfully built a complex
security systems business.
The G4S Academy was established on
the belief that, in an environment where
security threats are dynamic, it is essential
that our customers have access to our
global knowledge of the newest, most
sophisticated solutions that address these
threats. Knowledge not only means creating
a culture of awareness but also connecting
security with core business strategies,
making it an integrated and active part of
a company’s operations.
Integrated Report and Accounts 2018 G4S plc 61
REGIONAL AND SERVICE LINE REVIEW CONTINUED
CASH SOLUTIONS
The G4S Global Cash Solutions division
was formed in January 2018. In December
2018, the board announced that it was
reviewing the separation options for
the Cash Solutions business, believing
that a separation has the clear potential
to enhance the long-term strategic,
commercial and operational focus of both
the cash and secure solutions businesses
and unlock substantial shareholder value.
CASH SOLUTIONS
DIVISIONAL CEO JESUS ROSANO
2018 HIGHLIGHTS:
UNDERLYING RESULTS
-9.4%
Organic growth
32,000
Employees
$19bn
Value of global Cash-in-
transit and other services
market in 2017*
-17.1%
Adjusted PBITA growth
Revenue
£m
Adjusted PBITA
£m
2018
1,059
2017
1,168
YoY
9.4%
2018
121
2017
YoY
146 (17.1%)
* Freedonia Security Services Report, October 2018.
G4S Cash Solutions has operations in 44
countries and has either the number one
or two market position in 41 of them.
During 2018, we continued to experience very good
demand for our Cash Solutions technology and the
number of bank and business locations that we serve
grew from 19,800 to 23,300. In North America,
our operational scale grew in Retail Cash Solutions,
resulting in our Adjusted PBITA margin expanding to
c.15% (2017: 11%) for this business.
In 2017, the Retail Cash Solutions business posted
very strong revenue growth as we mobilised a large
cash technology and services contract in North
America. Whilst we had a number of significant
contract wins in 2018, we did not have a similar
mobilisation to 2017, leading to a reduction in Cash
Solutions revenues of 9.3%. Adjusted PBITA fell by
17.1% reflecting the impact of ATM and bank branch
closures in some markets and higher security costs in
Africa, principally South Africa, partially offset by a £5
million benefit from the early completion of a bullion
centre contract in the UK. Excluding Retail Cash
Solutions, Cash Solutions revenues grew by 0.5%.
We believe good growth opportunities exist in all
of our markets where we possess the infrastructure,
technology, licenses and a strong track record of
reliable and efficient delivery, for banks and retailers
to outsource more of their cash management activity
to G4S. In addition, we expect our network and
operational efficiency programmes to contribute to
profitability through 2019 and 2020.
62 G4S plc Integrated Report and Accounts 2018
G4S RETAIL CASH SOLUTIONS
TECHNOLOGY
DELIVERING SIGNIFICANT BENEFITS TO
RETAIL, BANKING AND OTHER BUSINESS
PARTNERS
Cash is still the most widely used form of payment by far in all regions of the world.
And cash in circulation is growing. For more information see the G4S Global Cash 2018
report online.
The payments landscape is changing and cash remains vital because choice of payment
is important for consumers and citizens across society. G4S continues to invest in cash
technology and to work with customers and payment institutions to improve the efficiency
and ease of using cash.
Cash technology such as G4S Retail Cash Solutions, an integrated cash management system,
combining hardware, in the form of cash recyling equipment, software and a managed
service offers customers the opportunity to significantly reduce their cash handling costs
and working capital related to cash management.
Integrated Report and Accounts 2018 G4S plc 63
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 significant risks to achievement of our strategic
objectives and safeguard our reputation.
An evolving risk landscape
Evolution of the risk landscape in 2018 was similar to
2017 with political leadership in several countries
causing uncertainty, continuing terrorism, weakening
economic recovery, geopolitical shifts, and on-going
instability in the Middle East. Environmental, cyber and
data privacy risks have gained prevalence and their
potential to disrupt business has increased.
These factors have created risks and opportunities for
the security industry. G4S continues to face the
operational and health and safety risks often
associated with the security industry, along with
financial and commercial risks common to all
multinational companies. Regulations continue to be
tightened with high penalties for non-compliance.
We continue to believe the risk to G4S from the UK’s
decision to leave the EU is unlikely to have a material
direct impact on G4S as we mainly operate within
national boundaries with around 80% of total Group
revenues outside the UK and minimal cross-border
trading. However, the continued political uncertainty
over the terms of the UK’s exit from the EU and the
shape of any future trading relationship is one of a
range of business factors that could affect us including
the availability of labour, supply of product, wage and
inflationary impacts, regulations and taxation. It is also
possible that the continuing uncertainty will have an
adverse impact on economic growth in the UK and
Europe, further affecting both our customers and
our competitors.
We continue to monitor global emerging risks
through our risk and governance framework.
What we did in 2018
Progress continued to be made on increasing risk
awareness and accountability for risk management on
the part of 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 implementation. Control self-assessments
were completed by all businesses. These are
reviewed, challenged and best practice shared by
region and group functional experts, with compliance
tested through internal audits. Our quarterly Regional
Audit Committees continued to focus on financial
judgments and addressing internal and external audit
findings, which enabled further improvement in
financial control awareness and effective performance
of risk mitigating controls.
What we will do in 2019
We will continue to refine our standards and controls,
and through support and training, we will help
businesses operate them effectively. Functional teams
will use the results of control self-assessments to assist
countries with achieving 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, financial judgments and reporting.
Through continued engagement and review by
country, region and group management, we will
enhance the quality and timeliness of the identification
of emerging risks and the delivery of mitigating actions.
Actions planned for 2019 for specific residual risks are
included in the principal risk section below.
64 G4S plc Integrated Report and Accounts 2018
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 our businesses
where 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, 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.
The review of separation options for our Secure
Solutions and Cash Solutions businesses, to establish
two independent businesses that are able to take
advantage of their leading market positions to deliver
sustainable profitable growth and unlock substantial
shareholder value may introduce new challenges to
G4S in the short term. These could include: not
identifying a successful value-adding proposition;
distracting management attention from delivering
results; disruption to existing transformation projects;
and reduced focus on control and risk mitigation. In
order to manage these challenges we will obtain
appropriate external advice, establish internal
governance structures and maintain focus on trading
reviews and close monitoring of other core aspects of
business performance and service delivery.
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 key 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 explanations and mitigating actions,
are outlined on pages 67 to 71. The Group’s risk
appetite has remained unchanged from the prior year
and this was reaffirmed by the Risk Committee and
the board during the year. The residual risks in
respect of growth strategy and laws and regulations
has increased from last year but has remained
relatively constant in other principal risk areas.
Integrated Report and Accounts 2018 G4S plc 65
RISK MANAGEMENT AND OUR PRINCIPAL RISKS CONTINUED
ENTERPRISE RISK MANAGEMENT GOVERNANCE MODEL
The board has responsibility for ensuring risk management processes are effective by reviewing the most critical risks and controls.
BOARD
RISK COMMITTEE
AUDIT COMMITTEE
The Risk Committee meets four times per year and reviews the
Group’s risk appetite, assesses the Group’s principal risks and
assesses the overall enterprise risk management process.
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 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 findings;
and
2. Reports on status of financial controls and significant
accounting judgments.
Operating
companies
We employ
three lines
of defence
to control and
manage risks
across the
Group.
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 achievement
of their business objectives 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 business
planning process with updates made in senior
management team meetings and trading reviews.
Self-assessments of compliance with Group control
standards are completed annually (bi-annually
for financial control standards).
1ST LINE: BUSINESS OPERATIONS AND SUPPORT
Responsibility for the first 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, finance,
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
66 G4S plc Integrated Report and Accounts 2018
Risk
The provision of security services, often in hostile or
dangerous circumstances, presents health and safety
(H&S) challenges. In addition to the significant impact
on individuals, serious H&S incidents could disrupt the
Group’s businesses, have a negative impact on our
reputation and lead to financial and regulatory costs.
In 2018, 24 (2017: 25) employees lost their lives in
work-related incidents, of which 14 (2017: 8) were as
a result of armed attacks and 7 (2017: 11) were
road-traffic incidents, as the year-on-year improvement
in road safety continued. There were 9 (2017: 3)
non-natural deaths of people in our custody.
Risk mitigation
We are committed to protecting the health, safety and
well being of our employees, people in our care or
custody and third parties. G4S uses a systematic
approach to managing H&S which is consistent with
internationally recognised standards. We monitor H&S
performance regularly and intervene if performance
does not meet the continuous improvement targets
set. The Group’s mandatory standards target the
critical safety risks in the Group including road and
firearm safety, and are supplemented by controls and
training for front line staff through to business leaders.
The annual self assessment by countries of compliance
with our standards is supported by site reviews from
local, regional and group managers and is included in
the scope of country internal audit visits.
Risk
G4S provides security for people, premises and
valuable assets. The Care & Justice Services business
provides services to detainees, victims of crime, people
needing assistance, and other members of the public.
We operate in many different countries with a diversity
of local and national cultures. Having an appropriate set
of values deeply embedded in our corporate culture is
key to ensuring that employees meet our expectations
including compliance with our ethical business conduct
standards. Failure to do so risks not delivering on our
commitment to our colleagues, customers and other
stakeholders, and businesses failing to comply with
legislation and international standards.
Risk mitigation
Our values, detailed on page 6, are continually
reinforced through a variety of processes including
recruitment, induction training and recognition
schemes, as well as communication materials. Our
values-based training materials for front-line employees
have been developed to reflect common experiences
or particular challenges which are identified through
whistleblowing cases, internal grievances or feedback
from the global employee engagement survey.
Nominated values ambassadors in businesses are helping
to cascade values-related communications. For managers,
the enhanced competency framework has helped guide
the development of mandatory online training. This also
uses realistic scenarios to guide managers in making value
based decisions from a range of options in order to
achieve the right outcomes in real-life situations. We
continue to build awareness of the importance of living
our values in our day-to-day activities, no matter how
challenging the circumstances.
During 2018 we continued the roll-out of safety
induction training, which included a focus on the risks
facing security officers. Four wide-ranging H&S reviews
were conducted in high-priority businesses, as well as
two follow-up audits to monitor improvement.
Safety improvement plans are required for all
businesses, with business leaders being responsible for
leading safety performance, developing and monitoring
action plans and putting H&S at the forefront of their
day-to-day activities.
Good practice and progress in delivering H&S
improvements are recognised and rewarded, while
poor practice and insufficient progress lead to close
executive scrutiny, and can impact performance-related
pay for business leaders.
Mitigation priorities for 2019
We will continue to refine our standards, policies and
controls where we see an opportunity to reduce H&S
risks further, using lessons learned from serious
incidents to drive actions to prevent recurrence.
Compliance with our standards will continue to be
monitored through self assessments, region and Group
reviews and internal audits. Topics which will be
prioritised are risk assessment processes, training on
road safety and improving controls to prevent attacks.
In the event that employees notice unethical behaviour
contrary to our values we encourage them to use our
confidential whistleblowing facility, Speak Out.
In 2018, we received 519 Speak Out reports (2017:
300) as we continue to raise awareness of this facility.
While all calls are investigated, matters of a serious
nature are investigated at a senior and independent
level, with 105 investigations completed during 2018
(2017: 59).
Mitigation priorities for 2019
For our front-line employees, we will continue to
provide updated training materials to reinforce the
behaviours expected in line with our values and will
use the global employee engagement survey, due to
be completed in 2019, to assess levels of awareness
and understanding. Where gaps are identified we will
develop remediation plans.
All new managers will be required to complete
the online training developed in 2018 and to confirm
their understanding of and commitment to compliance
with the Group’s Business Ethics Policy. Further
updated training on anti-bribery and corruption will
also be made available to all managers and employees
with responsibilities relating to financial transactions or
supplier and customer relationships.
Our reward and recognition schemes will continue to
be aligned with our values, to ensure they are
promoted in everything we do. The Group-wide
scheme will be enhanced to supplement local efforts
and enable us to showcase the types of behaviour
which exemplify our values and reflect the great work
that our employees do.
Principal risk
HEALTH AND
SAFETY (H&S)
Link to strategy
Principal risk
CULTURE AND
VALUES
Link to strategy
People and values
Customers
and service excellence
Technology
and innovation
Operational excellence
and productivity
Financial and
commercial discipline
Integrated Report and Accounts 2018 G4S plc 67
RISK MANAGEMENT AND OUR PRINCIPAL RISKS CONTINUED
Principal risk
PEOPLE
Link to strategy
Principal risk
MAJOR CONTRACTS
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 546,000
employees. Screening and vetting is a particular
challenge in some territories which lack supporting
infrastructure from the relevant authorities.
Any incident where our people fail to meet the
expectations of customers and other stakeholders
could lead to financial and reputational damage.
Whilst our controls are robust, we still face the risk of
an employee not behaving in line with our values.
Risk mitigation
The Group’s Human Resource (HR) standards cover
core requirements for delivering the HR strategy, such
as ensuring there are effective organisational
structures in place, that employees are screened,
inducted and trained to perform their jobs, and that
there are appropriate mechanisms in place for
managing ongoing performance and recognising
service excellence. Compliance is self-assessed
annually and reviewed by local, regional and Group
teams. Additionally, core HR controls are tested by
internal audit during visits to the businesses.
The performance and potential of managers across
the Group is reviewed to identify development needs
and build succession plans. We also deliver regional
leadership programmes to nurture talented individuals
early in their careers, and help them develop into
more senior roles as they move through the
organisation. Feedback from our global employee
survey is used to develop initiatives which support
employee engagement and development at all levels
of the organisation. Examples include the introduction
of two health and wellbeing initiatives for employees
in G4S Peru, the development of a new employee
handbook in the UAE and the launch of a new
quarterly briefing by managers for employees in the
UK Cash Solutions business.
Staff turnover is a key indicator of employee
satisfaction, and reducing it improves service standards
and reduces recruitment costs. During the year staff
turnover reduced from 25.3% in 2017 to 24.7% in
2018 (see page 20).
Mitigation priorities for 2019
Compliance with our core HR Standards will again be self
assessed during 2019 and reviewed by local, regional and
Group teams as well as tested by internal audit. Direct
support will be provided as necessary to enhance
compliance with our standards. Further, more detailed
training is being prepared to ensure HR teams have a
strong understanding of the core standards, why they are
important and what actions they need to take to ensure
compliance if there are any gaps.
Mitigation priorities for 2019
While improvements have been made in reducing the
risk of taking on onerous contracts, as the impact can
be significant, we will continue to enhance the quality
of the analysis used in the bidding process and ensure
that lessons are learnt from underperforming
contracts. Internal audit will perform more contract
reviews to ensure the risks in those contracts are
appropriately mitigated.
Risk
The Group operates a number of long-term,
complex, high-value contracts with multinational
companies, governments or strategic partners. Key
risks include; accepting onerous contractual terms;
poor mobilisation of contracts; not transitioning
effectively from mobilisation to on-going contract
management; not delivering contractual requirements;
inaccurate billing for complex contracts; ineffective
contract-change management; and not managing
sub-contractors appropriately.
Risk mitigation
We have strict thresholds for the approval of major
bids, involving detailed legal and commercial review
and senior management oversight. For a selection of
our most significant contracts in the UK, independent
reviews of all aspects of contract management and
performance are completed with appropriate actions
agreed and monitored to completion. We also
perform a quarterly financial review of the top 25 and
the low margin contracts in each region.
For our large multinational customers, account
managers oversee performance of these contracts
across relevant countries and have regular updates
with customers to ensure we meet our contractual
commitments.
We have embedded into the Salesforce opportunity
management tool our updated approval requirements,
to make compliance and monitoring more effective.
68 G4S plc Integrated Report and Accounts 2018
Principal risk
LAWS AND
REGULATIONS
Link to strategy
appropriate plans to respond. G4S continues to liaise
with relevant governments and authorities to
influence positively the regulatory environments in
which we work.
Mitigation priorities for 2019
Given the increased exposure and high penalties for
non-compliance in respect of this risk, the board and
Executive team will focus as a priority on the
enhancement of compliance with laws and regulations
across all jurisdictions we operate in. This will include
direct enquiry and oversight by Group and region of
local management to ensure awareness of these risks
become fully understood and ensure that concerns
are addressed appropriately with mitigation plans
implemented promptly.
Risk
G4S operates under many complex and diverse
regulatory frameworks, some of which have
extraterritorial reach and many where regulations
change frequently. Risks include: new or changed
restrictions on foreign ownership; difficulties obtaining
relevant licences to operate; complying with
employment legislation covering a wide range of
requirements; complying with often complex and
broad ranging local tax regulations; increasing litigation
and class actions; bribery and corruption and
complying with human rights legislation. Failure to
meet the required standards can lead to higher costs
from claims and litigation; inability to operate in
certain jurisdictions, through either direct
ownership or joint ventures; loss of management
control; damage to our reputation; and loss of
customer confidence.
The investigation opened by the Serious Fraud Office
(SFO) in 2013 in respect of the Group’s Electronic
Monitoring contract remains on-going and the Group
continues to engage and co-operate fully with the
investigation. Based on currently available information,
the Group is unable to make a reliable estimate of the
financial effect of the SFO’s investigation, and no
provision has been made in respect of it.
Risk mitigation
Our policies and procedures clearly set out the
requirement for local management teams to comply
with relevant laws and regulations. Group and
regional leadership, together with our Ethics
Committees at Group and regional level provide
oversight and support our businesses in mitigating the
risks. Group legal and regional leadership closely
monitor changes in foreign ownership laws and make
People and values
Customers
and service excellence
Technology
and innovation
Operational excellence
and productivity
Financial and
commercial discipline
Integrated Report and Accounts 2018 G4S plc 69
RISK MANAGEMENT AND OUR PRINCIPAL RISKS CONTINUED
Principal risk
GROWTH STRATEGY
Link to strategy
Principal risk
GEOPOLITICAL
Link to strategy
Risk
Our focus is on investing in the development of
innovative and integrated products and services and
improving business efficiency to strengthen service
excellence and support improved margins. There are
risks with adopting such a strategy: that we fail to
create higher-value solutions that differentiate us from
local commoditised competitors; that we fail to
deliver our core services effectively and consistently;
that we lose contracts or growth opportunities
through price competition and market changes; that
we fail to enter target markets successfully; that we
become over reliant on large customers; and that our
business transformation initiatives do not deliver as
expected.
Risk mitigation
We continue to focus on delivering excellent service
through the best-practice service delivery guidelines
in place for both our Secure Solutions and Cash
Solutions service lines. We have implemented a sales
methodology focused on consultative selling which
enables our sales teams to promote innovative
integrated solutions. We use our centres of
excellence to develop innovative solutions for
customers, particularly in electronic security and Retail
Cash Solutions. We leverage our global network to
offer integrated solutions internationally and our
global accounts programme supports and promotes
our multinational accounts initiatives. Our consistent
focus on delivering excellent service to customers
helps to drive customer satisfaction, retention
and growth.
Risk
We operate in many countries across the world, with
wide-ranging government and political structures,
different cultures with varying degrees of compliance
with laws and human rights, particularly within conflict
and post-conflict zones. Associated risk factors
include: political volatility, including the outcome of
elections and referendums affecting trade rules and
regulations and changes in policies towards business,
revolution, terrorism, and military intervention, and
mistreatment of migrant workers and employees
working for our suppliers. These risks impact us in
many ways: the health and safety of our staff and
customers; the continued operation of our businesses;
and the ability to secure our assets and deliver good
financial performance.
Risk mitigation
In markets where policy or trade agreements have a
significant impact on our ability to trade we engage
with governments to promote the benefits that G4S
brings to a market and an economy, to ensure that
we minimise potential adverse impacts of trade
restrictions or trade policy.
We collaborate with local partners, conduct early risk
assessments before and during security assignments,
develop robust operating procedures and work
closely with our local and global customers in
managing the risks of operating in such environments.
Through the diversity of industries and markets we
serve and the portfolio of products offering cost-
efficient solutions, we are able to mitigate the risk of
local reduced growth opportunities. We focus our
investment on innovative products and transforming
our cost base, with projects closely monitored by
Group and regional teams.
Mitigation priorities for 2019
Secure Solutions and Cash Solutions are strong
businesses with clear strategies and prospects. In
2019, we will review the options for separation of
these into two independent businesses, ensuring
even greater focus on customers and innovation.
The new sales methodology will continue to focus on
customer need and how our innovative and
integrated service will add value and drive increased
win rates. To improve customer retention rates we
will systematically leverage the existing structural
approach we have to understanding customers
requirements to proactively improve relationships and
customer satisfaction. We will continue to innovate
our product offering within each business, which will
include: proprietary security systems, video and
intelligent camera systems, video management
systems, global security intelligence systems, and
software tools including incident-management systems
such as RISK360 in our Secure Solutions business.
For Cash Solutions, our service offering will include
Retail Cash Solutions and solutions for our SME
customers.
Business transformation projects will be embedded
to ensure efficiency and margin improvements
are delivered.
Our Risk Management business has particular
expertise in providing secure solutions in very
high-risk, low-infrastructure environments.
We have a clear commitment to respect human
rights. All business units are required to annually
self-assess their compliance with human rights
standards which are reviewed by the Group and
included in internal audits for the higher risk countries.
We have also built awareness of human rights
responsibilities across the business and our partners
and are increasing engagement with suppliers to
ensure they are also complying with international
human rights standards. This is governed by a
mandatory supplier code of conduct which includes
anti-bribery and modern slavery requirements.
Mitigation priorities for 2019
In markets where potential government policy or
trade agreements may have a significant impact on
our ability to trade we will continue to engage with
governments to promote the benefits that G4S
brings. We will continue to monitor the results of
human rights control self assessments, providing
support with training and guidance where needed to
further embed awareness and understanding of
expectations. We will also continue to increase
engagement with suppliers to ensure their compliance
with human rights standards.
70 G4S plc Integrated Report and Accounts 2018
Risk
Increased regulations and sanctions relating to the
potential failure to secure sensitive and confidential
data, which we are entrusted with by customers, staff,
suppliers and other stakeholders, have increased our
risks in this area. Like all organisations, we face cyber
attacks from a variety of sources which, if successful,
could result in censure and fines by national
governments, loss of confidence in the G4S brand
and specific loss of trust by customers, especially
those in government and financial sectors.
Additionally, we face the risk of disruption to service
delivery and data loss from system failures, incomplete
backup routines, and inadequate business continuity
and disaster recovery plans.
Risk mitigation
The IT function is centrally managed to control the
way our systems are supported and run. We have
'defence-in-depth' technologies (i.e. multiple layers
of defence) in key systems to protect information
entrusted to us. This helps to ensure policies and
standards are applied consistently across all
operating businesses.
A programme of investment in cyber defence tools
was delivered during 2018 which has strengthened
the security of our IT systems and infrastructure,
including managed cyber security products, centralised
infrastructure management tools and cyber
vulnerability assessments.
We have introduced standards and guidance to
ensure compliance with the General Data Protection
Regulation (GDPR) across the UK and Europe.
Risk
We provide a wide range of cash management
services, including cash processing, fit-sorting of notes
for recycling, holding funds on behalf of customers,
secure storage, ATM services, as well as transporting
high values of cash and valuables including
international shipments. Our Retail Cash Solutions
offering can provide a full outsourcing of the cash
cycle. Our cash business face risks related to external
attacks, internal theft, gaps in cash reconciliations and
weak management supervision, which could lead to
loss of profit, increased cost of insurance and health
and safety considerations for our staff and the public.
Risk mitigation
The introduction of the Global Cash Solutions
division in 2018 has given us additional focus to drive
improvement in the effective performance of physical
security and cash reconciliations throughout our cash
businesses, to reduce both the number and value
of losses.
Our Reconciliation and Operational Cash Controls
continue to be implemented across our cash
businesses with direct support from regions and
Group to ensure awareness and effective
performance improvement. Self assessments against
Mitigation priorities for 2019
We will augment the cyber toolset with new network
management systems as well as a global programme
to migrate legacy data processing systems to the
Cloud. By moving our data processing systems to the
Cloud we will establish a global standard for disaster
recovery using the latest technologies available.
The programme of cloud migration will be complete
by mid-2020.
Principal risk
INFORMATION
SECURITY
Link to strategy
these standards are performed twice a year by each
branch and country head office. Compliance is
supported and monitored by regional teams and
through internal audit. We also have clearly defined
standards for physical cash security for our employees,
vehicles and processing centres. The Group, region
and local cash security teams are responsible for
monitoring compliance with these through self-
assessments of Mandatory Security Principles
performed by local management There are processes
in place for monitoring attacks and other cash losses
to ensure lessons learned are communicated across
the Group. Innovative security-defence products such
as cash box tracking, vehicle protection foam and
protective boxes are used in a number of businesses.
Mitigation priorities for 2019
The recently implemented merger of cash
reconciliation and physical cash security teams, will
provide greater focus on these key controls across
our cash businesses. In addition we will refine both
sets of controls to ensure they are relevant and
efficient and there will be more reviews to check
compliance by both regional teams and internal audit.
Principal risk
CASH LOSSES
Link to strategy
People and values
Customers
and service excellence
Technology
and innovation
Operational excellence
and productivity
Financial and
commercial discipline
Integrated Report and Accounts 2018 G4S plc 71
CHAIRMAN’S STATEMENT
CORPORATE
GOVERNANCE
SUPPORTING CHANGE
Focused on delivering value
During 2018 we made progress in developing our plans to
position the company for the future and in December 2018
announced that we had commenced a review of the options
for the separation of our Cash Solutions business. The board
believes that a separation has the clear potential to enhance the
focus and success of both Secure Solutions and Cash Solutions
and unlock substantial shareholder value.
JOHN CONNOLLY,
Chairman
BOARD AREAS OF FOCUS 2018
The board action plan for 2018 was informed
among other things by the results of the board
evaluation process and included:
■ Annual review of and development of plans for
execution of Group strategy
■ Monitoring the effectiveness and performance
of the organisation
■ Application of 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
Progress made in 2018 in all these key areas is set
out in the governance report.
COMPLIANCE WITH THE UK
CORPORATE GOVERNANCE CODE
In respect of the year ended 31 December 2018,
the company has complied with the provisions
of 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 corporate governance report examines how
we have applied these provisions.
72 G4S plc Integrated Report and Accounts 2018
Strategic context
At a time of great political and economic uncertainty,
we believe we have a clear plan and continue to
make progress against our strategic priorities. More
details on this progress can be found on pages 2
to 5. The review of the separation options for our
Cash Solutions business is underway and we believe
that this has the potential to create two strong,
independent businesses, each able to take advantage
of their strong market positions and service offerings
to deliver sustainable shareholder value. This is
consistent with the fundamentals of our strategy,
which is to deliver industry leading, innovative
solutions and outstanding service, for our customers,
engaging and rewarding work for employees and
sustainable growth and returns for stakeholders.
Supporting Progress
Planning for the future requires us to maintain our
focus on ensuring that the board composition remains
fit to support the Group, as it evolves. As noted in
the Nomination Committee Report (page 90), board
succession planning remains a priority for 2019,
particularly in light of our ongoing separation review.
In addition, our Chief Executive and Group HR
Director engage with the board each year on talent
management and succession plans.
In promoting the success of the company for the
benefit of its members, the board takes account of
other stakeholders’ interests. We will continue to
engage with our stakeholders and we value greatly
the feedback we received throughout the year. More
information about the board’s engagement with
stakeholders is set out on pages 86 and 87.
Corporate Governance
The board is committed to ensuring that corporate
governance is an integral part of our organisation.
The board has reviewed the company’s performance
against the UK Corporate Governance Code (the
Code) and has concluded that the company complied
with the Code throughout the 2018 financial year.
A copy of the Code is available from frc.org.uk. As
part of our annual corporate governance review, the
Board also considered the new provisions contained
within the 2018 Corporate Governance Code, which
applies to the company with effect from 1 January
2019 (the "New Code") and is taking steps to address
the new requirements. The board is supportive of
the changes which continue to focus on principles of
good governance and promote a more thoughtful and
company-specific approach to governance.
Adjusted PBITA margin rose from 6.2% to 6.5%. In
Cash Solutions, our North American Retail Cash
Solutions grew the number of locations served by
17% but did not have the same very large customer
mobilisation as in 2017. Overall Cash Solutions
revenues declined 9.3% and Adjusted PBITA declined
17.1%. Group organic revenue growth was 1.0% and
Adjusted PBITA was unchanged at £474 million.
As explained in the Strategic Report, the industries
in which we operate are going through a period
of significant change. The board has an important
role to play in reviewing our strategy, plans and
performance to ensure that the company is well
positioned to address these changes in a way that is
consistent with good governance and the interests
of our stakeholders. The role of our separate Risk
Committee remains important in supporting the
board in setting the right level of risk appetite and
reviewing key risks, major projects and contracts. The
work of the Risk Committee is described on page 96.
Changes to the board
Broadening the board’s capabilities and increasing the
diversity of skills, experience and backgrounds of our
board members was an important aspect of the work
of the board through its Nomination Committee
during 2018.
John Ramsay joined the board on 1 January 2018.
His extensive experience in international businesses
and his background in finance and accounting are
proving very valuable to our board and in leading our
Audit Committee.
As announced last year, after eight years on the
board, Clare Spottiswoode stepped down after
the company’s annual general meeting on 15 May
2018. Clare was instrumental, as chair of the CSR
Committee since 2014, in helping embed CSR and
governance processes across our organisation. On 18
June 2018, Elisabeth Fleuriot joined the board and was
appointed to the role of chair of the CSR Committee.
Elisabeth brings wide international management
experience in developed and emerging markets and
an understanding of CSR matters together with a
keen interest in sustainable development. The work of
the CSR Committee is described on page 93.
As announced on 1 March, John Daly will step
down after the company’s annual general meeting
on 16 May 2019. I would like to thank John for
his contribution to the work of the board, Audit
Committee and his leadership of the Remuneration
Committee. The Nomination Committee has initiated
a search to find a new non-executive director to join
the board.
Performance evaluation
Our externally facilitated board performance
evaluation conducted between September and
December 2018 is described on page 84. As in prior
years, I led the performance evaluation process with
assistance from the company secretary. Again this
year, the results were very useful and insightful and
were incorporated into the board plan for 2019.
Underlying results
During 2018, our Secure Solutions business delivered
organic revenue growth of 3.0% and Secure Solutions
The Group’s adjusted earnings per share was
unchanged at 16.7 pence per share. Operating
cash flow in 2018 was 96% of Adjusted PBITA
(2017:107%). The Group’s net debt to Adjusted
EBITDA at the year end was 2.7x (2017: 2.4x).
In August 2018, the board declared an interim
dividend of 3.59 pence (DKK 0.2969) per share
which was paid on 12 October 2018. The board
is confident that the business has the potential to
deliver good revenue growth in the medium term.
Mindful of the attractive opportunities to invest in
developing new products, solutions and services in
both Cash and Secure Solutions, the board proposes
to recommend a final dividend of 6.11p (DKK 0.5321)
per share, payable on 14 June 2019. This will bring the
total dividend for the year to 9.70p per share, in line
with last year’s.
People
With 546,000 employees across more than 90
countries, our people remain at the heart of
everything we do. The board continues to support
our employee engagement programmes and to
promote the application of our values across
the Group.
We also promote the use of “Speak Out”, our
independent and confidential whistleblowing system,
as an important tool to help us to monitor adherence
to our values and to take steps to ensure values and
behaviours are closely aligned wherever we operate.
The board and I look forward to reviewing the results
of our 2019 employee survey and in the meantime,
we thank all our people for their continued hard work
and dedication.
JOHN CONNOLLY
Chairman
OUR VALUES
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 find 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.
Integrated Report and Accounts 2018 G4S plc 73
BOARD OF DIRECTORS
BOARD OF DIRECTORS
1
2
3
4
5
6
7
8
9
10
74 G4S plc Integrated Report and Accounts 2018
OUR
BOARD
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
firm 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 firm.
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 Officer
Appointment to the board: May 2013
Committee membership: Risk Committee
Skills and experience: Extensive board
and executive management experience in
complex international businesses. Holds an
MBA from the London Business School.
Career experience: 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.
Formerly non-executive director (chair of
Risk and Audit) of Schroders plc between
2011 and 2016 and Noble Corporation Inc
between 2013 and 2018.
Current external commitments: Chairman 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. Significant 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
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 Pacific.
Current external commitments:
Non-executive Chairman of Britvic plc and
Vivo Energy.
4. ELISABETH FLEURIOT
Non-Executive Director
Appointment to the board: June 2018
Committee membership: CSR Committee
(chair) and Remuneration Committee
Skills and experience: BA in Economy,
Finance and Marketing and an MA in
Economic Sciences from the Institut
d’Etudes Politiques de Paris. Awarded the
title of Chevalier de L’Ordre national de la
Légion d’honneur.
Career experience: Over 20 years’
experience as President and CEO in FMCG
multinational companies based in Europe,
the USA and Asia. Served as CEO of Thai
Union Europe & Africa between 2013
and 2017. Prior to this, she spent 12 years
with the Kellogg Company, in various roles
including Regional President and Senior Vice
President Emerging Markets. Earlier in her
career she was General Manager, Europe for
Yoplait, having spent the first 18 years of her
career with the Danone group.
Current external commitments: Currently
a non-executive director of Stora Enso
Oyj, a company listed on the Helsinki and
Stockholm stock exchanges, board member
of a private company investing in foodtech
start ups and board member of Fondation
Caritas.
5. 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 finance, audit
and corporate advisory work and has held
a wide range of roles in private equity firms
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.
6. 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.
7. 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.
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
Pacific for Zeneca Agrochemicals and later
promoted to Global Financial Controller.
In 2000 he joined Syngenta AG, as Group
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 non-executive director of RHI
Magnesita N.V.
8. 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 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
significant 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.
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
finance, Columbia University, New York
and a BA in psychology, Duke University,
North Carolina. International executive
with experience using technology to meet
customers’ needs and develop new business
models. Strong knowledge of North
America, Latin America and Scandinavia.
Career experience: After an early career
in marketing in North America, held senior
management roles in the consumer goods
and telecommunications sectors including
CEO of NetCom ASA, Norway’s second
largest mobile network operator. Extensive
non-executive experience with global
companies including several international
technology companies.
Current external commitments: Non-
executive director of Svenska Cellulosa
Aktiebolaget SCA (publ), Essity Aktiebolag
(publ) and Hilti AG.
10. TIM WELLER
Chief Financial Officer
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 significant 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 financial control.
Held CFO positions with Innogy, a leading
integrated energy company at the time,
RWE Thames Water and United Utilities
Group plc. 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.
Integrated Report and Accounts 2018 G4S plc 75
EXECUTIVE COMMITTEE
EXECUTIVE COMMITTEE
OUR EXECUTIVE
COMMITTEE
1
2
3
4
5
6
7
8
76 G4S plc Integrated Report and Accounts 2018
9
10
11
9. STEPHANE VERDOY
Group Sales and Marketing Director
Appointed: February 2018
Skills and experience: Stephane joined G4S
in May 2014 in the role of Regional Sales
Operations Director and moved in to
the role of Sales Director, Europe shortly
afterwards. Stephane holds a bachelor
degree in Marketing and Distribution. Prior
to joining G4S he held many different roles
in sales, sales operations and field marketing
at Fedex. His last position at Fedex was Vice
President Global Sales and Sales Operations
Europe.
10. SANJAY VERMA
Regional CEO, Asia Pacific
Appointed: January 2018
Skills and experience: Sanjay joined G4S
in May 2017 as Regional President Secure
Solutions – Asia Pacific. Sanjay has extensive
business experience operating across Asia
Pacific having been based in India, China
and Hong Kong. Sanjay joined G4S from
Cushman & Wakefield, a global real estate
services firm. During his 17 years in that
company he held a number of leadership
roles including CEO, Asia Pacific and
Chief Executive, Global Occupier Services,
covering 16 countries in the Asia Pacific
region. Sanjay is a graduate in electrical
engineering and has a MBA in finance &
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.
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. SØREN LUNDSBERG-NIELSEN,
Group General Counsel
Appointed: 2001
Skills and experience: Søren began his
career as a lawyer in Denmark and has had
a wide range of legal experience as general
counsel for international groups in Europe
and the US before joining the Group in
2001 as Group General Counsel. Søren
has overall responsibility for all internal and
external legal services for G4S Group and
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.
7. JENNI MYLES
Group HR Director
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 office 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).
8. JESUS ROSANO
Divisional CEO, Global Cash Solutions
Appointed: January 2018
Skills and experience: Jesus joined G4S in
March 2014 as Chief Operating Officer,
Latin America. In January 2016 Jesus
joined the executive committee as Group
Strategy and Commercial Director and was
appointed to his current role, on 1 January
2018. 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 Latin America and North
America. Before DHL, Jesus worked in
strategy consulting and investment banking.
1. ASHLEY ALMANZA
Chief Executive Officer
See page 74 for full biography
2. TIM WELLER
Chief Financial Officer
See page 75 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
India and South Asia, 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 OfficeMax.
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 member of Miami University
Advisory Athletic Board and a past board
member of the Make-a-Wish Foundation.
5. GRAHAM LEVINSOHN
Regional CEO, Europe and Middle East
Appointed: November 2017
Skills and experience: Graham has more
than 20 years’ experience in the security
industry. He has held a number of
commercial and line management positions
in our cash and security businesses. Graham
was responsible for the creation of the
UK cash centres outsourcing business in
2001. He became Group Strategy and
Development Director in 2008 and joined
the executive committee in 2010. He was
appointed Regional CEO, Europe in 2013
and the Middle East was added to his
portfolio in 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.
Integrated Report and Accounts 2018 G4S plc 77
CORPORATE GOVERNANCE REPORT
OUR GOVERNANCE
FRAMEWORK
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 fulfils a number of its
responsibilities directly (see the
list of matters reserved to the
board on page 79) and others
through its committees.
NOMINATION COMMITTEE
Role and responsibilities
■ Review board composition
■ Lead the process for new board and committee appointments
■ Review board succession planning processes
See page 90
CORPORATE SOCIAL RESPONSIBILITY COMMITTEE
Role and responsibilities
■ Review and approve the company’s CSR strategy or recommend
policies to ensure CSR remains 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 93
BOARD
RISK COMMITTEE
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
GROUP RISK
AND
INTERNAL
AUDIT
FUNCTION
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 96
AUDIT COMMITTEE
Role and responsibilities
■ Oversee the financial reporting process and ensure the integrity
of the company’s financial statements
■ Monitor internal audit
■ Approve external audit scope and fee, review and monitor
external auditor’s independence
See page 98
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 105
78 G4S plc Integrated Report and Accounts 2018
The board is responsible for a number of specific matters in the following areas:
MATTERS RESERVED TO THE BOARD
■ Strategy and management
■ Structure and capital
■ Financial reporting and controls
■ Risk appetite, risk management and
internal controls
■ Material contracts
■ Major acquisitions and disposals
■ Communication with shareholders
■ Board membership and other
appointments
■ Delegation of authority
■ Corporate governance matters
■ Tax and treasury 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.
KEY ROLES IN OUR GOVERNANCE FRAMEWORK
To ensure a clear division of responsibilities
Chairman of the board
■ Leads the board, 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, on going training to support
the performance of their duties and
timely and clear information
■ Maintains regular contact with major
shareholders and conveys their views
to the board
Chief Executive Officer
■ 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 profile in
accordance with the risk appetite set by
the board
■ Ensures effective communication
between the board and the business
Senior Independent Director
■ Acts as a sounding board for the
chairman and as an intermediary for the
other directors when needed
Independent non-executive
directors (NEDs)
■ Provide constructive challenge and
support
■ Maintains a balanced understanding of
the views of major shareholders
■ Maintains regular and effective
communication with other directors
■ Leads the yearly appraisal of the
chairman’s performance
■ Chairs the Nomination Committee
when it is considering issues directly
affecting the chairman
■ Monitor management’s performance
against agreed targets
■ Satisfy themselves on the integrity of
financial information and that financial
controls and systems of risk management
are robust and effective
■ Determine appropriate levels of
remuneration for executive directors
■ Key role in appointing directors and in
board succession planning
Chief Financial Officer
■ Manages financial risks in accordance
with the risk appetite set by the board
and implements effective internal
financial control processes across the
Group
■ Responsible for financial
planning to support the company’s
strategic objectives
■ Leads the Group’s finance, internal
audit, procurement, information
technology, tax and treasury functions
■ Provides regular financial reporting to
the board
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 officer in preparing and
organising induction programmes
for NEDs
Integrated Report and Accounts 2018 G4S plc 79
CORPORATE GOVERNANCE REPORT CONTINUED
BOARD BALANCE AND DIVERSITY
The Group’s workforce reflects 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 therefore it actively promotes diversity within
the organisation.
More information about the Group’s approach to
diversity is set out on pages 22 and 23.
Mindful of its obligations under both DTR7.2.8A and
Code Provision B.2.4, the board adopted, earlier
this year, a formal board diversity policy to capture
its approach to diversity and set out the principles
it follows in considering board appointments, board
composition, and succession planning.
The board diversity policy is available at g4s.com/
investors and further information on how the board
applies the principles set out in the policy is set out in
the report of the Nomination Committee on pages
90 and 91.
The board’s policy promotes diversity in terms
of gender, ethnicity, nationality, skills, personal
attributes and experience. Most board members have
international experience, which is very important in a
Group like G4S, with operations in over 90 countries.
Experience of a variety of industries, a mix of both
long-serving and new members, gender diversity as
well as five nationalities represented on the board, all
contribute to greatly enrich debate in the boardroom,
and bring fresh perspectives and understanding.
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.
Board balance
Non-executive directors
Executive directors
Gender
Male
Female
Board tenure 2018
2 years or less
> 2 yrs < 4 yrs
> 4 yrs < 6 yrs
> 6 yrs < 8 yrs
80%
20%
70%
30%
20%
30%
30%
20%
Geographical experience
Africa
Asia Pacific
Europe
Latin America
Middle East &
India
North America
UK & Ireland
Industry experience
Business services
Energy/utilities
Finance
FMCG
Logistics
Manufacturing/
operations
Technology
Pharmaceutical/
biotechnology
80 G4S plc Integrated Report and Accounts 2018
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
2018 and their biographical details are set out on pages
74 and 75.
All these directors served throughout the year
under review, apart from Clare Spottiswoode, a
non-executive director who retired from the board
on 15 May 2018, and Elisabeth Fleuriot, who was
appointed to the board on 18 June 2018.
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. In
addition, a review is undertaken by the Nomination
Committee at least once a year.
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 each annual general
meeting, in accordance with the Code’s provision
on re-election of directors. With the exception of
John Daly who will step down at the end of the 2019
AGM, all the continuing directors intend to stand for
election or re-election, as the case may be, at the
company’s upcoming AGM.
Potential conflicts
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 conflicts or
may conflict 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.
Board composition, roles and attendance (as at 31 December 2018)
Chairman
John Connolly1
Executive Directors
Chief Executive Officer
Ashley Almanza
Chief Financial Officer
Tim Weller2
Non-Executive Directors
John Daly3
9/10
Elisabeth Fleuriot4
5/6
Winnie Fok
9/10
Steve Mogford (Senior Independent Director)5 10/10
John Ramsay6
9/10
Paul Spence
10/10
Clare Spottiswoode7
4/4
Barbara Thoralfsson
10/10
Meetings attended
Board* Nomination
2/2
9/10
CSR*
n/a
Risk*
5/6
Audit Remuneration
n/a
n/a
10/10
10/10
n/a
n/a
n/a
n/a
2/2
n/a
n/a
n/a
2/2
n/a
n/a
n/a
4/4
6/6
6/6
6/6
2/2
n/a
6/6
5/6
n/a
n/a
5/6
n/a
6/6
n/a
n/a
n/a
n/a
4/4
n/a
4/4
4/4
4/4
n/a
n/a
n/a
n/a
3/3
2/2
3/3
n/a
n/a
n/a
1/1
3/3
* There were seven scheduled board meetings and three additional meetings during the year. Four meetings of the CSR Committee and the Risk
Committee were scheduled during the year and two additional meetings for each committee also took place.
1. Mr Connolly was unable to attend one board meeting and one Risk Committee meeting due to a temporary indisposition.
2. Mr Weller was unable to attend one unscheduled meeting of the Risk Committee due to a prior conflicting engagement. Prior to the meeting,
he had signified his approval of the matters being discussed to the committee chairman.
3. Mr Daly was unable to attend one unscheduled board meeting due to a prior conflicting engagement. Prior to the meeting, he had provided
comments and feedback on matters to be discussed to the chairman of the board.
4. Ms Fleuriot was appointed to the board and as chair of the CSR Committee and member of the Remuneration Committee with effect from
18 June 2018. She was unable to attend one board meeting due to a conflicting engagement made prior to her joining the board
5. Mr Mogford was unable to attend one meeting of the Risk Committee due to a prior conflicting commitment. Prior to the meeting, he had signified
his approval of the matters being discussed to the committee chairman.
6. Mr Ramsay was unable to attend one board meeting due to a conflicting engagement made prior to joining the board. Prior to the meeting,
he had provided comments and feedback on matters to be discussed to the chairman of the board.
7. Ms Spottiswoode retired from the board and as chair of the CSR Committee on15 May 2018.
Integrated Report and Accounts 2018 G4S plc 81
CORPORATE GOVERNANCE REPORT CONTINUED
Board meetings
Seven scheduled board meetings and three additional
meetings took place during the year ended
31 December 2018. 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 significant 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 2019
including a two-day board and strategy meeting.
2018 BOARD ACTIVITIES IN FOCUS
■ Held a two-day strategy forum with the Group
Executive Committee, in October
■ Approved the launch of the review of
separation options for the Cash Solutions
business
■ Appointed one new non-executive director
■ Discussed succession plans for board members
■ Approved half-year results and year-end results
■ Received regular reports from the chair of the
nomination, CSR, risk, audit and remuneration
committees
■ Reviewed and approved the Group Business
Ethics Policy, Market Abuse Regime framework,
Group treasury policy and Group tax strategy
■ Approved the Group’s slavery and human
trafficking statement
■ Monitored and reviewed developments in
corporate governance and reporting
■ Conducted visits to a G4S cash centre and G4S
managed custodial facilities in the UK, as well as
to Group operations in Northern Europe (see
below)
■ Took part in various engagements with
shareholders and investors during the year –
see page 86
■ Reviewed the 2018 AGM proxy voting figures
TWO-DAY STRATEGY
SESSION AT G4S DENMARK
SAFETY, SECURITY AND
SERVICE EXCELLENCE
In October 2018, the board and Group executive team held a
two-day strategy session at the Group’s Danish headquarters,
located just outside Copenhagen. The board and Group
executive team met with the Danish senior management team
as well as a number of employees focused on research and
development and innovation.
The board received an in-depth presentation on the
business model adopted by the Danish business. By placing
the customer at the heart of their offering and involving
the customer every step of the way, the team ensures
the development of integrated security solutions which
generate tangible value for customers and promote greater
and closer collaboration.
A demonstration of drone technology took place at which
the board and executive team learnt more about how such
technology was being deployed to support and supplement
other security solutions.
In addition, the board and executive team had the
opportunity of meeting the Danish senior management
team informally.
VALUES:
Innovation and Teamwork
82 G4S plc Integrated Report and Accounts 2018
INDUCTION, INFORMATION AND DEVELOPMENT
A tailored induction is provided to new directors joining the
board. The induction is designed to ensure new directors have the
necessary understanding of their role and how they can maximise
their effectiveness. It is therefore tailored to individual needs and
those of the role they will fulfil on the board.
To build on the induction programme, directors receive further
briefings both to help in their own development and to enhance
their awareness of the different elements of the business. In
addition, non-executive directors learn about the Group’s business
and meet employees and management through site visits.
In 2018, induction programmes were run for two non-executive
directors, namely Mr Ramsay who joined the board on 1 January
2018 and chairs the Audit Committee and Ms Fleuriot who joined
the board on 18 June 2018 and chairs the CSR Committee.
Continued induction – Audit Committee chair
In addition to the steps set out one page 76 of the 2017 Integrated Report and Accounts, Mr Ramsay’s induction also included several
site visits, which were arranged throughout the year, including to two G4S run custodial facilities as well as the Group’s largest cash centre
in the UK. Mr Ramsay also attended a regional audit committee, thus gaining a better understanding of management processes, focus on
controls and approach to judgmental areas.
Tailored induction – CSR Committee chair
Upon joining the board on 18 June 2018, a four step induction programme was prepared for Elisabeth Fleuriot, who also took on the role
of chair of the CSR Committee.
Step 1 focused on promoting a good understanding of the
company and the role and duties associated with the role
of board director in the context of a UK quoted company.
Access to information about the company, group structure,
management team, board governance, minutes of board and
committee meetings and risk management, briefing on directors’
duties and other regulatory and legal matters was provided.
Step 2 sought to help Ms Fleuriot develop an understanding
of the company’s business, markets and main relationships.
Over four days, Ms Fleuriot had individual sessions with
members of the group executive team and senior managers.
Areas covered included strategy, investor relations, governance,
finance, legal and human resources.
Step 3 was designed to provide a deeper knowledge of corporate
social responsibility matters from a G4S perspective. Ms Fleuriot
met with her predecessor
Ms Spottiswoode, as well as the Group Corporate Affairs Director,
the main executive sponsor for CSR matters. In addition, focused
sessions with members of the senior management team with
responsibilities or particular knowledge of CSR matters took place.
These included a session with the Head of Government Relations
& CSR. A series of meetings were also organised with the Group
Director who has particular responsibility for the Group’s health
and safety programme. Such meetings included focused sessions
with the Group Health & Safety Director who appraised Ms
Fleuriot of the company’s goal of zero-harm and related initiatives.
Ms Fleuriot also met with the Head of Employee Relations,
Diversity and Inclusion, to gain a better understanding of employee
relations and engagement methods, as well as the Group’s
approach to diversity and inclusion.
Step 4 consisted of site visits and Ms Fleuriot together with other
members of the CSR Committee visited the Gatwick Immigration
Removal Centres in December 2018. Additional site visits are due
to be arranged during the first half of 2019.
BOARD DEVELOPMENT PROGRAMME
Our board development programme focuses on promoting a greater
awareness and understanding of our business and wider market issues as well
as developing trends or topical issues relevant to their role as director of a
UK quoted company with a secondary listing in Copenhagen.
Site visits, which allow directors to meet with local management and
front-line staff, are organised once or twice a year. Some visits will involve
the entire board, such as the visit to the Group’s operations in Denmark.
Others involve smaller groups, for example our CSR Committee visited a UK
custodial facility during the year and another group of directors visited our
largest cash centre in the UK. Meeting operational staff and local management
is helpful both to gain a better understanding of challenges they face but also
when reviewing succession planning below board level.
In addition, all non-executive directors are encouraged to visit our overseas
businesses, if they happen to be travelling for other purposes.
During the year regular updates were also provided at board and
committee meetings on developing trends and UK corporate governance
changes which would need to be reflected in the Group’s corporate
governance arrangements.
April – UK cash centre visit
A group consisting of about half of the members of the board met with the
management team of the cash centre and UK cash business and received a
presentation on cash cycle management and outsourcing. Directors then
toured the facility and watched a demonstration of vehicle security and
protective solutions for cash transportation.
October – Denmark business visit
The two-day strategy session was held in Denmark (see case study opposite).
This gave the board an opportunity to see the new products and services
being developed by the Danish R&D teams.
December – UK immigration removal centre
The CSR Committee members visited Brook House, a G4S managed
immigration removal centre (see page 94).
Integrated Report and Accounts 2018 G4S plc 83
CORPORATE GOVERNANCE REPORT CONTINUED
BOARD AND COMMITTEES PERFORMANCE REVIEW
In accordance with guidance from the Code, board
and committees performance are assessed yearly
with the support of an external facilitator. At least
once every three years, the board conducts a fully
externally facilitated exercise which was last carried
out in 2017. In 2018, the board and committee
evaluations were carried out by Oliver Ziehn of
Lintstock. Oliver Ziehn and Lintstock have no other
connection with the company.
The exercise consisted of tailored questionnaires
sent to board members as well as a number of other
internal and external stakeholders. The responses
to the questionnaires were then compiled and
analysed by Lintstock before they were shared with
the board and each committee for consideration at
meetings which took place in December.
Stage 1
The process started in September, with the
development of tailored questionnaires in
collaboration with the chairman of the board and
each committee chair.
In late October, each of the directors, company
secretary, Group HR Director, Group Corporate
Affairs Director, Director of Risk and Internal Audit,
Group Financial Controller, Director of Compensation
and Benefits, other regular board committee
attendees and external participants including audit
partners from PwC (the Group’s external auditor)
and Deloitte (the Group’s remuneration consultant)
were invited to complete the questionnaires online.
The process was entirely confidential and designed
to ensure open and valuable feedback was provided.
Stage 2
The Lintstock team compiled a report based on
views gathered through replies to the questionnaires.
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 2019.
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 also 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 led by
the senior independent director about the chairman’s
performance, without the chairman being present.
The senior independent director also sought the
views of the executive directors.
BOARD REVIEW OUTCOME
Board
The conclusions of this year’s review confirmed
that the board operates effectively, with the
board dynamics enhanced by recent additions to
the board. Other areas which received positive
feedback included the board’s relationship with the
chief executive officer, time management of board
meetings and board support.
A number of areas for further work were also
identified. 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 directors’
continuous development.
Committees
The effectiveness of the committees of the board
was also reviewed and the results of the evaluation
were also positive, with committees perceived to be
running efficiently 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 continued to be highly
rated, in particular in managing individual directors’
input. His relationship with the chief executive officer
was also highly rated.
84 G4S plc Integrated Report and Accounts 2018
BOARD ACTION PLAN 2019
The board action plan for 2019 was informed among other things by the results of the board evaluation process and will include:
■ Board oversight on execution of the strategy
■ Maintaining the application of technology in the business
■ Board and management succession planning
■ Development of board members including interaction with executives
■ Monitoring the effectiveness and performance of the organisation
■ Implementing changes to the Group’s corporate governance structure to comply with the New Code and reporting
requirements
■ Continued focus on corporate culture
■ Maintaining an understanding of the Group’s stakeholders, including customers, employees and shareholders
Stakeholders
The board’s engagement with the Group’s stakeholders helps frame the Group’s strategic direction, informs the board’s decision making
process and overall supports the board’s duty to promote the success of the company as set out in Section 172 of the Companies
Act 2006. Our formal engagement process for CSR matters is set out below. Other stakeholders engagement activities are
described overleaf.
CSR Materiality Assessment
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 undertaken every two years. The most recent assessment, completed in
December 2017 confirms three core CSR priority areas during 2018 and 2019:
1. Health and Safety
2. Human Rights
3. Anti-Bribery and Corruption
Working in partnership with independent experts, we reviewed and identified issues and trends which may have the potential to have an
impact on our business, our stakeholders and the wider security industry. Together with our partners, we conducted a series of interviews
with the executive and non-executive members of G4S senior management team and a broad range of external stakeholders, including
sustainability analysts, industry bodies, customers, suppliers, and NGOs. We sought views and opinions on which issues present the greatest
risk or opportunity to the organisation’s performance, strategy and reputation. The findings reinforce the importance that G4S’ ethics,
culture and values, and our employee’s personal standards and behaviour have in preventing issues and poor performance across the core
priorities and other CSR matters. Our next CSR materiality assessment is due in 2019.
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 2018 G4S plc 85
CORPORATE GOVERNANCE REPORT CONTINUED
ENGAGING TO DELIVER VALUE
Engagement activities with the Group’s key stakeholders, what matters to each group and how we respond,
are detailed on pages 16 and 17. This section focuses on how our board engages with stakeholder groups.
KEY STAKEHOLDERS
HOW THE BOARD ENGAGES
SOCIETY
Our employees
touch the lives of
others every day,
providing crucial
services to help
keep society safe
and secure.
■ As part of its decision making process, the board takes into consideration a broad range of issues which are
reported to the board through a variety of means.
■ During the year under review, the board received regular updates on corporate governance reform and
broader societal issues that were considered by the Financial Reporting Council and UK government.
■ The board reviewed and approved a number of policies including the Business Ethics Policy (g4s.com/ethics)
as well as the tax strategy (g4s.com/tax).
■ The Audit Committee reviewed the potential impact of Brexit on the Group and the Company.
■ The CSR Committee sought to understand whether certain societal trends, such as the MeToo movement
were reflected in the reports coming through whistleblowing and other reporting channels.
CUSTOMERS
Through
understanding our
customers’ needs
we can offer value
added, innovative,
cost effective security
solutions and
build enduring
relationships.
SHAREHOLDERS
The company
actively seeks
to engage with
shareholders on
a regular basis.
■ The chief executive officer, chief financial officer and chairman attend a number of meetings with customers.
■ The chief executive officer and other senior executives provide customer feedback and information to the
board during the year.
■ The board receives insights into customer constraints and requirements as part of its consideration of large
contract bids or renewal.
■ The board also reviews customers’ changing expectations or needs as part of its strategy session every year.
■ A number of major contracts were reviewed by the Risk Committee.
■ The primary means used by the board for communicating with all company shareholders are the annual
report, annual results and half-year results announcements and the AGM.
■ The section of the website dedicated to investor 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.
■ The board receives reports on investor relations at each scheduled meeting.
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
■ Each year, the chairman, director of investor relations and company secretary meet with major shareholders
as part of an annual round of governance meetings. The chairman reports on those meetings to the board.
■ The chief executive officer and the chief financial officer also have contact via one-on-one meetings,
group meetings and telephone conference calls with current and potential shareholders as well as with
analysts. These meetings tend to be focused primarily on the Group’s trading performance and the
implementation of its strategy.
■
In addition, the senior independent director and the chairman of the Remuneration Committee also met
with some shareholders.
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 16 May 2019, 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 Group’s website. It is intended that all the directors (other than Winnie Fok who has a
conflicting engagement) will attend and be available to answer questions from shareholders.
■ The meeting will be informed of the number of proxy votes cast and the final results of votes on the
resolutions will be published subsequently on the website.
86 G4S plc Integrated Report and Accounts 2018
KEY STAKEHOLDERS
HOW THE BOARD ENGAGES
EMPLOYEES
With 546,000 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.
■ The board’s engagement with the Group’s 546,000 employees is facilitated through a variety of
initiatives and channels.
Board visits and other engagements
■ Throughout the year, board members had a number of opportunities to meet both front-line
employees and managers in a number of geographies through various board visits. Board members met
with staff working in UK custodial facilities as well as in immigration removal centres. Further details
can be found on page 94. The board also met employees in the Cash Solutions division at the Group’s
largest cash centre in the UK. In October the board’s visit to G4S’ operations in Denmark afforded
an opportunity for board members to meet the senior management team in Denmark, as well as
employees focusing on integrated security solutions. Further details of the board’s trip to the Danish
business are on page 82.
■ The board met with the members of the group executive team in October for a two-day strategy session.
■ The chairman visited the headquarters of the North American business at the beginning of the year and
provided an update to the board.
Health and Safety
■ The board received regular health and safety reports. Specific briefings were also provided to the
board in relation to serious incidents such as the incident in Kabul, Afghanistan, which resulted in five
of our colleagues losing their lives.
Surveys and other forms of engagement
■ The results of the employee surveys, as well as those of focus groups are reported and discussed by
the board.
■ The Remuneration Committee and the board reviewed and approved the Gender Pay Gap report.
SUPPLIERS
We have a responsible
purchasing policy
consistent with our
business ethics.
■ The Group CFO is the executive with responsibility for management of the group procurement
function. With a supplier base of about 40,000 suppliers of varying sizes spread across the 90 countries
the Group operates in, engaging with suppliers takes place in many different ways.
■ One of the main ways in which the board considers key suppliers is as part of large contract bid or
renewal approvals.
■ Supplier management initiatives are also discussed as part of the annual review and approval by the
board of the Slavery and Human Trafficking Statement.
■ The Treasury Policy which sets out the Group’s approach to managing its bank and other suppliers of
financial services to the Group is also reviewed and approved by the board.
Integrated Report and Accounts 2018 G4S plc 87
CORPORATE GOVERNANCE REPORT CONTINUED
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 defined 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 in this
regard 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 Group. The
principal risks, their possible impact and the
mitigating actions taken, are set out on pages 67 to
71. 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 66 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 96.
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 an
area of focus during 2019.
The Audit Committee has confirmed that,
although it is satisfied that the Group’s risk
management and internal control processes are
appropriate and effective, given the decentralised
nature of the Group and the number of internal
controls and processes which are manual, the need
for continued focus on enhancing the internal
control environment remains. The work of the
Audit Committee in this respect can be found in
the Audit Committee report on page 98. The
board has reviewed the Group’s risk management
and internal control systems for the year to
31 December 2018 by considering reports from
the Audit Committee and the Risk Committee
and has also taken account of events since
31 December 2018.
FAIR, BALANCED AND UNDERSTANDABLE
The preparation of the Integrated Report and Accounts is coordinated by the finance, investor relations
and company secretariat teams with group-wide support and input from other areas of the business.
Comprehensive reviews were undertaken at regular intervals throughout the process by senior
management and other contributing personnel within the Group.
The preparation process was reviewed by the Audit Committee and the board has reviewed a paper
prepared by management setting out the governance process relating to the preparation of the
Integrated Report and Accounts.
The board has separately considered the disclosures in the Integrated Report and Accounts and has
concluded that they are fair, balanced and understandable.
The statement required to be given by the directors by Code provision C.1.1 can be found on page 131.
88 G4S plc Integrated Report and Accounts 2018
VIABILITY
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 bottom-
up rolling planning cycle, taking into account the
Group’s current position, the potential impact of the
principal risks documented on pages 67 to 71 and the
Group's business model. 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 impact of the Group’s on-going
productivity programme.
The analysis of the viability of the Group has been
performed following a two-stage approach
considering firstly the assessment of the Group's
prospects, followed by an assessment of the
Group's viability.
ASSESSMENT OF PROSPECTS
The Group’s prospects are assessed primarily through
its bottom-up strategic planning process. In 2013
the overall strategy for the Group was refreshed
comprehensively and the board has monitored progress
closely against this strategy as well as the risks to its
success. The portfolio management programme has
created a focused Group with two principal business
segments: Secure Solutions and Cash Solutions, which
resulted in the establishment of the Global Cash
Solutions division on 1 January 2018. In December
2018, the Group announced that it was reviewing
options for the separation of the Group’s Cash
Solutions businesses from the Group and the rationale
for this is set out on page 3 of the strategic report.
Nevertheless, this viability analysis addresses the Group
as it is currently constituted and does not consider the
potential impact of a cash separation.
The 2018 planning process commenced in May 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 refined by regional management and then by the
group executive committee before being reviewed by
the board in October 2018. The key assumptions in
the financial forecasts, reflecting the overall strategy,
include:
■ A continued demand for security services and a
growing demand for technology-enabled and
integrated security, as set out on page 10 of the
strategic report;
■ An ability to continue to drive through our
productivity programmes to drive efficiency and
operational improvement and to flex the cost
base, as set out on pages 30 to 31; and
■ Continued delivery of operating cash flow
conversion in line with our targets as set out on
pages 32 and 33.
ASSESSMENT OF VIABILITY
The output of the strategic plan was used as the
baseline for analysing covenant headroom under
different scenarios. This analysis included assessing the
sensitivity of the financial performance of the Group
to changes in trading conditions, the capital needs of
the business, as well as the potential impact of 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 67 to
71 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 financial position. Nevertheless, the Group
has sensitised its three-year financial projections for
the following risks:
a. Potential loss of certain of the Group’s
top customers;
b. Potential adverse changes in foreign ownership
legislation resulting in cessation of material
business lines;
c. Potential working capital deterioration leading to
operating cash flow being below expectation
during the viability period;
d. Potential claims in respect of major contracts
resulting in material settlement payments; and
e. 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 to 2021 as indicated on page
47 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, albeit with significantly lower levels of liquidity
than are typically available to the Group, unless
further debt capital market issuance takes place. In
recent years the Group has had good access to the
debt capital markets and the directors expect that
such access will continue to be available, which
mitigates the risk of tightening liquidity over the next
three years in a stress test scenario.
VIABILITY STATEMENT
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 financial years to 31 December 2021.
Integrated Report and Accounts 2018 G4S plc 89
CORPORATE GOVERNANCE REPORT CONTINUED
THE NOMINATION
COMMITTEE
During the year, the work of the
Nomination Committee was focused on
refreshing the board and reviewing its
composition as well as laying the
foundations to ensure that the attributes,
skills and experience needed to ensure the
board continues to be effective, as the
business enters a period of change, are
clearly understood.
Responsibilities
The Nomination Committee’s remit covers broadly
five 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.
Board composition
Following the announcement in December 2017 that
Clare Spottiswoode would step down from the board
and as chair of the CSR Committee at the conclusion
of the AGM on 15 May 2018, the Nomination
Committee initiated the recruitment process for the
appointment of a new non-executive director to
succeed Ms Spottiswoode.
The Zygos Partnership (Zygos) was appointed to
assist the committee with the recruitment. Zygos was
provided with a candidate specification setting out the
requirements for the role and the preferred attributes
of potential candidates. In selecting the candidates,
consideration was given to the skills and
competencies required for the role, including an
interest in, and enthusiasm for, the CSR agenda and a
strong corporate conscience. The ability to make a
broad contribution to the board was also key. In
addition, consideration was given to the need to
enhance board diversity and to continue to attract
individuals with relevant skills and strong international
experience, as well as corporate culture and fit.
Shortlisted candidates were interviewed by the
chairman, other members of the Nomination
Committee, and the CEO. Zygos (now part of Russell
Reynolds) has no connection with the company other
than as provider of recruitment consultancy services
to the Nomination Committee.
JOHN CONNOLLY,
Nomination Committee Chairman
Committee membership during 2018
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 2018, the committee met twice. In addition a number
of decisions were made by written resolution.
Members’ attendance at committee meetings is shown
on page 81.
Main activities of the Nomination
Committee during the year (%)
Recruitment of NEDs
Independence and extending terms of appointment
Reviewing board committee membership
Succession planning
50%
20%
15%
15%
Link to strategic priorities
90 G4S plc Integrated Report and Accounts 2018
The process resulted in Elisabeth Fleuriot joining the
board as non-executive director and chair of the CSR
Committee on 18 June 2018. In addition, she was
appointed as a member of the Remuneration
Committee. Information about the induction
programme undertaken by Elisabeth is provided on
page 83.
Following the announcement in March 2019 that John
Daly would step down from the board and as chair of
the Remuneration Committee at the conclusion of
the company’s 2019 AGM on, a recruitment process
has been initiated for a new non-executive director to
succeed him. Russell Reynolds, which has no
connection with the company other than as provider
of recruitment consultancy services to the committee,
was appointed to assist with the recruitment.
Directors’ length of service
As part of its annual review of 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.
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
During 2018, the committee considered the terms of
appointment of five directors which were due to
expire either during the year or early in 2019. Two of
these directors (Steve Mogford and Barbara
Thoralfsson) had been appointed in 2016 and were
coming to the end of their initial two-year term. In
May 2018 the Nomination Committee considered
the extension of their term of appointment and,
concluded that they had successfully developed a
deeper understanding of the business and made
active contributions to the board. At the same
meeting, the term of appointment of the chairman,
John Connolly, who had been appointed in June 2012,
was also considered. In light of his length of service,
taking account of provision B.2.3 of the Code, a
rigorous review of his contribution to the board was
carried out and it was concluded that the chairman
continued to lead the board effectively.
Messrs Connolly and Mogford and Ms Thoralfsson did
not participate in the committee’s deliberations
regarding their respective term of appointment.
The matter of the extension of two directors’ terms
of appointment was considered later in the year. The
term of appointment of Winnie Fok, who was
appointed to the board in October 2010 and first
elected at the 2011 annual general meeting was due
to expire in September 2018. That of Paul Spence
Director
Executive directors
Ashley Almanza
Tim Weller
Non-executive directors
John Connolly
John Daly
Elisabeth Fleuriot
Winnie Fok
Steve Mogford
John Ramsay
Paul Spence
Barbara Thoralfsson
Date of appointment
Unexpired termc
1 May 2013a
1 April 2013b
8 June 2012
5 June 2015
18 June 2018
1 October 2010
27 May 2016
1 January 2018
1 January 2013
1 July 2016
n/a
n/a
16 months
3 months
16 months
18 months
15 months
10 months
20 months
17 months
a. Ashley Almanza was appointed to the board on 1 May 2013 as chief financial officer and took on the role of chief executive officer 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 financial officer
c. Unexpired term calculated on the basis of the current two-year term for non-executive directors.
Integrated Report and Accounts 2018 G4S plc 91
CORPORATE GOVERNANCE REPORT CONTINUED
was due to expire in January 2019. In relation to
Winnie Fok, in evaluating her contribution to the
board, the committee noted that the combination of
Winnie’s position and experience relating to the
Group’s Chinese and Asian markets combined with
her general business experience and expertise
remained valuable to the board in supporting the
development of the business in its fastest growing
market. As for Paul Spence, the committee noted that
his government and large outsourcing contracts
experience as well as his experience and knowledge
of the US, one of the Group’s largest markets,
remained very relevant to the business. The in-depth
knowledge he had gained as chair of the Risk
Committee since January 2016 and as chair of the
Audit Committee during 2017 was also noted.
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.
Diversity is also expresly included in the specification
provided to search agencies for each recruitment.
Consideration is also given to diversity when
reviewing board composition and the result of the
annual board performance evaluation. In doing so, the
committee took account of the results of the third
Hampton-Alexander review into gender diversity on
boards of FTSE 350 companies published, as well as
the recommendations of the Parker review on
ethnic diversity.
Committees composition
The composition of board committees was reviewed
at the time of the appointment of Elisabeth Fleuriot in
June, and her experience as a current serving member
on the remuneration committee of another quoted
company was thought to naturally lend itself to her
joining the Remuneration Committee in addition to
chairing the CSR Committee. The review concluded
that the committees’ composition remained effective
and will be further reviewed during the first half
of 2019.
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 considered to be effective, the committee
acknowledged the need for greater focus and a more
structured approach to succession planning for the
board and executive team. The committee will also
support the work of the board in taking a more active
interest in talent management to ensure initiatives are
in place to develop the pipeline and to promote
diversity and inclusion in appointments to the board,
executive team and senior management.
The committee recommended to the board that the
appointments of Messrs Mogford, Spence, Connolly
and Mses Thoralfsson and Fok be extended for a
further two-year term.
The committee was satisfied that the non-executive
directors continue to remain independent and
committed to their role as directors of the company.
With regard to Winnie Fok specifically, both the
committee and the board are satisfied that she will
continue to remain independent when her tenure
exceeds nine years, for the reasons set out above.
The board further believes that her knowledge and
experience of the business will provide helpful
continuity at a time of great change for the Group.
The committee and the board are mindful of the
need to refresh the board however, and will keep the
matter under review as a part of the overall board
succession plan.
Succession planning
At its December meeting, the Nomination
Committee reviewed the board directors' length of
tenure, board committees composition as well as the
current skills and experience available on the board.
The committee also considered what further skills or
experience may be useful to enable the board to
support the developing needs of the Group. The
results of the board evaluation were also considered.
Reviewing these various parameters helps inform
future board recruitment.
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 80.
92 G4S plc Integrated Report and Accounts 2018
THE CSR
COMMITTEE
This is my first report, having joined the board in June 2018
and taking over as chair of the CSR Committee from my
predecessor Clare Spottiswoode. I would like to thank Clare, for
her dedication and focus on ensuring the integration of CSR as
part of the Group’s overall strategy during her tenure. A lot of
good work has been done, but there remains scope to embed
CSR further throughout the organisation and I am committed to
ensuring that we continue to take a holistic and integrated
approach in this regard. There are few businesses in the world
which have as wide a geographic footprint, scale and diversity of
workforce as G4S, with service offerings touching the lives of
millions of people. Of crucial importance to me and to our
Group is our continued drive to improve health and safety, and
during 2019 our committee will continue to support our goal of
zero harm. We operate in countries where the political and
social environment is challenging, so we need to make sure we
operate in line with our corporate culture and values to ensure
the integrity of our organisation, the safety of our employees and
those in our care and, the sustainability of our business.
Responsibilities
The Group takes a holistic approach to corporate and
social responsibility and is mindful of our societal
impact. Our 546,000 employees deliver services in
complex and challenging environments and contribute
to creating a safer and more connected society in
which millions of people live and work. 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. Over the last seven
years, this holistic and integrated approach to CSR has
been promoted successfully throughout the Group
and during the course of 2018, the committee
reviewed and considered amending its terms of
reference accordingly. However, in light of the New
Code, which came into force in early 2019, it was
agreed that amending the terms of reference would
be deferred to 2019. Further details of the
committee’s responsibilities can be found in the
committee’s terms of reference which are available at
g4s.com/investors.
Integrated Report and Accounts 2018 G4S plc 93
ELISABETH FLEURIOT,
CSR Committee Chair
Committee membership during 2018
Clare Spottiswoode (Chair)1
Elisabeth Fleuriot (Chair)2
Winnie Kin Wah Fok
John Ramsay
Paul Spence
Member since
January 2012
June 2018
January 2012
January 2018
January 2013
1. Clare Spottiswoode retired as a director on 15 May 2018.
2. Elisabeth Fleuriot joined the board and was appointed chair of the
CSR Committee on 18 June 2018.
Other regular attendees include the Regional President for the Africa
region, the Group Corporate Affairs Director and the Group HR
Director.
There were four scheduled meetings and two additional meetings
during 2018. Members’ attendance at committee meetings is shown
on page 81.
Main activities of the CSR
Committee during the year (%)
Current issues
Health and safety
CSR reporting
Values/culture ethics/whistleblowing
Link to strategic priorities
45%
25%
15%
15%
CORPORATE GOVERNANCE REPORT CONTINUED
Strategic Health Authority and of the Financial
Ombudsman Services Limited. The CSR Committee
met with Kate Lampard on three occasions to discuss
progress, findings and recommendations. Members of
the committee also visited Brook House and met with
detainees, detainee custody officers and team leaders
as well as the senior management team. While at
Brook House, the committee was provided with an
update on the action plan and initiatives to capture
and share best practice across other similar facilities. In
December 2018, G4S published the full report from
Verita, as well as the action plan and progress to date.
The CSR Committee continues to receive regular
updates about the operational improvement plans
implemented following the allegations and the findings
and recommendations of the Verita investigation.
HMP Birmingham
Following a major disturbance at HMP Birmingham in
December 2016, the inner city remand prison faced
numerous challenges in returning to normal operation
as a result of issues including drug usage by prisoners
and increasingly high levels of violence towards staff
and fellow prisoners. The CSR Committee was
appraised of measures being taken following the
incidents of 2016 to ensure the prison was fully
operational, bearing in mind that the nature, age,
condition and location of HMP Birmingham made it a
particularly challenging environment.
In August 2018, G4S agreed with the UK Ministry of
Justice (MoJ) that Her Majesty’s Prison and Probation
Service (HMPPS) would "step-in" and take over the
management of the prison by appointing a Governor
and providing additional resources. This status remains
in place at the time of this report.
The CSR Committee led an internal review to assess
the factors which led to the situation at the prison
and ultimately to the "step-in" by HMPPS and identify
any lessons that could be learnt and shared across the
broader G4S custodial estate. The committee will
continue to monitor the actions arising from the
review.
Health and safety
The safety of our employees and those in our care is
of paramount importance. As part of its normal cycle
of work, the committee received regular health and
safety reports, including updates on on-going
initiatives, details of future plans and summaries of
incidents. The committee monitored the global
programmes raising awareness across the spectrum of
health and safety risks as well as those focused on
addressing and eliminating specific recurring incidents.
In addition, particular focus was given to health and
safety challenges faced in custodial facilities and a
presentation on these aspects was received.
The CSR Committee supports the Group’s goal of
zero harm. However sadly, in 2018, 24 employees
lost their lives in work related incidents. There has
been a clear reduction in road traffic related deaths as
a result of improved vehicle management and training.
In addition, following the embedding of High Potential
Incident reporting across the Group, there is
improved visibility of incidents and compliance issues
and efforts are continuing to ensure consistency in
reporting such incidents.
Specific issues
Brook House
During 2018, the CSR Committee received regular
updates relating to Brook House Immigration
Removal Centre following allegations regarding the
conduct and behaviour of a number of staff at the
facility, which had come to light in late August 2017.
As part of these update sessions, the committee
provided oversight and challenge to the management
team responsible for this part of the business.
In parallel and as previously reported, the CSR
Committee commissioned Verita, a specialist
consultancy, to carry out an independent review to
understand the extent and root causes of the issues
which had arisen at Brook House. The review
examined G4S’ management, operational and staffing
arrangements and the practices and behaviour of
G4S’ staff. It also assessed how G4S oversees the care
and welfare of detainees, including mental health
issues, self-harm, violence prevention, use of force and
proper reporting of incidents.
The review was led by Kate Lampard CBE, a former
barrister and vice chair of the South of England
94 G4S plc Integrated Report and Accounts 2018
Culture and values
Mindful that our values are integral to everything we
do, the CSR Committee oversees the culture and
values programme which is focused on embedding
our values across the Group, to ensure that our
culture and values are consistently reflected in
behaviours and actions in all parts of the business.
Values training is provided to new employees as part
of the induction process and also to existing managers
and front-line staff.
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 challenge and good
oversight over the Group’s CSR strategy and the
implementation of the global whistleblowing and case
management system. This had resulted in the
committee receiving a good level of information on
whistleblowing cases and trends.
In addition to the positive enhancements to
whistleblowing systems and processes, the committee
believes there are further opportunities for the Group
in identifying and understanding the early warning
signs of potential issues within the business and in
sharing best practice and learnings from incidents to
prevent them recurring.
In 2019, in light of progress made since its creation in
2011 and the New Code, the committee will review
the scope of its remit and activities and reflect any
changes in its terms of reference.
The committee will also continue to support the
communication of the Group’s values and
whistleblowing arrangements to enhance the
environment for G4S employees and the people in
our care and to support the various initiatives to
achieve our goal of zero harm.
During the year, the committee reviewed the
enhanced communication to all employees in respect
of the whistleblowing facility, Speak Out, intended to
create a culture in which people feel confident to
report and raise ethical concerns. Data relating to
whistleblowing trends and the usage of Speak Out is
presented to the committee at each meeting and the
committee supports the initiative to promote and
encourage the use of Speak Out.
In addition, the committee has been keen to gain a
better understanding of challenges faced by the
Group in some geographies to ensure our culture and
values are consistently applied. Reports on current
situations and limitations in certain territories where
the Group operates were discussed, with the
committee seeking to provide constructive challenge
and support to management initiatives to enhance the
application of our culture and values in these
geographies.
Integrated CSR reporting
In 2017, G4S set out to produce its first fully
integrated annual report and accounts. Business
leaders and governing bodies continue to promote
integrated thinking and management in business
practice and reporting. G4S has embraced this
forward-thinking approach to highlight the Group’s
integrated and holistic approach to corporate social
responsibility. In light of the success of the 2017
integrated annual report, which was highly
commended for most effective integration of ESG at
the UK IR Society awards and at the 2018 PwC
Building Public Trust awards, the committee agreed
that the fully integrated reporting approach will
continue as best practice.
Integrated Report and Accounts 2018 G4S plc 95
CORPORATE GOVERNANCE REPORT CONTINUED
PAUL SPENCE,
Risk Committee Chairman
Committee membership during 2018
Paul Spence (Chairman)
Ashley Almanza
John Connolly
Steve Mogford
Tim Weller
Member since
January 2013
May 2013
January 2013
January 2018
April 2013
Other regular attendees include the Group Director of Risk and
Internal Audit.
There were four scheduled meetings and two unscheduled meetings
held during the year ended 31 December 2018. Members’
attendance at committee meetings is shown on page 81.
Main activities of the Risk
Committee during the year (%)
30%
Risk governance/internal control
30%
Contract risk ranagement
In depth review of specific high risk contracts/projects 25%
15%
Committee governance and reporting
Links to strategic priorities
96 G4S plc Integrated Report and Accounts 2018
THE RISK
COMMITTEE
Robust risk management processes and
systems are essential to ensure sustainable
performance for all our stakeholders, and
it is the role of the Risk Committee to
oversee the substantive assessment of the
principal risks facing the Group.
Throughout 2018 the committee
reviewed the principal risks and assessed
the processes and controls in place to
mitigate those risks.
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
consider 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.
Risk governance
As part of its continued focus on risk governance, the
committee reviewed the governance processes and
controls in place, including the risk and control matrix
and the assurance resources available, to ensure
appropriate risk governance across the Group. This
review also included approval of the Group’s risk
management policy, which defines G4S' strategic
approach to risk management. 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 specified by the
Group to reduce such risks, are embedded and
compliance enhanced. During the process, regional
functional leaders review and challenge the results of
business unit self assessments. The internal audit
function also performs tests to identify and correct
any potential discrepancy between the results of
CSAs and its findings. 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 confirm that it was satisfied that
the Group’s risk management processes
were appropriate.
Principal risks
During the year, the Risk Committee received regular
updates on the progress of mitigating the Group’s
principal risks set out on pages 67 to 71.
Presentations on cyber security, GDPR, geopolitical
and people risks covering the inherent risks,
mitigations in place and management of the residual
risk, were also received. This also included a review of
risk management best practice and improvements.
Further details of the significant risks and uncertainties
facing the business are set out on pages 67 to 71.
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. Managers from the relevant
business attend the meeting to present an overview
of the particular contract due for review. These
sessions tend to focus on the key risks relating to that
particular contract, whether operational, strategic,
relating to people or otherwise. Management reports
on how such identified risks are mitigated, and on
how assurance is obtained that controls are in place
and operate effectively. The level of residual risk is
also discussed where relevant. These sessions give the
committee the opportunity to gain a better
understanding of the particular risks associated with
these large contracts and to interact with those who
manage such risks on a day-to-day basis.
The committee has delegated authority from the
board to review and approve the acceptance and
execution of those major contracts that require
board approval due to their size or level of risk, as
defined in the risk management policy. During the
year under review, the Risk Committee considered
several major contract bids, both during scheduled
meetings and during additional meetings held
specifically for this purpose.
In addition, the committee continues to have
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 and is overseeing the
implementation of the project in the UK. Further
information about this project is set out on page 30.
Committee performance
The assessment of the committee’s performance,
conducted with assistance from Lintstock, concluded
that the committee had good oversight of the
company’s controls over significant risks and in
relation to the Group’s overall risk management
strategy and policy.
The review also concluded that there was good
alignment of the Group's risk management policies
with the Group's overall strategy. The assessment
highlighted the committee’s desire for 2019 to focus
on mitigating and eliminating operational risks.
Another key area of focus identified for 2019 was to
review the effectiveness of our compliance processes
in relation to labour laws.
Integrated Report and Accounts 2018 G4S plc 97
THE AUDIT
COMMITTEE
REPORT
This is my first year as chair of the Audit Committee and I am
grateful for the support I have received, which has allowed me
to settle rapidly into the role. In 2018, the committee continued
to oversee the quality and integrity of the Group’s financial
reporting, financial control and compliance processes, with areas
of particular focus including the use of Alternative Performance
Measures, compliance with laws and regulations and financial
results presentation. The adoption of IFRS 9 and IFRS
15 in 2018, as well as the preparation for the implementation
of IFRS 16 in 2019 and related disclosures, were also reviewed.
Committee membership
The Audit Committee consists of four independent
non-executive directors. The chief executive officer
and chairman of the board also attend meetings when
invited by the chairman. John Ramsay, who was
appointed to the board and as chair of the Audit
Committee with effect from 1 January 2018, is the
member with recent relevant financial experience.
Part of the induction process and on-going
development for all directors seeks to ensure that
committee members have knowledge relevant to the
sector in which the company operates. Details of Mr
Ramsay’s further induction programme are set out on
page 83. The board is satisfied that Mr Ramsay as well
as the other members, taken together, bring
significant and relevant experience gained at senior
management level and that the committee’s
composition during the year met the requirements of
both the Code and DTR7.1. Their skills and
experience are set out on pages 74 and 75.
Responsibilities
The committee ensures that there is effective
governance of the Group’s financial reporting and
internal controls to ensure the integrity of its financial
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.
CORPORATE GOVERNANCE REPORT CONTINUED
JOHN RAMSAY
Audit Committee Chairman
Committee membership during 2018
John Ramsay (Chairman)
John Daly
Steve Mogford
Paul Spence
Member since
January 2018
May 2015
May 2016
January 2013
Regular attendees include the chief financial officer, the Group
financial controller, the Group director of risk and internal audit, and
representatives of the Group’s external auditor.
There were four scheduled meetings held during the year ended 31
December 2018. Members’ attendance is shown on page 81.
Main activities of the Audit Committee
during the year (%)
Effectiveness of financial controls and risk
management procedures
Financial reporting
Internal audit
External audit and non-audit services
Whistleblowing/fraud allegations
Links to strategic priorities
30%
30%
20%
15%
5%
98 G4S plc Integrated Report and Accounts 2018
During the year, the terms of reference of the Audit
Committee were reviewed. The terms are available at
g4s.com/investors. The terms of reference will be
reviewed again in 2019.
The committee has an annual agenda, which includes
standing items that the committee considers regularly,
as well as specific 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.
SIGNIFICANT JUDGMENTS AND ISSUES CONSIDERED BY THE AUDIT COMMITTEE
The primary judgments and issues considered by the committee in respect of the 2018 financial statements,
and how these were addressed, were:
ONEROUS CONTRACT PROVISIONS
Description
The Group delivers certain long-term outsourcing
contracts 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. In such a situation the net present value of
estimated future losses needs to be determined in
order to calculate an appropriate onerous contract
provision. The identification and measurement of such
provisions require significant judgment, given the
extended time periods often involved and the
number of variables that may impact on future losses.
In particular, judgment is required in assessing the
future expected revenue and costs, including
determining the expected impact of any profit
improvement plans, 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 future cash flows.
Details of the outcome of the assessment of contract
provisions are set out in the Chief Financial Officer’s
Review on page 52.
Action taken
The committee discussed the process for the
identification and assessment of onerous contracts
and reviewed in respect of material low margin
contracts as well as for each onerous contract, the
critical assumptions made by management, and
enquired about 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.
Conclusion
The Audit Committee was satisfied that the level of
provisions and the related disclosures as at
31 December 2018 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 relevant accounting standards (IFRS10).
Professional advisors are typically retained to help
establish and maintain contractual ownership
structures, which comply with local laws and
regulations relating to foreign ownership.
Action taken
The committee received reports in relation to FORs
in a number of countries, which provided an update
on relevant changes in law and regulations, their
potential impact on the Group, and, where relevant,
reviewed mitigation plans. During the year, the
committee also reviewed the impact of changes in
certain shareholder agreements and the accounting
implications of these.
When restrictions apply to direct share
ownership, the Group typically seeks to exercise
influence or control through arrangements, including
shareholder agreements.
Changes in FORs can limit the Group’s ability to do
business or invest in certain markets and may, in
certain circumstances, result in a loss of
management control.
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 changes or different
interpretations to FORs.
Conclusion
The committee was satisfied with the Group’s
processes and approach to foreign ownership and
consolidation of undertakings.
This will remain an area of focus to ensure that the
committee remains abreast of changes in laws,
regulations and the relevant accounting standards.
Integrated Report and Accounts 2018 G4S plc 99
CORPORATE GOVERNANCE REPORT CONTINUED
ALTERNATIVE PERFORMANCE MEASURES
Description
The Group uses Adjusted PBITA and other
alternative performance measures (APMs) for the
purposes of consistent internal and external reporting,
given that management views these measures 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 specific and other separately disclosed items
which the Group believes should be disclosed
separately by virtue of their size, nature or incidence
(see page 42 for further details). Judgment is required
when defining those items to be disclosed separately
and when applying the classification criteria to each
period’s results. Further details on separately disclosed
items are set out in note 8.
Action taken
The Audit Committee reviewed guidance issued by
the Financial Reporting Council (FRC) and the
European Securities and Markets Authority (ESMA)
together with management’s response to the results
of the FRC review of the 2016 Integrated Report and
Accounts and enhanced disclosures that were
included in the 2017 and 2018 Integrated Report and
Accounts (pages 40 to 42) in relation to APMs. The
committee assessed whether the Group’s accounting
policies were being applied consistently from year to
year, and considered whether specific items were
being identified 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 classified as
specific items were treated consistently as specific
items, for both increases and decreases.
Conclusion
The committee was satisfied that the Group’s
definition of APMs, and in particular in relation to
specific and other separately disclosed items, had
been applied correctly and that the designation of
specific 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.
GOODWILL IMPAIRMENT TESTING
Description
The total value of the Group’s goodwill as at
31 December 2018 was £1.9bn (£1.9bn at
31 December 2017), a significant 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 goodwill for impairment on an
annual basis or more frequently if there are indications
that an impairment may have occurred. The
impairment analysis consists of the estimation of the
recoverable amount of goodwill supported by the
Group’s cash generating units. This analysis requires
significant judgment, primarily in relation to the
achievability of long-term business plans and future
cash flows. Such achievability is dependent on
circumstances both within and outside management’s
control, in relation to the discount rates adjusted to
reflect risks specific to individual assets used, and in
relation to the macro economic assumptions and
related modelling assumptions underlying the
valuation process.
For 2018, the Group reassessed cash generating units
used to determine the level at which goodwill is
assessed for impairment in light of the changes to the
Group’s segments at 1 January 2018 when Cash
Solutions businesses were separated to form a new
reporting segment. The result of the annual review of
the carrying value of goodwill did not identify any
impairment charge to goodwill as being required (see
note 18 to the consolidated financial 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.
Action taken
The Audit Committee reviewed the methodology for
the reassessment of cash generating units as well as
the methodology for 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 disposal values, less costs to sell, for
similar assets in similar locations, both within the
Group and external to the Group.
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 satisfied with the carrying value
of goodwill and related disclosures as at 31
December 2018.
100 G4S plc Integrated Report and Accounts 2018
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 level of tax provisions and
any required disclosure around contingent tax
liabilities at each period end.
Provisions for tax liabilities are established 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 first
instance. More complex cases are reviewed by the
Group tax function and provisions 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, fixed assets and carried
forward losses. At 31 December 2018, total deferred
tax assets were £248m (2017: £242m). Recognising
such assets requires an assessment of their likely
recovery through utilisation, which includes an
assessment of the taxable profits 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.
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 financial
statements and emerging matters arising from the
OECD’s Base Erosion and Profit 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.
Conclusion
The committee was satisfied with the Group’s
approach to tax, with the assessment of recoverability
of deferred tax assets and with the accounting
treatment and disclosure in respect of tax exposures.
LAWS AND REGULATIONS
Description
The Group operates in many jurisdictions globally,
with complex and diverse regulatory frameworks. As
a result, the Group faces many associated risks,
including litigation including class actions; bribery and
corruption; obtaining and retaining 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 modification
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
During the year the committee received regular
updates on significant areas of exposure to claims
and areas where labour laws and regulations are
complex and there is therefore an inherent risk to
the judgment made when determining how to ensure
compliance with those laws and regulations. In light of
the quantum of the California class action settlement,
a review of on-going labour litigation across the
Group was carried out and the level of provisioning
required was confirmed with management.
Conclusion
The committee was satisfied that the provisions
booked at 31 December 2018 were appropriate. The
committee was satisfied that the enhanced disclosure
around the judgments made in relation to contingent
liabilities was clear and appropriate.
Integrated Report and Accounts 2018 G4S plc 101
CORPORATE GOVERNANCE REPORT CONTINUED
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 significant number of
local financial systems and processes. This leads to an
inherently diverse set of processes and controls that
rely on local capabilities for implementation and
maintenance of control. As set out on page 66, the
Group has adopted a three-lines-of-defence model to
control and manage risks across the Group.
Over the course of the last five years the Group has
made significant investment in strengthening capability
in finance, 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 in
embedding the Group’s Minimum Financial Controls
and received 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 regular reports from the external
auditor and the Group’s whistleblowing process.
The committee also considered progress made in
reducing reliance on manual controls, by developing
and integrating financial and operational systems
across the Group.
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,
significant work remains to be done.
Viability statement
At the February 2019 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 also considered the work
being performed in relation to the review of
separation options for the global cash division and
acknowledged that any decisions that may be made
during 2019 as a result of this review might be
expected to lead to a stronger Group.
The committee was satisfied 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 confidence in its projections
reflecting 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 confirm 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 89.
102 G4S plc Integrated Report and Accounts 2018
Fair, balanced and understandable
One of the key compliance requirements in respect
of a group’s financial statements is for the annual
report, taken as a whole, to be fair, balanced and
understandable. Guidelines on APMs were issued by
the 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. Attention was also paid to guidance
on disclosure of judgments and estimates and other
key areas of interest set out in the FRC’s Annual
review of corporate governance and reporting
2017/2018 published in October 2018. 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 verification exercise was carried
out to confirm that the information contained in the
annual report is supported either by factual evidence,
or by confirmation from management where such
information is a statement of belief or intent.
The committee was satisfied 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.
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
financial year. PwC was subsequently reappointed at
the 2018 AGM to hold office 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
findings, with particular focus on the areas set out
above. The committee 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, PwC updated the committee on current
trends in the auditing market, including the
Competition and Markets Authority’s market study of
the audit sector and the Kingman review of the FRC.
Non-audit services
To ensure that the independence of the external
audit is not compromised, the committee has 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 conflict of
interest, result in the audit firm 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
services and legal services.
The committee has pre-approved certain services
which can be provided by the auditor subject to
specified fee limits, above which further approval is
required. All other services would require prior
approval by the committee. The Audit Committee
reviewed its policy on the provision of non-audit
services by the external auditor in 2018 and
concluded that no changes needed to be made.
The committee will monitor any future changes
which may be required in light of the results of the
on-going audit sector reviews.
Details of the fees paid for audit services, audit related
services and non-audit services can be found in note
10 to the consolidated financial statements.
Internal control
Since 2013, the Group has had a heightened focus
on improving its systems of internal control and risk
management for financial reporting. The main features
of these control systems include clearly defined
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
financial 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 received an update on initiatives
being implemented by the Group to continue its
progress in strengthening internal controls and
reviewed progress made. During 2018 Group Internal
Audit followed a targeted audit plan for those areas
where control issues had been identified.
Further details on internal controls are set out on
page 66. The Audit Committee confirmed to the
board that it is satisfied that progress continues to be
made in improving the Group’s risk management and
internal control processes and procedures and that
these are appropriate and effective. However,
strengthening of the internal control environment
remains a key area of focus for the Group.
As such, in January 2019 the Group reviewed and
relaunched its financial controls. The new Group
Financial Controls are a more comprehensive suite of
controls that are expected to provide a higher degree
of transparency to management, enabling a more
effective control environment and decision making.
Internal audit
During 2018, the internal audit function continued to
provide support and guidance to business units to
improve awareness of and compliance with Minimum
Financial Controls.
In addition internal audit also assessed the
effectiveness of a broader set of mandated controls
including HR core standards on screening, health and
safety, driver and firearms controls, payroll and IT. A
risk-based approach was used to determine coverage
for HR core standards and human rights. The goal
remains to focus local management on the most
material control issues specific to their local
environment.
The Group finance function and regional audit
committees also provided support to assist in driving
improvements where appropriate.
In 2019, internal audits will continue to test the
operational effectiveness of the Group’s standards
and controls. This will include assessing compliance
with the Group Financial Controls, which were
relaunched in January. Precise coverage in each
country will continue to be determined through
Integrated Report and Accounts 2018 G4S plc 103
CORPORATE GOVERNANCE REPORT CONTINUED
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.
CMA Order Compliance
The G4S group audit was put out to tender in
2014, following which PwC was appointed with effect
from 2015.
The committee confirms that the company has
complied with the Audit Services for Large
Companies (Mandatory Use of Competitive Tender
Processes and Audit Committee Responsibilities)
Order 2014.
Committee performance
Again this year, the assessment of the committee’s
performance, conducted with assistance from
Lintstock, concluded that the performance of the
committee was rated highly overall, in particular in
assessing the system of internal controls as well as in
reviewing and assessing the work of the external
auditors. The committee’s oversight of the Group’s
whistleblowing arrangements was also positively rated.
In addition the good relationship and communication
between the Audit Committee and key individuals in
the company, such as the chief financial officer and
the Group financial controller was commended again
in 2018.
In 2019, the committee will continue to focus on the
progress of Group Financial Controls and the quality
of the Group’s financial reporting.
JOHN RAMSAY
Audit Committee Chairman
A formal questionnaire is completed at the end of
the audit by members of the Audit Committee, the
Group Finance department and the finance directors
of significant operations across the Group. The results
of those questionnaires are reviewed by the Audit
Committee. The assessment of the external audit for
2018 concluded that it remained effective and that
the external auditor is independent. The auditor,
PwC, has written to the Audit Committee confirming
that, in its opinion, it was independent for the period
through to 12 March 2019.
Regulators and our financial report
As previously reported, in 2017 the Group received
a letter from the FRC confirming that the Annual
Report for the year ended 31 December 2016 had
been subject to a review by its Conduct Committee,
which is responsible for reviewing and investigating
the annual accounts, directors’ and strategic reports
of UK public companies for compliance with relevant
reporting requirements and with a view to stimulating
improvements in the quality of corporate reporting.
Such reviews are based on the annual report and
accounts and are conducted by staff of the Conduct
Committee who have an understanding of the
relevant legal and accounting framework but do not
benefit from detailed knowledge of the business or
an understanding of the underlying transactions
entered into.
As a result of the correspondence with the FRC as
part of its review, changes were made in the 2017
Integrated Report and Accounts, among other things,
to improve reporting on Alternative Performance
Measures and the commentary on IFRS measures in
the Strategic Report. These changes have been
maintained and, where possible enhanced, in the
2018 Integrated Report and Accounts. Enhanced
disclosure and explanations can be found on pages 40
to 42. Subsequent to the issue of the 2017 Integrated
Report and Accounts, the FRC confirmed that their
enquiries into the 2016 Integrated Report and
Accounts were closed.
104 G4S plc Integrated Report and Accounts 2018
DIRECTORS’ REMUNERATION REPORT
THE
REMUNERATION
COMMITTEE
Our remuneration framework is aligned with the Group’s
strategic objectives, by rewarding the creation of sustainable
value, with particular focus on our customers, shareholders,
people and values.
The committee consists entirely of independent
non-executive directors. Biographies of the members
of the committee are set out on pages 74 and 75.
Following Clare Spottiswoode’s retirement from
the board in May 2018, Elisabeth Fleuriot joined
the committee upon her appointment to the board
in June. Elisabeth is a welcome addition to the
committee, bringing a wealth of international business
experience.
Responsibilities
The Remuneration Committee is responsible for
determining 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.
From 2019, to comply with the new UK Corporate
Governance Code, the committee will also be
responsible for setting the remuneration of the
company secretary.
In determining the executive remuneration policy,
the committee takes into account the Group’s need
to attract, retain and incentivise executive talent,
a variety of legal and regulatory requirements, the
relevant provisions of the UK Corporate Governance
Code and the pay policies and practices throughout
the Group.
The committee also determines the policy on the
duration, notice period and termination payments
under the members of the Group Executive
Committee’ contracts, with a view to recognising
service to the company whilst ensuring that failure is
not rewarded and that the need 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 awards under long-term incentive plans and
the methods for assessing performance against the
objectives of those plans. No individual determines
their own remuneration.
The committee’s terms of reference are available on
the company’s website at g4s.com/investors.
JOHN DALY
Remuneration Committee Chairman
Committee membership during 2018
John Daly (Chairman)
Winnie Fok
Clare Spottiswoode1
Barbara Thoralfsson
Elisabeth Fleuriot2
Member since
May 2015
(chair since May 2016)
January 2013
June 2010
July 2016
June 2018
1. Clare Spottiswoode retired as a director on 15 May 2018.
2. Elisabeth Feluriot joined the board and Remuneration Committee
on 18 June 2018.
There were three scheduled meetings held during the year ended
31 December 2018.
Members’ attendance at committee meetings is shown on page 81.
Main activities of the Remuneration
Committee during the year (%)
Performance and incentives
Governance
Reporting
Executives’ base pay/Chairman fee
Below board level
Links to strategic priorities
30%
35%
15%
5%
15%
Integrated Report and Accounts 2018 G4S plc 105
DIRECTORS’ REMUNERATION REPORT CONTINUED
FIXED PAY
■ Base pay
■ Retirement benefits
■ Other benefits
SHORT-TERM INCENTIVES
■ Annual bonus plan (one year) with deferred
element (three years)
LONG-TERM INCENTIVES
■ Long-term incentive plan (three years)
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.
Business context and performance
The Group has two principal business segments;
Secure Solutions and Cash Solutions.
In Secure Solutions, the Group delivered 3.1%
underlying revenue growth and improved Adjusted
PBITA margins from 6.2% to 6.5%. This performance
was delivered in the context of tightening labour
supply and intense competition in manned security
services in some geographies.
In Cash Solutions the company continued to
experience good demand for its cash solutions
technology and ended the year with these products
and services deployed at 23,300 locations across
the world, up from 19,800 at the end of 2017. This
progress was more than offset by the impact of bank
branch and ATM closures in the UK and Europe and
Adjusted PBITA for the year was 17.1% lower than
in 2017.
The net effect of the results of the two business
segments was that Group underlying revenues rose
by 1.1% and that Adjusted PBITA of £474 million was
in line with 2017.
Further details are set out in the chief executive
officer’s introduction to the Strategic Review on pages
2 to 15.
Good progress was made in the development of the
Group’s strategy during the year. In January 2018,
management established a Global Cash Division
and in December 2018 the Group announced a
review of the Group’s options to create two strong,
independent companies via the separation of Secure
Solutions and Cash Solutions. The board believes
that this has the potential to strengthen strategic,
commercial and operational focus to the benefit of
customers, employees and shareholders.
2018 Remuneration outcomes
Pay review – As reported last year, the salaries of
both the CEO and CFO were increased by 2%
effective from 1 January 2018. The increase awarded
to the executive directors was in line with the
increase applicable to Group employees and most
managers based in the UK.
106 G4S plc Integrated Report and Accounts 2018
Annual bonus – The annual bonus is determined
by reference to the Group’s financial performance,
together with individual performance against
strategic objectives.
During 2018 the Group faced strong competition and
management maintained commercial discipline and
increased profits and margins in the Group’s largest
business segment, Secure Solutions. However, this
was partially offset by challenging market conditions
in a number of Cash Solutions markets, which
weighed on the overall financial performance of the
Group. As a result, despite meeting a number of
important strategic objectives, the executive directors
notified the Committee of their wish to waive their
entitlement to a bonus for 2018. The committee
approved this recommendation from the executive
directors and consequently no bonus is payable in
respect of 2018.
Long-term incentive plan (LTIP) – In line with
our commitment to ensure that our remuneration
framework aligns with our strategy and promotes
the long-term success of G4S, a significant part of
performance-related reward is delivered through
shares. Over the past three years (2016 to 2018),
the Group has delivered strong growth in underlying
earnings and strong operating cash flow and a portion
of the awards which were granted in 2016 have
therefore vested at a level of 55.8%.
Further information on the levels of executive
remuneration earned in 2018, including performance
against the relevant targets, is given on pages 116
to 119.
Total single figure - The overall change in the total
single figure for 2018 compared with 2017 is a
reduction of 21.9%.
Key areas of focus in 2018
Remuneration Policy and approach
Our remuneration policy, which received a high-
level of support from shareholders at our 2017
AGM, continues to operate effectively. In light of the
announcement of strategic changes to the business,
the committee has chosen to defer a review of our
remuneration policy until the required renewal at our
AGM in 2020, in line with the usual three-year cycle.
However, the committee is cognisant of evolving
investor views and changes to the UK Corporate
Governance Code and in order to align our practice
with these latest developments, the committee and
board have agreed to make a number of changes to
the executive remuneration framework;
■ Introduction of a holding period – for all long-
term incentive awards granted to executive
directors and the group executive committee after
the 2019 AGM, a two-year holding period will
apply following the completion of the performance
period. This extends the total time horizon to a
period of five years.
■ Reduction in pension for future hires – for future
external executive director appointments, pension
contributions will be reduced to 15% of salary in
line with senior management in the UK and recent
appointments to the group executive committee.
■ Increase in share ownership requirements – our
share ownership requirement for the CEO is
already 200% of salary. The requirement for the
CFO has been increased from 150% to 200%, so
the minimum share ownership requirement is now
200% for both executive directors.
■ Introduction of a post-employment shareholding
policy – to reflect the requirement in the New
Code and the views of shareholders, we are
introducing a post-employment shareholding
policy. Executive directors will be expected
to retain shares equal to the share ownership
requirements (or their actual shareholding at the
date their employment ends if lower) for a period
of two years post-departure.
The committee considers that the introduction
of these changes will strengthen the alignment
of the executives with the interests of our
other stakeholders.
Our workforce
The committee recognises the need to consider
workforce remuneration and related policies when
determining remuneration arrangements for senior
management. The committee has reviewed its
approach during 2018 to ensure it has greater
oversight of the most relevant information, which
will include visibility of pay rates and trends, benefits
policy and variable compensation across different
organisational levels and geographies.
Governance
With a view to reflecting changes made by the 2018
UK Corporate Governance Code, the committee
is in the process of reviewing its terms of reference.
The current committee’s terms of reference are
available on the company’s website at g4s.com/
investors.
UK Code Compliance
The committee is 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.
As described above, the committee has introduced a
number of features to the remuneration framework
to ensure compliance with the New Code: new
holding periods will apply consistently to the LTIP
awards made to both the executive directors
and to the Group Executive team after the 2019
AGM. The inclusion of deferral, share ownership
requirements and malus and clawback within the
policy provides suitable long-term alignment of
interests between our senior executives and our
other shareholders.
Implementation of remuneration in 2019
Pay review
The executive directors have recommended to the
committee that no increases be made to their salaries
with effect from 1 January 2019.
Incentives
The annual bonus opportunity and LTIP award
levels remain unchanged for 2019, both of which are
subject to maximum award sizes as set out in the
Remuneration Policy on pages 108 to 115.
In relation to the annual bonus, the committee seeks
to set targets that support the overarching strategy,
reflecting 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 confident that
the 2019 targets meet these criteria.
The long-term incentive plan introduced in 2014
received overwhelming support from shareholders
and will continue to operate in 2019, with
the addition of a two-year holding period for
awards made after the company’s 2019 annual
general meeting.
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 2018.
Details of the process for board and committee
performance evaluations are set out on page 84.
Overall, the review concluded that the committee
continues to be effective and to perform well. It
also highlighted the committee’s role in ensuring pay
appropriately reflects performance of the Group,
taking account of our shareholders’ views and
expectations. In 2019, the committee will have a
key role to play in ensuring that our remuneration
practices continue to focus on and support the
delivery of our strategic objectives, while retaining
and rewarding the high calibre individuals and talent
needed 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
12 March 2019
Remuneration policy
The company’s remuneration policy for directors is set out on pages 108
to 115 of this report and on the company’s website at g4s.com/investors/
corporate-governance. 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 financial years unless a new or revised policy is approved
by shareholders in the meantime.
Integrated Report and Accounts 2018 G4S plc 107
DIRECTORS’ REMUNERATION REPORT CONTINUED
DIRECTORS’ REMUNERATION POLICY
The Directors’ Remuneration Policy approved by our shareholders at our 2017 AGM is reproduced below.
However, we are making a number of changes to the executive remuneration framework within this policy as
described in the letter from the Remuneration Committee chairman at the start of this report.
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 reflect a number of factors
including individual experience, expertise and role.
Operation
Reviewed annually and fixed for 12 months
commencing 1 January. Interim salary reviews may
be carried out following significant changes in role,
scope or responsibility or at any other time at the
committee’s discretion.
The final salary decision may also be influenced
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 significant change to the nature or scale
of the business;
■ following a significant 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 first 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 benefits is
made available in order to recruit and retain high
calibre executives.
Operation
Executives are entitled to a number of benefits
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 financial advice from time to time
and expatriate benefits where relevant. A relocation
allowance reflecting reasonable costs actually incurred
will be paid.
Other benefits 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 benefits per director per annum:
■ holidays – 30 days
■ car allowance – £20,000
■ business related local transport – £40,000
■ for financial advice, expatriate benefits and
relocation expenses, the expense will reflect the
cost of the provision of benefits from time to time
but will be kept under review by the committee
■ other benefits 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 benefit to the
director
Any allowance in relation to relocation will provide
for the reimbursement of reasonable costs incurred.
Performance measures and clawback
None.
108 G4S plc Integrated Report and Accounts 2018
ANNUAL BONUS
Purpose and link to strategy
Rewards the achievement of annual financial
and strategic business targets and delivery of
personal objectives.
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.
Performance measures and clawback
Typically, executive directors’ bonus measures are
weighted so that:
■ between 70% and 85% of the bonus is based on
achievement of challenging financial performance
measures (e.g. profit before tax and amortisation,
organic growth, cash-flow measures, etc.), with
each measure operating independently of the
others; and the remainder is linked to personal
and/or non-financial 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-financial performance
measures were satisfied.
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 112).
LONG TERM INCENTIVE PLAN
Purpose and link to strategy
Incentivises executives to achieve the company’s long-
term financial goals, as well as focus on value creation,
whilst aligning the interests of executives with those
of shareholders.
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.
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.
Performance measures and clawback
Awards vest based on performance over a period
of at least three financial years commencing with the
financial 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 flow. For awards made in
2017, these were in the proportion of 40%, 30% and
30% respectively. However, the committee retains
the flexibility to amend these proportions, provided
that no single measure will be a significantly 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 119.
Awards are subject to clawback in certain
circumstances (see below on page 112).
Integrated Report and Accounts 2018 G4S plc 109
DIRECTORS’ REMUNERATION REPORT CONTINUED
RETIREMENT BENEFITS
Purpose and link to strategy
As with base salary and other benefits, making
available a suitable retirement benefits package
aids the recruitment and retention of high calibre
executives, allowing such executives to provide for
their retirement.
Operation
G4S operates a defined 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.
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.
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 reflects
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.
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 specified 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 reflect 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 reflect
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 NEDs (including the chairman) in
aggregate per annum shall not exceed the maximum
specified in the company’s articles of association for
the relevant year.
110 G4S plc Integrated Report and Accounts 2018
BENEFITS
Purpose
Benefits 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 benefits.
Maximum opportunity
Reasonable business expenses are not subject to
a maximum, since these are not a benefit to the
director.
Benefits and expenses will reflect the actual cost of
provision.
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.
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 reflect 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 financial and strategic business
targets, and each executive director’s key role-specific
objectives for the year.
Long Term Incentive Plan – In choosing the
performance measures for the Long Term Incentive
Plan, the committee aims to find a balance of
measures which reflect the company’s long-term
financial 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 office (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 first
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 benefits
other than those referred to in the above table.
Integrated Report and Accounts 2018 G4S plc 111
DIRECTORS’ REMUNERATION REPORT CONTINUED
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.
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
Malus and claw-back
Material misstatement
of group financial
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 sufficient 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 executive director and where it is in the
best interests of the company to do so. Such
awards would only be made as compensation
112 G4S plc Integrated Report and Accounts 2018
unlimited
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 reflecting 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 fulfilled.
■ 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.
Service contracts
Shareholders are entitled to inspect a copy of
executive directors’ service contracts at the
company’s head office 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.
Specific 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 has no external non-
executive appointment having stepped down from
the board of Noble Corporation in June 2018
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, disqualification 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 Code.
■ Initial period of appointment is two years.
■ All reasonably-incurred expenses will be met.
■ Fees are normally reviewed annually.
Loss-of-office 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 benefits 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 reflect the value of contractual
benefits during such period.
The Remuneration Committee would also retain the
discretion to make appropriate payments necessary
to finalise 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.
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 reflect 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.
Integrated Report and Accounts 2018 G4S plc 113
DIRECTORS’ REMUNERATION REPORT CONTINUED
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 office 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 satisfied 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.
Illustrations of application of remuneration policy
Ashley Almanza, Chief Executive Officer (£000)
Tim Weller, Chief Financial Officer (£000)
6,000
5,000
4,000
3,000
2,000
1,000
0
£5,142
47%
£2,338
26%
28%
£1,308
18%
100% 56%
25%
3,500
3,000
2,500
2,000
1,500
1,000
500
0
£3,116
42%
32%
£1,441
23%
20%
£818
100% 57%
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
2019
Base pay
Benefits
Pension
Total Fixed Pay
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
The benefits figures 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 2019
and based on the assumptions set out below:
Fixed pay
Minimum
Maximum
Threshold
Consists of total fixed pay including base salary, benefits and pension benefits
■ Base salary – salary effective as at 1 January 2019
■ Benefits – amount received by the Executive Directors respectively in 2018 including business
expenses classified by HMRC as benefits but which the company does not consider to be benefits
in the ordinary sense
■ Retirement benefits – 25% of salary for Ashley Almanza, 20% of salary for Tim Weller
No payout
Annual
bonus
Long-term
incentives
No vesting
30% of the maximum payout (i.e.
45% 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.
150% of salary for Ashley Almanza
and 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 2018
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 remuneration will reflect 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 pay
Pay
Pensions
Variable
Benefits
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 benefits, 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 reflect 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.
Integrated Report and Accounts 2018 G4S plc 115
DIRECTORS’ REMUNERATION REPORT CONTINUED
ANNUAL REPORT ON REMUNERATION
SINGLE TOTAL FIGURE OF REMUNERATION (AUDITED INFORMATION)
Executive directors
Base pay
Benefits
£
Ashley Almanza
Tim Weller
2018
2017
2017
958,550 939,755 116,459 110,112
656,625 643,750
29,702
30,169
2018
Annual Bonus
2018
LTIP
Pension related benefits
Total
2018
2017
2017
– 1,120,168 1,615,596 1,349,155
–
171,074
670,774 1,148,054
2018
239,638
131,325
2018
2017
2017
234,939 2,930,243 3,754,129
128,750 1,966,173 1,644,050
Notes:
1. Benefits include car allowance, business-related travel, healthcare, disability and life assurance. Benefit values include the cost of certain travel, overnight accommodation, meals and
memberships which HMRC treats as a taxable benefit and on which the company has paid, or will in due course pay, tax as it does not consider such expenses to be benefits in the
ordinary tax sense. The grossed-up amounts for 2018 are £40,343 (2017: £71,706) for Ashley Almanza. Benefit values also include local travel costs of £25,098 (2017: £10,420) for
Ashley Almanza who bears the tax himself, and contain other business costs which HMRC deems to be benefits.
2. 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 qualifies as a good leaver, in which case release of such deferred shares occurs shortly after termination of employment. Mr Almanza’s bonus pay-outs
for 2017 consisted of £704,816 in cash and £415,353 in shares deferred for three years. Mr Weller’s bonus pay-outs for 2017 consisted of £482,813 in cash and £187,961 in shares
deferred for three years. For 2018, the executive directors notified the Committee of their wish to waive their entitlement to a bonus. The Committee approved this recommendation.
Further information regarding 2018 bonus performance is set out on page 118.
3. For 2018, Ashley Almanza received a fee of $55,000 as well as shares valued at $356,314 from Noble Corporation, (2017: $88,500 in fees) which he retained for the part of the year
prior to his stepping down from his non-executive directorship referred to on page 113 on 19 June 2018. Mr Weller received and retained £17,000 from the Carbon Trust for his non-
executive directorship during the year under review (2017: £17,000).
4. Values in the 2017 LTIP column relate to the 2015 LTIP, which vested on 20 March 2018 and are calculated using the share price on the date of vesting of 247.7p per share. Values
provided in the 2017 LTIP column of the 2017 directors’ remuneration report were estimates. On 20 March 2018, Ashley Almanza had 544,673 shares vesting under the 2015 LTIP, of
which he retained 288,676 shares after selling 255,997 shares to satisfy tax and NI liabilities arising out of such vesting. On the same date, Tim Weller had 69,065 shares vesting under the
2015 LTIP, of which he retained 36,604 after selling 32,461 shares to satisfy tax and NI liabilities arising out of such vesting.
5. Values in the 2018 LTIP column relate to the 2016 LTIP due to vest on 15 March 2019. Since the share price on the date of vesting is unknown at the date of this report, the figures
provided are estimates calculated using the average market value over the last quarter of the year under review, i.e. 201.4p per share and the vesting level under the 2016 LTIP, which is
55.8%. Further information regarding performance and vesting of the 2016 LTIP is set out on page 119. The amount of executive directors’ remuneration attributable to the company’s
share price growth over the three-year performance period is the difference between the share price of 183.8p per share used for the purpose of the awards made or deemed granted
in March 2016 and the average market value over the last quarter of the year under review, i.e. 201.4p per share used to estimate value at the vesting date of 15 March 2019. On this
basis, the amounts are £141,165 and £100,313 for Messrs Almanza and Weller respectively.
6. In relation to Mr Weller, the LTIP figure for 2018 includes estimates regarding three separate awards under the company’s LTIP 2016 granted as part of his remuneration arrangement
upon joining the company as CFO on 24 October 2016 and due to vest on 15 March 2019. These are:
■ an award made following his relinquishing the 2015 performance share plan aware from his previous employer,
■ an award made as compensation for the forfeiture of his annual bonus from his previous employer; and
■ an award on a pro-rata basis relative to his start date as CFO on 24 October 2016.
Estimates were calculated using the methodology described in note 5 above.
Non-executive directors
The following table shows a single total figure of remuneration in respect of qualifying services for the 2018 financial year for each non-
executive director, together with the comparative figures for 2017. Aggregate non-executive directors’ emoluments are shown in the last
column of the table.
£
Base fee
SID
Chair of Committee
Benefits
Total
Total
John Connolly
John Daly
Elisabeth Fleuriot
Winnie Fok
Steve Mogford
John Ramsay
Paul Spence
Clare Spottiswoode
Barbara Thoralfsson
2018
382,500
63,500
34,270
63,500
63,500
63,500
63,500
23,373
63,500
2017
375,000
61,750
n/a
61,750
61,750
n/a
61,750
61,750
61,750
2018
n/a
n/a
n/a
n/a
15,000
n/a
n/a
n/a
n/a
2017
n/a
n/a
n/a
n/a
15,000
n/a
n/a
n/a
n/a
2018
n/a
18,500
9,984
n/a
n/a
20,000
18,500
7,228
n/a
2017
n/a
18,500
n/a
n/a
n/a
n/a
37,500
18,500
n/a
2018
3,216
6,297
5,611
18,403
1,990
5,816
12,897
7,477
20,790
2017
4,770
3,259
n/a
15,243
1,531
n/a
16,452
2,315
24,101
2018
385,716
88,297
49,865
81,903
80,490
89,316
94,897
38,078
84,290
2017
379,770
83,509
n/a
76,993
78,281
n/a
115,702
82,565
85,851
Notes: The above fees were pro-rated where the appointments or retirements were part way through the year.
1. Benefit values include the cost of overnight accommodation, travel and meals, which HMRC treats as taxable benefits and on which the company has paid, or will in due course pay, tax
as it does not consider such expenses to be benefits in the ordinary tax sense.
2. For Clare Spottiswoode figures cover the period up to the date that she retired from the board on 16 May 2018.
3. For Elisabeth Fleuriot figures cover the period from the date of her appointment as a non-executive director on 18 June 2018 and fees received for her role as chair of the CSR
Committee.
4. Benefits figures for Winnie Fok, Barbara Thoralfsson and Elisabeth Fleuriot include professional fees in relation to tax and social security compliance.
5. During 2017, in addition to his role as chair of the Risk Committee, Mr Spence also chaired the Audit Committee.
116 G4S plc Integrated Report and Accounts 2018
2018 Annual bonus
During the financial year ended 31 December 2018, the performance measures relating to the annual
bonus scheme rules were consistent with the Remuneration Policy, with 85% of the maximum bonus
opportunity for Ashley Almanza and 80% for Mr Weller being based on achievement of challenging financial
performance measures.
The financial performance measures were based on revenue, budgeted Group earnings (excluding specific and
other separately disclosed items) and budgeted Group operating cash flow before capital expenditure for Mr
Almanza and budgeted Group earnings (excluding specific and other separately disclosed items) and budgeted
Group operating cash flow before capital expenditure for Mr Weller.
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 significantly in excess of budget. The element of bonus determined for each financial
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 maximum bonus opportunity for Mr Almanza and 20% for Mr Weller was linked
to objectives relating to non-financial performance. These consisted of personal objectives or related to the
organisation and were linked to specific 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 2017 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.
Integrated Report and Accounts 2018 G4S plc 117
DIRECTORS’ REMUNERATION REPORT CONTINUED
The tables below show how pay was linked to performance in 2018 and set out details of each of the financial measures, the targets in
respect of these measures and the actual outcomes:
2018 annual bonus – Performance conditions and outcomes
ASHLEY ALMANZA
Financial measures
Revenue
Group Earnings
Group OCF
Total
Threshold to
earn bonus
Weighting
(% of
To achieve
maximum
full vesting Achievement
Target
bonus)
10% £7,583m £7,818m £8,052m £7,512m
£253m
45%
£439m
30%
n/a
85%
£273m
£543m
n/a
£282m
£559m
n/a
£290m
£576m
n/a
Score
achieved
(% of total
for each
measure)
nil
nil
nil
nil
Personal objectives
Mr Almanza was able to earn up to 15% of the maximum bonus potential for achieving personal objectives. Mr Almanza’s personal
objectives for 2018 covered three key areas, namely strategy, productivity and organisation, which were designed to align with the strategic
priorities for 2018 (see pages 18 and 19) and were set out in the 2017 Directors’ Remuneration report.
Further details on each personal objective, achievement and performance rating are set out in the table below:
Personal Objective
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
Financial measures
Group Earnings
Group OCF
Total
Achievement
■
■
Increased security risk consulting and systems revenue
Increased customer locations using G4S cash technology
Performance Rating
A score of 10 points out
of a potential maximum of
15 points.
Implemented programme of organisation efficiency with an in-year benefit
during 2018 of £30m.
The new organisation structure introduced in 2018, resulted in clearer focus
on strategy and performance in Cash Solutions and Secure Solutions, and
created a strong foundation from which to consider the potential separation
of the Cash Solutions businesses.
Weighting (% of
maximum bonus)
45%
35%
80%
Threshold to
earn bonus
£273m
£543m
n/a
Target
£282m
£559m
n/a
To achieve
full vesting Achievement
£253m
£290m
£439m
£576m
n/a
n/a
Score achieved (% of total
for each measure)
nil
nil
nil
Personal objectives
Mr Weller was able to earn up to 20% 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 2018. These were set out in the 2017 Directors
Remuneration report and focused on two key areas, namely productivity and IT. Further details about the personal objectives, as well as Mr
Weller’s achievement and overall performance rating are set out in the table below:
Personal Objective
Productivity – Contribute to
Group programme with efficiency
improvements in key support functions
Integrated IT systems – Deliver lean
process IT project
Achievement
Implemented changes to embed streamlined reporting and management
information as well as de-layering which have resulted in sustained efficiency
improvements.
Following the launch of the pilot of the Javelin IT-enabled operating model
in Ireland during 2017, the enhanced version of Javelin encompassing all of
the lessons learned was deployed into Ireland in 2018 and into the UK in
February 2019.
Performance Rating
A score of 10 points
out of a maximum of 20
points.
As mentioned earlier in the report, the executive directors communicated to the Remuneration Committee their wish to waive their
entitlement to a bonus for 2018. The committee approved this recommendation and consequently, no bonus is payable in respect of 2018.
118 G4S plc Integrated Report and Accounts 2018
Long term incentive plan (LTIP)
The 2018 and 2017 values shown in the fourth column of the single-figure table relate to the LTIP awards
made in March 2016 and 2015 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%
Greater than +
12% pa (36% over
3 years)
Proportion of
allocation vesting
Pro-rata between
25% and 100%
100%
Ranking against
the bespoke
comparator group
by reference
to TSR
Below median
Median
Proportion of
allocation vesting
Average operating
cash flow
Proportion of
allocation vesting
Nil
25%
<105%
105%
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 2015 award targets and the resulting pay-
out as shown in the 2017 values in the fourth column of the single figure 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
The table below illustrates the company’s performance against the 2016 award targets and the estimated pay-
out as shown in the 2018 values in the fourth column of the single figure table:
Measure
Average annual growth in EPS
Relative TSR
Average OCF
Total vesting
Performance
Increase of 9.33% pa
Ranked between 40th
and 41st in peer group
123%
Vesting (% of element)
72%
0%
90%
55.8% of maximum
Vesting under the 2016 LTIP was 55.8% of maximum of the award. 90% performance was achieved for the
average OCF component and 72% of the portion allocated to average annual EPS growth vested. Dividend
payments to shareholders were maintained throughout and increased towards the end of the performance
period, however relative TSR performance was affected by share price fluctuations so did not result in any pay-
out for this measure.
TSR Comparator group
The bespoke comparator group consisted of companies constituent of the FTSE 100 index corrected to
exclude financial institutions and companies in the extractive sector, and include competitor companies which
are outside that index. It consisted originally of 66 companies (not including G4S). During the three-year
performance period, six of these companies were delisted as a result of takeovers or mergers (ARM Holdings,
British Sky Broadcasting, GKN, Rexam, SABMiller and Tui Travel), therefore these were removed from the
group. Competitors included in the comparator group are Loomis, Prosegur, Securitas, Capita and Brink’s.
Total pension entitlements (audited information)
None of the executive directors have any prospective entitlement to a group defined benefit pension nor is
either a member of the Group’s pension plan, which is a defined 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 2018 G4S plc 119
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 2018 consistent with the company’s normal grant policy. 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 121:
Director
Ashley Almanza
Tim Weller
Award type
Conditional
shares
Conditional
shares
Number
of shares
925,277
Face
value (£)
£2,396,375
507,065
£1,313,250
EPS,TSR
and AOCF
Performance
period
01/01/2018 –
31/12/2020
01/01/2018 –
31/12/2020
Performance
condition
40% EPS/30%
TSR/30%
AOCF
40% EPS/30%
TSR/30%
AOCF
% vesting at
threshold
25%
25%
Notes:
1. The face-value calculation for all awards granted in March 2018 was based on a share price of £2.5899 which represents the average closing share
price during the three business days following the announcement of the company’s 2017 financial results.
2. Awards of conditional shares under the 2018 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. Further details of performance conditions are set out in the table below.
Performance measures for long-term incentives awarded in 2018
The bespoke comparator group consists of companies constituent of the FTSE 100 index corrected to exclude
financial 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 definition 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 verified 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%
Greater than +
12% pa (36% over
3 years)
Proportion of
allocation vesting
Pro-rata between
25% and 100%
100%
Ranking against
the bespoke
comparator group
by reference to
TSR
Below median
Median
Proportion of
allocation vesting
Average operating
cash flow
Proportion of
allocation vesting
Nil
25%
<105%
105%
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%
120 G4S plc Integrated Report and Accounts 2018
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 196.95p per share
at 31 December 2018.
2017
Ashley Almanza 1,326,745 907,678
53,663
Tim Weller
90,267
2018
Share ownership
requirement
(% of salary)
200%
150%
Shareholding requirement
achieved at 31/12/18
273%
27.1%
Number of Deferred
shares held at
31/12/18
527,899
72,574
Total shares
under LTIP awards subject to
performance at 31/12/18
2,980,253
1,837,945
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. In accordance with the Remuneration Policy, any bonus due above 50% of Messrs Almanza and Weller’s maximum bonus entitlement is awarded
in deferred shares, which although not subject to further performance conditions are subject to employment conditions and vest after a period of
three years. The number of deferred shares held as at 31/12/18 column consists of, in the case of Mr Almanza, 146,410 shares relating to the portion
of his 2015 annual bonus deferred into shares, 221,116 shares relating to the portion of his 2016 annual bonus deferred into shares and 160,373
shares relating to the portion of his 2017 annual bonus deferred into shares. On 16 March 2019, Mr Almanza will receive the aforementioned
146,410 shares as well as additional shares to account for dividend entitlement during the period of deferral (before selling sufficient shares to pay
the withholding taxes) relating to the deferred shares granted under the aforementioned 2015 annual bonus scheme. For Mr Weller, the 72,574
shares listed in this column relate to the portion of his 2017 annual bonus which was deferred into shares.
4. In relation to Mr Almanza, the total shares under LTIP awards subject to performance column consists of an award of 1,259,114 conditional shares
under the 2016 LTIP, an award of 795,862 conditional shares granted under the 2017 LTIP, as well as an award of 925,277 conditional shares
granted under the 2018 LTIP. In relation to the 2016 LTIP, on 15 March 2019, Mr Almanza will receive an estimated 802,062 shares, which includes
additional shares to account for dividend entitlement (before selling sufficient shares to pay the withholding taxes).
5. In relation to Mr Weller, the total shares under LTIP awards subject to performance column includes the following as yet unvested awards made in
accordance with Mr Weller’s remuneration arrangement upon becoming CFO on 24 October 2016, further details of which arrangements are set
out on page 90 of the Integrated Reports and Accounts 2016:
■ an award of 250,000 conditional shares granted on 8 November 2016, with a deemed date of grant of March 2016 following his relinquishing
the 2015 performance share plan award 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.
■ 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.
These awards are due to vest on 15 March 2019. Mr Weller will receive an estimated 569,951 shares which includes additional shares to account
for dividend entitlement (before selling sufficient shares to pay the withholding taxes). Estimates are calculated using a vesting price of the average
share price of the company for the last quarter of 2018, namely 201.4p per share multiplied by 55.8% (vesting level for the LTIP 2016) of the
number of shares awarded under the LTIP 2016 and additional dividend shares.
In addition, consistent with the company’s normal grant policy, in March 2017 Mr Weller received an award of 436,144 conditional shares under the
2017 LTIP and in March 2018, an award of 507,065 conditional shares under the 2018 LTIP.
6. 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 Benefit Trust.
As at 31 December 2018, the trustees of the Employee Benefit Trust held 5,342,225 shares (2017: 4,362,068 shares).
The shareholdings for non-executive directors are shown below.
John Connolly
John Daly
Elisabeth Fleuriot
Winnie Fok
Steve Mogford
John Ramsay
Paul Spence
Clare Spottiswoode
Barbara Thoralfson
As at 31.12.2018
336,642
30,000
–
30,000
10,000
38,000
30,000
n/a
–
As at 31.12.2017
336,642
30,000
n/a
30,000
10,000
n/a
20,000
4,681
–
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.
Integrated Report and Accounts 2018 G4S plc 121
DIRECTORS’ REMUNERATION REPORT CONTINUED
PAYMENT FOR LOSS OF OFFICE
There was no payment for loss of office during the year under review.
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 office 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 the 2017 Directors’ Remuneration 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, with such award vesting on 20 March
2018 when Mr Gibson, who is no longer subject to shareholding requirements, elected to receive payment in
cash and received a gross payment £141,541.
Himanshu Raja
Himanshu Raja stepped down from the board of the company and his role as chief financial officer on
1 October 2016. He ceased to be an employee on the same date. Details of payments for loss of office in
2016 are set out on page 95 of the company’s Integrated Report and Accounts 2016 available at g4s.com.
Awards made to Mr Raja under the company’s long-term incentive plan were pro-rated to 1 October 2016.
All such awards remained subject to performance, to be tested at the normal vesting dates. On 20 March
2017, Mr Raja received 344,499 shares (before selling sufficient shares to pay withholding taxes) following
the vesting of the LTIP award made in 2014. On 20 March 2018, Mr Raja received a 152,997 shares (before
selling sufficient 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. Such award is due to vest on 15 March 2019 and Mr Raja will receive an estimated
133,254 shares (before selling sufficient shares to pay withholding taxes).
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.
2008 – 2018 Total Shareholder Return
250
200
150
100
50
0
08
09
10
11
12
13
14
15
16
17
18
19
G4S
FTSE 100 index
122 G4S plc Integrated Report and Accounts 2018
CEO’s pay in last ten financial years
Year
Incumbent
CEO’s total single
figure of annual
remuneration (£’000)
Bonus % of
maximum awarded
PSP LTIP % of
maximum vesting
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
2018
Ashley
Almanza
3,248
2,823
1,542
1,186
514
1,459
2,521
2,738
4,790
3,754
2,930
74%
53%
0%
100%
58%
14%
0%
0%
0%
72%
98%
70%
97% 79.5%
0%
0%
n/a
n/a
27%
70%
62%
56%
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 figure 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 figures, since that is the most relevant year for measurement of performance.
4. The figures before 2013 did not include taxable expenses.
5. Bonus % of maximum awarded figure for 2017 is the adjusted figure after a reduction equivalent to 10% of base pay was applied, as recommended
by the executive directors and approved by the Remuneration Committee.
6. Bonus % of maximum awarded for 2018 takes account of the waiver by the executive directors of their bonus 2018.
PERCENTAGE CHANGE IN CEO’S REMUNERATION
The table below shows how the percentage change in the CEO’s salary, benefits and bonus between 2017 and
2018 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 – 2017 and 2018 – 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
Percentage change in remuneration between 2017 and 2018
Salary
2.0%
2.9%
Benefits
5.8%
See note below
Bonus
See note below
See note below
Notes:
1. The core benefit 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 of insurance and other benefits.
2. Information on bonuses is not readily available for all other UK employees.
3. As explained earlier in this report, Mr Almanza waived his entitlement to bonus in 2018.
RELATIVE IMPORTANCE OF SPEND ON PAY
The table below illustrates the relative importance of spend on pay compared with other disbursements
from profit.
Dividends paid
Total employee costs
2018
£150m
£5,194m
2017
£145m
£5,363m
Change
3.4%
-3.2%
There were no share buy-backs effected in either year.
The reduction in total employee costs is the result of a combination of a reduction in total employee numbers,
due to disposals and restructuring, and the impact of foreign exchange rates on the 2018 figure with the 2017
figure stated at December 2017 average rates.
Integrated Report and Accounts 2018 G4S plc 123
DIRECTORS’ REMUNERATION REPORT CONTINUED
STATEMENT OF IMPLEMENTATION OF REMUNERATION POLICY IN
2019
Decisions were taken on the basis of the directors’ remuneration policy approved at the company’s
2017 AGM set out on pages 108 to 115. However, as mentioned above, the committee is cognisant of
evolving investor expectations and of the changes to the UK Corporate Governance Code applicable
from 1 January 2019. Taking into consideration these developments, a number of changes to the executive
remuneration framework, which have been agreed are set out below in the relevant components of
remuneration.
The committee considers that the introduction of these features will increase the alignment of the
executive directors with the interests of our other shareholders.
Executive directors’ remuneration
Base pay
For 2019, at the annual pay review, it was decided that Messrs Almanza and Weller’s base pay would not
be increased in 2019 and would therefore remain at £958,550 and £656,625 respectively.
Annual Bonus Scheme
The annual bonus for the 2019 financial year will be determined on a basis consistent with the existing
remuneration policy, with the maximum bonus opportunity remaining at 150% of salary for both Ashley
Almanza and Tim Weller.
The majority of the annual bonus opportunity for executive directors will be based on Group financial
measures. For 2019, in line with the approach taken in 2018, the measures used to assess Group financial
performance will include underlying earnings, operating cash flow and revenue, as these metrics continue
to support the company’s key strategic objectives. When setting Group financial targets, the committee
takes into account a number of factors to ensure that the targets set are aligned with the Group’s strategy
and are sufficiently stretching.
The board approves strategic objectives for the CEO and 15% of the maximum bonus is allocated to
these objectives in 2019. The CEO recommended and the committee has approved a 15% allocation of
the CFO’s maximum bonus opportunity to non-financial objectives.
The Remuneration Committee will therefore determine final bonus outcomes for the Executive Directors
based on overall Group financial performance and the attainment of non-financial objectives.
Details of performance measures and targets are considered to be commercially sensitive since they relate
to the 2019 financial year. To the extent that they are no longer commercially sensitive, specific targets
and performance against these will be disclosed in the company’s 2019 integrated report and accounts.
The proposed target levels for 2019 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 2018.
In addition, the committee also considered the proposed non-financial objectives for each of Messrs
Almanza and Weller and concluded that these were also demanding.
124 G4S plc Integrated Report and Accounts 2018
Mr Almanza’s personal objectives for 2019 cover two key areas, namely strategy and organisation including
values & culture. The separation review is a major strategic project, the development of which is managed
by Mr Almanza and his executive team. Alongside this work Mr Almanza is accountable for leading the
executive team’s work to promote the Group’s values and to build and sustain the organisation required
for the successful execution of the Group’s strategy.
Mr Weller’s personal objectives for 2019 are focused on the separation review announced in December
2018. This review includes important finance, tax, treasury and IT components, overseen by Mr Weller.
As part of next year’s review of the Directors’ Remuneration Policy, the committee will review and will
consult with shareholders on the future annual bonus approach.
Long Term Incentive Plan
The level of awards due to be granted in the 2019 financial year under the LTIP approved by shareholders
at the 2014 AGM will be consistent with the existing remuneration policy. For all long-term incentive
awards granted after the 2019 AGM a two-year holding period will apply following the completion of
the performance period, which will have the effect of extending the total time horizon to a period of five
years.
As for 2019, the committee considers that a combination of earnings per share growth, total shareholder
return and average operating cash flow targets are the most appropriate performance measures for the
2019 awards, as they provide a robust method of assessing the company’s performance, both in terms of
underlying financial performance and returns to shareholders.
Awards granted under the LTIP during the 2019 financial year are subject to the performance conditions
listed in the table overleaf.
Integrated Report and Accounts 2018 G4S plc 125
DIRECTORS’ REMUNERATION REPORT CONTINUED
Performance measures for long-term incentives awarded in 2019
30% of each award granted
40% of each award granted
30% of each award granted
Average annual growth
in EPS period ending
on 31 December
in the third year
Proportion of
allocation vesting
Ranking against
the bespoke
comparator group
by reference to
TSR
Below median
Median
Proportion of
allocation vesting
Average
operating
cash flow
Proportion of
allocation vesting
Nil
25%
<105%
105%
Nil
25%
Pro-rata between
25% and 100%
100%
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%
Nil
25%
Less than 5% pa
5% pa (15% over 3
years)
+ 5 to 12% pa
Greater than + 12%
pa (36% over 3 years)
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 flow 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 deficit
repayment. Operating cash flow is expressed as EBITDA +/- working capital and provisions movement as a
percentage of EBITDA. Average operating cash flow is the average over three years.
TSR ranking will be verified externally.
Retirement benefits
From 2019, pension contributions in relation to any future external executive director appointments will be
reduced to 15% of base pay in line with senior management in the UK and recent appointments to the Group
Executive Committee.
Other features
From 2019, the minimum share ownership requirement for the CFO has been increased from 150% to 200%.
It is therefore aligned with that of the CEO and means that the minimum shareholding requirement is now
200% for both executive directors.
In addition, in order to reflect the requirement in the New Code and the views of shareholders, we are
introducing a post-employment shareholding requirement for all LTIP awards made following the 2019 AGM.
Executive directors will be expected to retain shares equal to the share ownership requirements (or their
actual shareholding on the date of termination if lower) for a period of two years following their departure.
126 G4S plc Integrated Report and Accounts 2018
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. Non-executive directors’ fees were last
increased in January 2018.
The review carried out in December 2018 concluded that there would be no change to the fees for the non-
executive directors, which was broadly in line with the approach adopted for the Group’s senior management
population.
The table below, sets out the fees for the non-executive chairman and other non-executive directors applicable
for 2019.
Annual fee
Chairman
Basic fee
Senior Independent Director
Chair of Audit Committee
Other chairs
2019
£
382,500
63,500
15,000
20,000
18,500
2018
£
382,500
63,500
15,000
20,000
18,500
Increase on
prior year
%
No change
No change
No change
No change
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 confirmed in August 2018. The committee received advice from Deloitte on executive
and senior management remuneration matters throughout the year under review. The committee has satisfied
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
Services provided
to Remuneration
Committee
Advice on executive
remuneration
Fees for services to
Rem Co
£30,200
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 benefits, Sok Wah Lee. Neither the group chief executive nor the group
HR Director participated in discussions regarding their own remuneration.
The committee is satisfied that the advice it received during the year was objective and independent based on
the experience of its members generally.
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.
A resolution to approve the Directors’ Remuneration Report (other than the part containing the Directors’
Remuneration Policy) for the year ended 31 December 2017 was passed at the company’s annual general
meeting held on 15 May 2018.
The results of the votes on these resolutions are set out in the table below:
Resolution
Directors’ Remuneration Policy – 2017 AGM
Directors’ Remuneration Report – 2018 AGM
For
97.26%
97.36%
Against
2.74%
2.64%
Withheld
131,465
603,228
Integrated Report and Accounts 2018 G4S plc 127
DIRECTORS’ REPORT
This is the report of the directors of the board of G4S
plc for the year ended 31 December 2018.
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 204 to 217.
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 2018 contain the consolidated results
for the year, shown in the consolidated income
statement on page 144, a management statement
contained in the strategic report and in the Directors’
report and responsibility statements on pages 128
to 131.
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 fulfils the requirements of a
management report, are all contained on pages 2 to
71 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
72 to 127. The Group’s financial risk management
objectives and policies in relation to its use of financial
instruments and its exposure to price, credit, liquidity
and cash flow risk, to the extent material, are set out
in note 30 to the consolidated financial statements
on pages 183 to 187 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 12 October 2018
■ Final dividend of 6.11p (DKK 0.5321) per share
payable on 14 June 2019
Shareholders on the Danish VP register will receive
their dividends in Danish kroner. Shareholders who
hold their shares through CREST or in certificated
form will receive their dividends in sterling unless
they prefer to receive Danish kroner by way of a
cheque payable in the UK, in which case they should
apply in writing to the Registrars by no later than
2 May 2019.
128 G4S plc Integrated Report and Accounts 2018
4. Capital
The issued share capital of G4S plc at 31 December
2018 is as set out on page 199 (note 34 to the
consolidated financial statements) and consisted of
1,551,594,436 ordinary shares of 25 pence each.
The number of shares in issue as at 12 March 2019
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 Benefit 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 2018 the directors had authority in
accordance with a resolution passed at the company’s
annual general meeting held on 15 May 2018 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 5,342,225 shares held within the
Trust and referred to on page 200 (note 35 to the
consolidated financial statement) are accounted for
as treasury shares. The Trust has waived its right to
receive dividends in respect of the company’s shares
which it held during the period under review.
5. Significant agreements – change of control
The company is party to a £750,000,000 multi-
currency revolving credit facility agreement which
requires prompt notification 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.
Under the same terms the company has a
$350,000,000 term facility agreement and in January
2019 entered into a £300,000,000 12 month term
bridge facility agreement.
The company entered into two US Private Placement
Note Purchase Agreements (the “USPP Agreements”),
on 1 March 2007 and 15 July 2008 respectively. The
first USPP Agreement originally for $550,000,000,
of which series C and D senior notes representing
$250,000,000 remained outstanding as at 31
December 2018. The series C senior notes matured,
on 1 March 2019 leaving only series D senior notes
representing £105,000,000 outstanding, maturing on 1
March 2022. The second USPP Agreement originally
for $513,500,000 and £69,000,000, of which only
the series F senior notes representing $74,500,000
remain outstanding, maturing on 15 July 2020. Under
the terms of both USPP Agreements, the company is
required to offer the note holders the right to sell the
notes at par value together with interest thereon upon
a change of control.
Under the terms of the £2,500,000,000 Euro
Medium Term Note Programme, the company
currently has in issue four tranches of Medium
Term Notes (MTNs), to various institutions on
13 May 2009 (£350,000,000), 9 November 2016
(€500,000,000), 2 June 2017 (€500,000,000) and 24
May 2018 (€550,000,000). 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.
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
Other than as described on page 202 (note 40) to
the consolidated financial statements, there have been
no significant events from 31 December 2018 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 profit and loss during the year amounted to £4m
(2017:£4m).
8. Employees
With 546,000 employees our success is underpinned
by the way we attract, develop and engage with
our people. Our disclosures relating to employee
communication and consultation can be found on
pages 20 to 25.
Our aim is to develop and grow, so removing barriers
to employment helps us to tap into the widest talent
pool and 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. 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. Further information on our approach to
diversity and inclusion can be found on page 23.
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 confirms
that the Group’s policy is not to make any financial
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
efficiency 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 fleet, fuel, refrigerants and electricity usage for
G4S businesses over which the Group has financial
and operational control. In addition the Group has
measured Scope 3 emissions from employee business
air travel.
The businesses that reported data in the 2018
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 2018,
extrapolated to 100% of the business equates to
some 455,310 t/CO2e. These CO2e emissions,
including emissions generated by services which our
customers have outsourced to G4S, have decreased
by 3.5% since 2017 – against a 1.1% revenue growth
in our underlying businesses during the same period,
reflecting the efforts made to increase the energy
efficiency of our business.
In 2019, we will continue to implement efficiency
strategies with the aim of reducing carbon intensity by
at least 3.5% per annum.
For further details, please visit g4s.com/environment.
* World Business Council for Sustainable Development
** World Resources Institute
Integrated Report and Accounts 2018 G4S plc 129
DIRECTORS’ REPORT CONTINUED
GHG emissions (t/CO2e)
(Based on 90% measurement)
Vehicles (inc. refrigerants)
Total buildings (inc. refrigerants)
Including electricity emissions of
Air travel
Tonnes CO2e per £m turnover
2018
236,155
132,149
96,833
17,147
2017
239,265
138,734
101,506
17,693
Carbon intensity
2017
61.2
2018
59.5
11. Substantial holdings
The company had been notified under DTR 5 of the following interests in the ordinary capital of G4S plc:
As at 31.12.2018
Invesco Limited
BlackRock, Inc.
Mondrian Investment Partners Limited
Harris Associates LP
Oddo BHF Asset Management SAS
Between 1.1.2019 and 12.3.2019
Invesco Limited
185,873,696 (11.97%)
86,852,067 (5.59%)
78,613,679 (5.07%)
79,355,377 (5.11%)
46,499,821 (3%)
170,634,274 (10.99%)
12. Auditor
A resolution to re-appoint PricewaterhouseCoopers
LLP, chartered accountants, as auditor to the
company for 2019, and for their remuneration to be
fixed by the Audit Committee, will be submitted to
the annual general meeting.
13. Directors
The directors, biographical details of whom are
contained on pages 74 and 75, held office throughout
the year, apart from Clare Spottiswoode who retired
from the board on 15 May 2018 and Elisabeth
Fleuriot, who was appointed to the board on
18 June 2018.
In accordance with the Code provisions on
re-election of directors in the UK Corporate
Governance Code, each of the directors continuing in
office will offer themselves for re-election or election,
as the case may be. The board believes that the
directors standing for re-election or 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
fixed 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 benefit of each of the directors in respect of
liabilities which may attach to them in their capacity as
directors of the company. These deeds are qualifying
third-party indemnity provisions as defined by section
130 G4S plc Integrated Report and Accounts 2018
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 2018 for Mr
Ramsay and 18 June 2018 for Ms Fleuriot. 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 India, Malaysia and
the UAE. The company has maintained a directors’
and officers’ 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 121, and the directors’
remuneration is set out on page 116.
The directors who held office at the date of approval
of this Directors’ report confirm that, so far as they
are each aware, there is no relevant audit information
of which the company’s auditor is unaware, and
each director has taken all the steps that he 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 significant to the business of the Group
during the financial year.
By order of the board
CELINE BARROCHE
Company Secretary
12 March 2019
DIRECTORS’ RESPONSIBILITIES
Statement of directors’ responsibilities in respect
of the annual report and the financial statements
The directors are responsible for preparing the
Integrated Report and Accounts and the Group and
parent company financial statements in accordance
with applicable law and regulations.
Company law requires the directors to prepare
group and parent company financial statements
for each financial year. Under that law they are
required to prepare the group financial statements
in accordance with IFRSs as adopted by the EU and
applicable law and have elected to prepare the parent
company financial statements in accordance with
UK Accounting Standards comprising FRS101 and
applicable law.
Under company law the directors must not approve
the financial statements unless they are satisfied that
they give a true and fair view of the state of affairs of
the Group and parent company and of their profit
or loss for that period. In preparing each of the
group and parent company financial statements, the
directors are required to:
■ select suitable accounting policies and then apply
them consistently;
■ make judgments and estimates that are reasonable
and prudent;
■ for the group financial statements, state whether
they have been prepared in accordance with IFRSs
as adopted by the EU, subject to any material
departures disclosed and explained in the group
financial statements;
■ for the parent company financial statements, state
whether applicable UK Accounting Standards
comprising FRS101 have been followed, subject to
any material departures disclosed and explained in
the parent company financial statements; and
■ prepare the financial statements on the going
concern basis unless it is inappropriate to presume
that the Group and the parent company will
continue in business.
The directors are responsible for keeping adequate
accounting records that are sufficient to show and
explain the Group and parent company’s transactions
and disclose with reasonable accuracy at any time
the financial position of the Group and parent
company and enable them to ensure that its financial
statements and Directors’ Remuneration Report
comply with the Companies Act 2006 and, as regards
the group financial statements, Article 4 of the IAS
Regulation. They have general responsibility for
taking such steps as are reasonably open to them to
safeguard the assets of the Group and to prevent and
detect fraud and other irregularities.
Under applicable law and regulations, the directors
are also responsible for preparing a strategic report,
Directors’ report, Directors’ remuneration report and
Corporate governance statement that comply with
that law and those regulations.
The directors are responsible for the maintenance
and integrity of the corporate and financial
information included on the company’s website.
Legislation in the UK governing the preparation and
dissemination of financial statements may differ from
legislation in other jurisdictions.
Directors’ responsibility statement
Each of the directors, the names of whom are set
out on pages 74 and 75 of this Integrated Report
and Accounts, confirm that, to the best of his or her
knowledge:
■ the financial statements in this Integrated Report
and Accounts have been prepared in accordance
with the applicable accounting standards and give
a true and fair view of the assets, liabilities, financial
position and results of the company and the
Group; and
■ the management report required by DTR4.1.8R
(contained in the strategic report and the
Directors’ report) includes a fair review of the
development and performance of the business and
the position of the parent company and the Group
taken as a whole, together with a description of
the principal risks and uncertainties they face.
The strategic report from the inside front cover
to page 71 includes information on the Group
structure, the performance of the business and the
principal risks and uncertainties it faces. The financial
statements on pages 144 to 226 include information
on the Group and the company’s financial results,
financial outlook, cash flow and net debt and
balance sheet positions. Notes 22, 25, 26, 29 and
30 to the consolidated financial statements include
information on the Group’s investments, cash and
cash equivalents, borrowings, derivatives, financial
risk management objectives, hedging policies and
exposure to interest, foreign exchange, credit, liquidity
and market risks.
Pages 144 to 216 contain information on the
performance of the Group, its financial position,
cash flows, net debt position and borrowing
facilities. Further information, including financial risk
management policies, exposures to market and
credit risk and hedging activities, is given in note 30
to the financial statements. After making enquiries,
the directors have a reasonable expectation that
the Group has adequate resources to continue in
operational existence for the foreseeable future.
For this reason the directors consider it appropriate
to adopt the going concern basis in preparing the
financial statements.
Directors are also required to provide a broader
assessment of viability over a longer period, which can
be found on page 89 of the Integrated Report and
Accounts.
The directors consider that the Integrated Report
and Accounts, taken as a whole, is fair, balanced
and understandable and provides the information
necessary for shareholders to assess the group and
parent company’s performance, business model and
strategy.
The statement of directors’ responsibilities and the
strategic report are approved by a duly authorised
committee of the board of directors on 12 March
2019 and signed on its behalf by Tim Weller, Group
Chief Financial Officer.
TIM WELLER
Group Chief Financial Officer
12 March 2019
Integrated Report and Accounts 2018 G4S plc 131
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 financial statements and parent
company financial statements (the “financial
statements”) give a true and fair view of the state
of the Group’s and of the parent company’s affairs
as at 31 December 2018 and of the Group’s profit
and cash flows for the year then ended;
■ the Group financial statements have been properly
prepared in accordance with International Financial
Reporting Standards (“IFRSs”) as adopted by the
European Union;
■ the parent company financial 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 financial statements have been prepared
in accordance with the requirements of the
Companies Act 2006 and, as regards the
Group financial statements, Article 4 of the
IAS Regulation.
We have audited the financial statements, included
within the Integrated Report and Accounts (the
“Annual Report”), which comprise:
■ the consolidated statement of financial position at
31 December 2018;
■ the parent company statement of financial position
at 31 December 2018;
■ the consolidated income statement for the year
then ended;
■ the consolidated statement of comprehensive
income 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;
■ the consolidated statement of cash flows for the
year then ended; and
■ the notes to the financial statements, which include
a description of the significant 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 financial
statements section of our report. We believe that
the audit evidence we have obtained is sufficient 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 financial statements in
the UK, which includes the FRC’s Ethical Standard,
as applicable to listed public interest entities, and
we have fulfilled 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 the
parent company.
Other than those disclosed in note 10 to the financial
statements, we have provided no non-audit services
to the Group or the parent company in the period
from 1 January 2018 to 31 December 2018.
OUR AUDIT APPROACH
Context
G4S is an integrated security company specialising
in the provision of security and related services to
customers in over 90 countries across four Secure
Solutions reportable segments and one Global Cash
reportable segment, which in 2018 for the purposes
of our audit were arranged into five regions.
Overview
Materiality
■ Overall Group materiality: £17 million (2017: £20
million), which represents approximately 5% of
adjusted profit before tax, being profit before tax
after adding back certain items that are separately
reported on the face of the consolidated income
statement including specific and other one-off
items, restructuring costs and profit/(loss) on
disposal.
■ Overall parent company materiality: £14
million (2017: £15 million), which represents
approximately 1% of net assets.
Audit scope
■ Our audit included full scope audits of the five
regions. The regional audits were supported by
full scope audits at 56 country components with
specified audit procedures on selected financial
statement line items performed at a further seven
country components.
■ Taken together, the components at which either
full scope audit work or specified audit procedures
on selected financial statement line items were
performed accounted for 72% of consolidated
revenue and 73% of consolidated profit before tax.
132 G4S plc Integrated Report and Accounts 2018
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
significance in the audit of the financial statements of
the current period and include the most significant
assessed risks of material misstatement (whether or
not due to fraud) identified 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. These matters, and any comments we make
on the results of our procedures thereon, were
addressed in the context of our audit of the financial
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
identified 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
The scope of our audit
As part of designing our audit, we determined
materiality and assessed the risks of material
misstatement in the financial statements. In
particular, we looked at where the directors made
subjective judgments, for example in respect of
significant 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 rules
and tax laws and regulations. Our tests included,
but were not limited to, review of correspondence
with legal advisors, enquiries of management, review
of significant component auditors’ work, review of
Internal Audit reports in so far as they related to
the financial statements and audit of the financial
statement disclosures. 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
reflected in the financial 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 2018 G4S plc 133
INDEPENDENT AUDITORS’ REPORT TO THE MEMBERS OF G4S PLC CONTINUED
Key audit matter
Onerous contract provisioning
Refer to Audit Committee report on page 98 and to
note 32 of the Group financial 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 financial 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 profitability, 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 2018 are £51m (2017: £62m) and the net
income statement charge for onerous contracts in
2018 amounts to £6m (2017: £22m).
How our audit addressed the key audit matter
Our 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 identified 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 benefits of performance improvement plans only where there is evidence of
plans being achievable. We critically challenged these benefits based on observable
benefits 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 reflected the risk in the underlying
cash flows. We also assessed the recoverability of dedicated contract assets by assessing
the level of impairment recorded where the contract was identified 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 Services businesses in the UK
and specifically on the Birmingham prison contract, the COMPASS contract and on a
legacy PFI contract which is long-term in nature. Each of these 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
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 counterparties and 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
financial 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 satisfied with the Group’s related disclosures
of these onerous contracts in light of the underlying assumptions and accounting
judgments made.
134 G4S plc Integrated Report and Accounts 2018
Key audit matter
Goodwill impairment
Refer to Audit Committee report on page 98 and
to note 18 of the Group financial statements.
The Group has £1.9bn of goodwill at 31 December
2018 (2017: £1.9bn). No impairment charge has
been recorded in 2018 (2017: £nil). 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”). Following the Group’s organisational
change, including changes to the Group’s reportable
segments, management has reassessed and expanded
the number of the Group’s CGUs, and revised the
allocation of goodwill between CGUs.
The carrying value of goodwill is contingent on future
cash flows and there is risk if these cash flows do not
meet the Group’s expectations that the assets will be
impaired. The impairment reviews performed by the
Group contain a number of significant judgments and
estimates including revenue growth, profit margins,
cash conversion and long-term growth and discount
rates. Changes in these assumptions can have a
significant impact on the headroom available in the
impairment calculations.
How our audit addressed the key audit matter
We have reviewed management’s reassessment of CGUs and the associated
reallocation of goodwill to ensure that this has been performed on a reasonable basis.
We assessed the mathematical accuracy of management’s cash flow model and agreed
the underlying forecasts to board approved budgets and assessed how these budgets
were compiled. We critically assessed management’s forecast by comparing forecast
growth to actual growth, applying sensitivities to future cash flows and assessing long
term growth assumptions and to IMF projections.
We considered the reliability of management’s forecasting for revenue, profit and cash
conversion by comparing budgeted results to actual performance over a period of
three years. Where we identified significant shortfalls against budget in prior years, this
informed our determination of sensitivities to apply as we formed our independent view
about reasonable downside scenarios.
With the support of our valuations experts, we assessed the long-term growth rates and
discount rates applied by management to third party information and confirmed 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.
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.
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.
The recoverable amounts of a number of CGUs including Brazil Secure Solutions,
South Africa Cash Solutions and UK Cash Solutions were found to be sensitive to
reasonably possible changes in assumptions and we satisfied 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 financial statements taken as a
whole and that adequate disclosure has been made.
Integrated Report and Accounts 2018 G4S plc 135
INDEPENDENT AUDITORS’ REPORT TO THE MEMBERS OF G4S PLC CONTINUED
Key audit matter
Uncertain tax positions and deferred tax assets
Refer to Audit Committee report on page 98 and to
notes 13 and 33 of the Group financial 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 2018, the Group has recognised
provisions of £25m related to uncertain tax positions
(2017: £48m).
In addition, the Group has recognised £248m of
deferred tax assets at 31 December 2018 (2017:
£242m). 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 sufficient taxable profits in future periods
to support utilisation of these assets.
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 relevant 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 financial 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. We are satisfied
that these judgments are adequately disclosed in note 13.
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 sufficient
taxable profits in future periods to support their recognition.
We evaluated the directors’ future cash flow forecasts and the process by which they
were prepared, ensuring consistency of cash flows with those used for the purpose
of goodwill impairment testing. Based on our procedures, future cash flow forecasts
supported the recoverability of the deferred tax assets recognised.
136 G4S plc Integrated Report and Accounts 2018
How our audit addressed the key audit matter
We met with the directors, management and in-house legal counsel and obtained
correspondence from the Group’s external legal advisors to assess the probable
outcomes in relation to ongoing claims and exposures.
We evaluated and challenged management’s judgments in order to assess the adequacy
of the Group’s provisions and disclosures, including the specific class action settlement in
the year. 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 satisfied with the Group’s provisioning decisions at
31 December 2018 in the context of the Group financial 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 specific was consistent
with the Group’s accounting policy and treatment in prior years. Furthermore, we
considered whether amounts included as specific items related to current year trading
and might be more appropriately reflected 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 specific 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 satisfied that the treatment and classification 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 98 and to
note 32 of the Group financial statements.
The Group employs 546,000 employees across six
continents. There are a number of on-going 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 financial performance and position.
The net income statement charge for the California
class action settlement in 2018 amounts to £100m
(2017: £nil).
Income statement presentation
Refer to Audit Committee report on page 98 and to
note 3(b) of the Group financial statements.
The Group has historically reported specific and
other items (including restructuring costs) on the
face of the income statement. Consistent with the
Group’s definition of profit before interest, tax and
amortisation (“Adjusted PBITA”), the following items
have continued to be disclosed separately on the face
of the income statement in 2018: net specific items
£22m (2017: £34m); restructuring costs £31m (2017:
£20m) and net profit/(loss) on disposal and closure
of subsidiaries (£16m) (2017: £74m). In addition,
the following items have been disclosed on the face
of the income statement in 2018: California class
action settlement £100m (2017: £nil) and guaranteed
minimum pension equalisation £35m (2017: £nil).
The treatment of specific and other separately
disclosed items is explained in the Group accounting
policy in note 3(b). We focused on this area because
the classification of items as specific 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 identification and presentation of these items
is important to ensure comparability of year-on-year
reporting in the Annual Report.
We determined that there were no key audit matters applicable to the parent company.
Integrated Report and Accounts 2018 G4S plc 137
INDEPENDENT AUDITORS’ REPORT TO THE MEMBERS OF G4S PLC CONTINUED
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 financial 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.
The Group is organised into four Secure Solutions reportable segments and one Global Cash Solutions reportable segment which in 2018
for the purposes of our audit were arranged into five regions. Corporate head office entities are managed at a Group level. Each 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 region has a separate management team which coordinates the businesses within that region.
The Group’s accounting processes are structured around a local finance function in each of the country components. In addition, finance
shared service centres in the UK, North America and India support certain of the Group’s country-based components. 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 financial information of each of the
regional components. We therefore deployed regional component audit teams in each of the five 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
financial information of that region. In addition to the five regional components, specific audit procedures over central functions, the Group
consolidation, head office entities and areas of judgment (including taxation, goodwill and intangible assets impairment, treasury, post-
retirement benefits and disposals) 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 financial
statements are an aggregation of approximately 600 reporting units, each of which is considered to be a country component. We identified
56 country component units that, in our view, required a full scope audit due to their size or risk characteristics. Specific audit procedures
over significant balances and transactions were performed at a further seven 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, all five 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 two 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 significant country components.
Taken together, the components and functions where we performed either full scope audit work or specified audit procedures on selected
financial statement line items accounted for 72% of consolidated revenue and 73% of consolidated profit 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 significant 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 influenced 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 financial statement line items and disclosures and in evaluating the effect of misstatements, both individually
and in aggregate on the financial statements as a whole.
Based on our professional judgment, we determined materiality for the financial statements as a whole as follows:
138 G4S plc Integrated Report and Accounts 2018
Overall materiality
How we determined it
Rationale for benchmark
applied
Group financial statements
Parent company financial statements
£14 million (2017: £15 million).
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
profit-oriented. The strength of the
balance sheet is the key measure of
financial health that is important to
shareholders since the primary concern
for the parent company is the payment
of dividends and servicing of debt.
£17 million (2017: £20 million).
5% of adjusted profit before tax,
being profit before tax after adding
back certain items that are separately
reported on the face of the consolidated
income statement including specific and
other one-off items, restructuring costs
and profit/loss on disposal.
The Group’s principal measure of
earnings is profit 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
reflects the underlying performance of
the Group. We took this measure into
account in determining our materiality,
except that we did not adjust profit
before tax to add back amortisation
of acquisition-related intangible assets
and finance income and expense as
in our view these are recurring items
which do not introduce volatility to the
Group’s earnings.
For each component in the scope of our Group audit, we allocated a materiality that is less than our overall
Group materiality. The range of overall materiality allocated to each regional component was between £3m
and £15m. Each region allocated materiality to sub-components lower than these amounts.
We agreed with the Audit Committee that we would report to them misstatements identified during our
audit above £1m (Group audit) (2017: £1m) and £0.7m (parent company audit) (2017: £0.8m) 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 financial
statements about whether the directors considered it appropriate to
adopt the going concern basis of accounting in preparing the financial
statements and the directors’ identification 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 financial 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.
For example, the terms on which the
United Kingdom may withdraw from
the European Union, which is currently
due to occur on 29 March 2019, are
not clear, and it is difficult to evaluate
all of the potential implications on the
company’s trade, customers, suppliers
and the wider economy.
We have nothing to report.
Integrated Report and Accounts 2018 G4S plc 139
INDEPENDENT AUDITORS’ REPORT TO THE MEMBERS OF G4S PLC CONTINUED
REPORTING ON OTHER INFORMATION
The other information comprises all of the information in the Annual Report other than the financial statements
and our auditors’ report thereon. The directors are responsible for the other information. Our opinion on the
financial 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 financial statements, our responsibility is to read the other information
and, in doing so, consider whether the other information is materially inconsistent with the financial 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 financial 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).
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 2018 is consistent with the financial 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 financial 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 financial 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)
140 G4S plc Integrated Report and Accounts 2018
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’ confirmation on page 88 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.
■ The directors’ explanation on page 89 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 qualifications 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 131, 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 98 describing the work of the Audit Committee does not
appropriately address matters communicated by us to the Audit Committee.
■ 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 specified, 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 2018 G4S plc 141
INDEPENDENT AUDITORS’ REPORT TO THE MEMBERS OF G4S PLC CONTINUED
RESPONSIBILITIES FOR THE FINANCIAL STATEMENTS AND THE AUDIT
Responsibilities of the directors for the financial statements
As explained more fully in the Directors’ Responsibilities Statement set out on page 131, the directors are
responsible for the preparation of the financial statements in accordance with the applicable framework and for
being satisfied 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 financial statements that are free from material
misstatement, whether due to fraud or error.
In preparing the financial 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 financial statements
Our objectives are to obtain reasonable assurance about whether the financial 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 influence the economic decisions of users taken on the basis of these financial statements.
A further description of our responsibilities for the audit of the financial statements is located on the FRC’s
website at: 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.
142 G4S plc Integrated Report and Accounts 2018
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 specified by law are not made; or
■ the parent company financial 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 financial statements for the year ended 31 December 2015 and subsequent financial periods.
The period of total uninterrupted engagement is four years, covering the years ended 31 December 2015 to
31 December 2018.
Richard Hughes (Senior Statutory Auditor)
for and on behalf of PricewaterhouseCoopers LLP
Chartered Accountants and Statutory Auditors
London
12 March 2019
Integrated Report and Accounts 2018 G4S plc 143
CONSOLIDATED INCOME STATEMENT
FOR THE YEAR ENDED 31 DECEMBER 2018
Continuing operations
Revenue
Operating profit before impairment losses on financial and contract assets, joint ventures, specific items
and other separately disclosed items
Net impairment losses on financial and contract assets
Share of post-tax profit from joint ventures
Adjusted profit before interest, tax and amortisation (Adjusted PBITA)
Specific items – charges
Specific items – credits
Guaranteed minimum pension equalisation charge
California class action settlement
Restructuring costs
(Loss)/profit on disposal/closure of subsidiaries/businesses
Amortisation of acquisition-related intangible assets
Operating profit
Finance income2
Finance expense2
Profit before tax
Tax
Profit from continuing operations after tax
Profit/(loss) from discontinued operations
Profit for the year
Attributable to:
Equity holders of the parent
Non-controlling interests
Profit for the year
Notes
2018
£m
2017
Restated1
£m
5, 6
7,512
7,826
20
6
8
8
8
8
8
8
8
6, 8
12
12
13
7
464
(11)
7
460
(32)
10
(35)
(100)
(31)
(15)
(4)
253
16
(126)
143
(55)
88
2
90
82
8
90
494
(11)
9
492
(34)
–
–
–
(20)
74
(10)
502
12
(127)
387
(128)
259
(6)
253
237
16
253
Earnings per share attributable to equity shareholders of the parent
15
Basic and diluted – from continuing operations
Basic and diluted – from continuing and discontinued operations
5.2p
5.3p
15.7p
15.3p
1. Comparative results have been restated for the adoption of IFRS 15 – Revenue from Contracts with Customers, see note 3.
2. The results for the year ended 31 December 2017 have been re-presented to decrease both finance income and finance expense by £4m with no effect on profit before tax,
see note 12 for details.
144 G4S plc Integrated Report and Accounts 2018
144
G4S plc Integrated Report and Accounts 2018
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
FOR THE YEAR ENDED 31 DECEMBER 2018
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 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 may be re-classified subsequently to profit or loss
Other comprehensive income/(loss), net of tax
Total comprehensive income for the year
Attributable to:
Equity holders of the parent
Non-controlling interests
Total comprehensive income for the year
1. Comparative results have been restated for the adoption of IFRS 15 – Revenue from Contracts with Customers, see note 3.
Notes
31
13
30
29
13, 29
2018
£m
90
38
(6)
32
45
(42)
11
(2)
12
44
134
125
9
134
2017
Restated1
£m
253
26
(4)
22
(125)
56
–
–
(69)
(47)
206
192
14
206
Integrated Report and Accounts 2018 G4S plc
145
Integrated Report and Accounts 2018 G4S plc 145
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
FOR THE YEAR ENDED 31 DECEMBER 2018
At 1 January 20181
Total comprehensive income
Dividends paid
Transactions with non-controlling interests3
Consolidation of previously equity-accounted entities
Recycling of cumulative translation adjustments
Own shares awarded
Own shares purchased
Share-based payments
At 31 December 2018
At 1 January 2017 – reported
Impact of adoption of IFRS 151
At 1 January 2017 – restated1
Total comprehensive income/(loss) – restated1
Dividends paid
Transactions with non-controlling interests
Recycling of net investment hedge
Recycling of cumulative translation adjustments
Own shares awarded
Own shares purchased
Share-based payments
At 31 December 2017 – restated1
Share
capital
£m
388
–
–
–
–
–
–
–
–
388
388
–
388
–
–
–
–
–
–
–
–
388
Attributable to equity holders of the parent
Other
reserves2
£m
370
12
–
–
–
(1)
9
(11)
–
379
Retained
earnings
£m
(177)
113
(150)
(39)
(6)
–
(9)
–
8
(260)
Share
premium
£m
258
–
–
–
–
–
–
–
–
258
258
–
258
–
–
–
–
–
–
–
–
258
(260)
(12)
(272)
261
(145)
(19)
–
–
(11)
–
9
(177)
456
–
456
(69)
–
–
24
(42)
11
(10)
–
370
Total
£m
839
125
(150)
(39)
(6)
(1)
–
(11)
8
765
842
(12)
830
192
(145)
(19)
24
(42)
–
(10)
9
839
NCI
reserve
£m
4
9
(20)
18
7
–
–
–
–
18
21
–
21
14
(34)
3
–
–
–
–
–
4
Total
equity
£m
843
134
(170)
(21)
1
(1)
–
(11)
8
783
863
(12)
851
206
(179)
(16)
24
(42)
–
(10)
9
843
1. Comparative results have been restated for the adoption of IFRS 15 – Revenue from Contracts with Customers, see note 3.
2. See note 35 for an analysis of other reserves.
3. Transactions with non-controlling interests (NCI) in 2018 relate primarily to agreements entered into during the year in Asia to strengthen the Group’s arrangements in those
countries. In addition, the Group has re-classified smaller amounts from retained earnings to NCI following a review of its arrangements in one country.
146 G4S plc Integrated Report and Accounts 2018
146
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CONSOLIDATED STATEMENT OF FINANCIAL POSITION
AT 31 DECEMBER 2018
ASSETS
Non-current assets
Goodwill
Other acquisition-related intangible assets
Non-acquisition-related intangible assets
Property, plant and equipment
Trade and other receivables
Investment in joint ventures
Investments
Retirement benefit surplus
Deferred tax assets
Current assets
Inventories
Investments
Trade and other receivables
Current tax assets
Cash and cash equivalents
Assets of disposal groups classified as held for sale
Total assets
LIABILITIES
Current liabilities
Bank overdrafts
Bank loans
Loan notes
Obligations under finance leases
Trade and other payables
Current tax liabilities
Provisions
Liabilities of disposal groups classified as held for sale
Non-current liabilities
Bank loans
Loan notes
Obligations under finance leases
Trade and other payables
Retirement benefit obligations
Provisions
Deferred tax liabilities
Total liabilities
Net assets
EQUITY
Share capital
Share premium
Reserves
Equity attributable to equity holders of the parent
Non-controlling interests
Total equity
Notes
18
18
18
19
23
20
22
31
33
6
21
22
23
25
24
25, 26
26
26
27
28
32
24
26
26
27
28
31
32
33
34
2018
£m
1,939
12
100
367
88
8
23
75
248
2,860
113
42
1,429
64
1,015
9
2,672
5,532
(305)
(12)
(464)
(11)
(1,237)
(56)
(202)
(1)
(2,288)
(293)
(1,533)
(16)
(38)
(439)
(136)
(6)
(2,461)
(4,749)
783
388
258
119
765
18
783
2017
Restated1
£m
1,914
9
88
395
82
20
20
80
242
2,850
104
42
1,417
55
902
53
2,573
5,423
(284)
(8)
(655)
(15)
(1,263)
(79)
(104)
(19)
(2,427)
(5)
(1,486)
(20)
(35)
(461)
(138)
(8)
(2,153)
(4,580)
843
388
258
193
839
4
843
1. The consolidated statement of financial position as at 31 December 2017 has been restated for the effect of IFRS 15 – Revenue from contacts with Customers, see note 3.
The consolidated financial statements were approved by the board of directors and authorised for issue on 12 March 2019. They were signed on
its behalf by:
ASHLEY ALMANZA
Director
TIM WELLER
Director
Integrated Report and Accounts 2018 G4S plc
147
Integrated Report and Accounts 2018 G4S plc 147
CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED 31 DECEMBER 2018
Operating profit – restated1
Adjustments for non-cash and other items:
Amortisation of acquisition-related intangible assets
Net loss/(profit) on disposal/closure of subsidiaries/businesses
Depreciation of property, plant and equipment
Amortisation of non-acquisition-related intangible assets
Share of profit from joint ventures
Equity-settled share-based payments
Increase in provisions
Additional pension contributions
Operating cash flow before movements in working capital
(Increase)/decrease in inventory
Increase in accounts receivable – restated1
(Decrease)/increase in accounts payable – restated1
Net cash flow from operating activities before tax
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
Cash, cash equivalents and bank overdrafts in acquired entities
Acquisition 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
Interest paid2
Repayment of obligations under finance leases
Transactions with non-controlling interests
Net cash flow from financing activities
Net increase/(decrease) 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
1. Comparative results have been restated for the adoption of IFRS 15 – Revenue from Contracts with Customers, see note 3.
2. Interest paid was re-presented to include interest paid and received on derivative financial instruments.
148 G4S plc Integrated Report and Accounts 2018
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G4S plc Integrated Report and Accounts 2018
Notes
20
31
17
36
25
2018
£m
253
4
15
93
20
(7)
8
148
(41)
493
(10)
(40)
(30)
413
(98)
315
(114)
12
45
(16)
5
(4)
17
–
7
(48)
(150)
(20)
(11)
761
(658)
(116)
(14)
(1)
(209)
58
571
44
673
2017
£m
502
10
(74)
104
22
(9)
9
18
(40)
542
1
(94)
39
488
(86)
402
(109)
5
156
(8)
–
(1)
29
3
6
81
(145)
(34)
(10)
437
(672)
(107)
(23)
(16)
(570)
(87)
672
(14)
571
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
1. General information
G4S plc is a company incorporated in the United Kingdom. The consolidated financial statements incorporate the financial statements of the
company and entities (its subsidiaries) controlled by the company (collectively comprising “the Group”) and the Group’s interest in joint ventures
made up to 31 December each year. The Group operates throughout the world and in a wide range of functional currencies, the most significant
being the Euro, the US dollar and Sterling. The Group’s financial statements are presented in Sterling, as the Group’s primary listing is in the UK. The
address of the registered office is given on page 228.
2. Statement of compliance
The consolidated financial statements of the Group have been prepared in accordance with the Companies Act 2006, with International Financial
Reporting Standards adopted by the European Union (IFRSs) and interpretations issued by the IFRS Interpretations Committee (IFRS IC), and the
accounting policies have been consistently applied. The parent company financial statements have been prepared in accordance with FRS 101 –
Reduced Disclosure Framework, in accordance with UK Generally Accepted Accounting Practice (UK GAAP). These are presented on pages 217
to 226.
3. Significant accounting policies
(a) Basis of preparation
The consolidated financial statements of the Group have been prepared on a going concern basis and using the historical cost basis, except for the
revaluation of certain non-current assets and financial instruments. The principal accounting policies adopted are set out below. Judgments made by
the directors in the application of those accounting policies which have a significant effect on the financial statements, and estimates with a significant
risk of material adjustment, are discussed in note 4.
(b) Presentation of the consolidated income statement
In order to provide further clarity in the Group’s consolidated income statement and segmental analysis, the Group separately discloses specific
items, restructuring costs, profits or losses on disposal/closure of subsidiaries or businesses, amortisation of acquisition-related intangible assets and
any acquisition-related expenses and goodwill impairment. This is consistent with the way that financial performance is measured by management
and reported to the Board and assists in providing a more meaningful analysis of the Group’s results. The directors believe that presentation of the
Group’s results in this way aids the understanding of the Group’s financial performance. Further explanation about the Group’s rationale for
separately presenting these items is set out in the Alternative Performance Measures section of the Strategic Report on pages 40 to 42.
Specific items
The Group’s consolidated income statement and segmental analysis note separately identify results before specific items. Specific items are those
that in management’s judgment need to be disclosed separately in arriving at operating profit by virtue of their size, nature or incidence. In
determining whether an event or transaction is specific, management considers quantitative as well as qualitative factors such as the frequency or
predictability of occurrence.
All items that are reported as specific items are evaluated and approved by the Group’s Audit Committee prior to being separately disclosed. The
Group seeks to be balanced when reporting specific items for both debits and credits, and any reversals of excess provisions previously created as
specific items are classified consistently as specific items.
In general, provisions recognised for future losses on onerous contracts are charged to the consolidated income statement within Adjusted PBITA.
However, where onerous contract charges are individually significant by virtue of their size, they are separately charged within specific items. Such
losses are distinct from “in-year” losses, which are utilised against provisions for onerous contract losses. Releases of onerous contract provisions
originally charged as specific items are separately credited within specific items.
Specific items may not be comparable with similarly-titled measures used by other companies. Specific items for the current and prior years are
described in note 8.
Other separately disclosed items
In order to provide further clarity in the consolidated income statement, the Group also discloses separately certain strategic restructuring costs,
profits or losses on disposal or closure of subsidiaries, costs of major corporate restructurings, acquisition-related amortisation and expenses and
goodwill impairment.
Restructuring costs that are separately disclosed reflect the multi-year productivity programme which is being implemented by the Group. This
programme is of a strategic nature and, as such, is monitored and approved by the Group’s Executive Committee. During 2016 and 2017 activities
under the programme focused primarily on transforming the operating model in the Europe & Middle East region. Investment during 2018 related
to the 2018-2020 strategic productivity programme announced in 2017 which is being implemented across the Group. Restructuring costs that are
incurred in the normal course of business are recorded within Adjusted PBITA.
Further explanation about the Group’s rationale for separately presenting profits or losses on disposal or closure of subsidiaries, amortisation of
acquisition-related intangible assets and goodwill impairment is set out on pages 41 and 42.
(c) Basis of consolidation
Subsidiaries
Subsidiaries are entities controlled by the Group. Control is achieved where the Group has existing rights that give it the current ability to direct the
activities that affect the Group’s returns and exposure or rights to variable returns from the entity. This can be determined either by the Group’s
ownership percentage, or by the terms of any shareholder agreement. In the case of certain investments detailed analysis 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).
Integrated Report and Accounts 2018 G4S plc
149
Integrated Report and Accounts 2018 G4S plc 149
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUED
3. Significant accounting policies continued
(c) Basis of consolidation continued
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. Any excess of the cost of acquisition over the fair values of the identifiable net assets acquired is recognised as goodwill. Any
deficiency in the cost of acquisition below the fair values of the identifiable net assets acquired (i.e. discount on acquisition) is credited to the
consolidated income statement in the year of acquisition.
The cost of acquisition includes the present value of deferred and contingent consideration payable, including that in respect of put options held by
non-controlling shareholders, as estimated at the date of acquisition. Subsequent changes to the present value of the estimate of contingent
consideration and any difference upon final settlement of such a liability 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 year are included in the consolidated income statement from the effective date of
control and up to the effective date of disposal, respectively.
Joint ventures
A joint venture is a joint arrangement whereby 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 equity method of
accounting. Under the equity 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 any 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 company 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 currencies
The financial statements of each of the Group’s businesses are prepared in the functional currency applicable to that business. Except for operations
that have a functional currency that is hyperinflationary, transactions in currencies other than the functional currency are translated at the rates of
exchange prevailing on the dates of the transactions. At each balance sheet date, monetary assets and liabilities which are denominated in other
currencies are retranslated at the rates prevailing on that date. Non-monetary assets and liabilities carried at fair value which are denominated in
other currencies are translated at the rates prevailing at the date when the fair value was determined. Non-monetary items measured at historical
cost denominated in other currencies are not retranslated. Gains and losses arising on retranslation are included in the 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 monetary items that are in substance a part of the
Group’s net investment in foreign operations, and on borrowings and other currency instruments designated as hedges of such investments where
and to the extent that the hedges are deemed to be effective. On disposal, translation differences are recognised in the consolidated income
statement in the period in which the operation is disposed of.
Current year transactions of operations that have a functional currency that is hyperinflationary are stated in terms of the value of money at the end
of the current reporting period and are translated by applying relevant closing exchange rates. Prior year comparatives presented in the
consolidated income statement and consolidated statement of financial position are not restated for changes in the value of money or exchange
rates. Any adjustments arising on the restatement of transactions and balances in the year to the value of money at the end of the current reporting
period are included within finance costs.
(e) Intangible assets
Goodwill
Business combinations are accounted for by the application of the acquisition method. Goodwill arising on consolidation represents the excess of
the cost of acquisition over the Group’s interest in the fair value of the identifiable assets, liabilities and contingent liabilities at the date of acquisition
of a subsidiary or joint venture. No goodwill arises on the acquisition of an additional interest from a non-controlling interest in a subsidiary as this is
accounted for as an equity transaction. Goodwill is stated at cost, less any accumulated impairment losses, and is tested annually for impairment or
more frequently if there are indications that amounts may be impaired. On disposal of a subsidiary or joint venture, the attributable amount of
goodwill is included in the determination of the profit or loss on disposal.
Acquisition-related intangible assets
Intangible assets on acquisitions that are either separable or arising from contractual rights are recognised at fair value at the date of acquisition.
Such acquisition-related intangible assets include trademarks, technology, customer contracts and customer relationships. The fair value of
acquisition-related intangible assets is determined by reference to market prices of similar assets, where such information is available, or by the use
of appropriate valuation techniques, including the royalty relief method and the excess earnings method.
Acquisition-related intangible assets are amortised by equal annual instalments over their expected economic life. The directors review acquisition-
related intangible assets on an on-going basis and, where appropriate, provide for any impairment in value.
150 G4S plc Integrated Report and Accounts 2018
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G4S plc Integrated Report and Accounts 2018
The estimated useful lives are as follows:
Trademarks and technology
up to a maximum of five years
Customer contracts and customer relationships
up to a maximum of ten years
Non-acquisition-related intangible assets
Development expenditure represents expenditure incurred in establishing new services and products of the Group. Development expenditure is
recognised as an intangible asset only if the following can be demonstrated: the expenditure creates an identifiable asset, its cost can be measured
reliably, it is probable that it will generate future economic benefits, it is technically and commercially feasible, and the Group has sufficient resources
to complete development. In all other instances, the cost of development expenditure is recorded directly in the consolidated income statement.
Capitalised development expenditure is amortised over the period during which the expenditure is expected to be revenue-producing, up to a
maximum of ten years. The directors review the capitalised development expenditure on an on-going basis and, where appropriate, provide for any
impairment in value.
Research expenditure is charged to the consolidated income statement in the year in which it is incurred.
Capitalised 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 residual values by equal annual instalments over their expected useful economic lives, up to a
maximum of eight years.
(f) Property, plant and equipment
Property, plant and equipment is stated at cost, net of accumulated depreciation and any provision for impairment. Depreciation is provided on all
property, plant and equipment other than freehold land. Depreciation is calculated so as to write off the cost of the assets to their estimated
residual values by equal annual instalments over their expected useful economic lives as follows:
Freehold and long leasehold buildings
up to 50 years
Short leasehold buildings (under 50 years)
over the life of the lease
Equipment and motor vehicles
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 equipment are re-assessed annually.
(g) Financial instruments
Financial assets and financial liabilities are recognised when the Group becomes a party to the contractual provisions of the instruments.
The Group classifies its financial assets (except derivatives) in the following measurement categories:
Those to be measured subsequently at fair value through profit or loss. This category includes investments; and
Those to be measured at amortised cost. This category includes trade and other receivables and cash and cash equivalents.
The Group classifies its financial liabilities (except derivatives) as measured at amortised cost.
Fair values are classified by reference to the inputs to the valuation technique used to derive them, using the following hierarchy:
Level 1 – inputs are unadjusted quoted prices in active markets for identical assets or liabilities;
Level 2 – inputs are observable for the asset or liability either directly or indirectly but are not quoted prices included in Level 1;
Level 3 – inputs are unobservable for the asset or liability.
Derivative financial instruments and hedge accounting
Derivative financial instruments are recognised in the consolidated statement of financial position at fair value as financial assets or financial liabilities.
Changes in the fair value of derivative financial instruments are recorded in the consolidated income statement unless they are designated as
hedges. The accounting for subsequent changes in the fair value of derivative financial instruments that are designated as hedges depends on the
nature of the hedging relationship as described below.
Fair value hedges
The carrying value of the hedged item is adjusted for fair value changes attributable to the risk being hedged. Changes in the fair value of both the
hedging instrument and the fair value of the risk being hedged are recognised immediately in the consolidated income statement.
Cash flow hedges
The effective portion of changes in the fair value of derivatives that are designated and qualify as cash flow hedges is recognised in the cash flow
hedge reserve within equity. The ineffective portion is recognised immediately in the consolidated income statement.
Amounts accumulated in equity are re-classified to the consolidated income statement in the periods when the hedged item affects profit or loss.
Integrated Report and Accounts 2018 G4S plc 151
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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUED
3. Significant accounting policies continued
(g) Financial instruments continued
Any cumulative deferred gains or losses along with any deferred costs of hedging that are recorded in equity when a hedging instrument expires or
is sold or terminated, or when a hedge no longer meets the criteria for hedge accounting, remain in equity until the forecast transaction occurs. If
the forecast transaction is no longer expected to occur, any cumulative gains or losses and deferred costs of hedging that are recorded in equity are
immediately re-classified to the consolidated income statement.
Net investment hedges
Hedges of net investments in foreign operations are accounted for in similar manner to cash flow hedges. Any gains or losses on the hedging
instrument relating to the effective portion of the hedge are recognised in other comprehensive income and accumulated in reserves in equity. Any
gains or losses relating to the ineffective portion are recognised immediately in the consolidated income statement.
Gains and losses accumulated in equity are re-classified to profit or loss when the foreign operation is disposed of in whole or in part.
Cost of hedging
The currency basis spread is a margin that is present in a cross currency derivative that is not present in a hedged item that is a single currency
exposure. As such, when designating a cross currency derivative as a hedging item and measuring the effectiveness of the hedge, the Group
excludes the currency basis spread. Additionally, when cross currency swaps are designated in a net investment hedge to manage the spot to spot
exposure of net assets, forward points inherent in the derivative are also considered to be a cost of hedging. Changes in the fair value of derivatives
that are designated as net investment hedges or cash flow hedges which relate to the currency basis spread or forward points described above are
recognised in other comprehensive income and included in the cost of hedging reserve which is a component of equity.
Trade receivables
Trade receivables are initially recognised at fair value which, unless there is a significant financing component, represents the amount of
consideration that is unconditional. These are subsequently carried at amortised cost using the effective interest method less loss allowances. Loss
allowances are determined using expected loss rates which are calculated taking into account payment profiles over a period of 36 months before
the balance sheet date and the corresponding historical credit losses experienced within this period. The expected loss rates are adjusted for
current and forward-looking local economic and market conditions.
Investments
Investments comprise investments in securities and certificates of deposit which are measured at fair value both on initial recognition and
subsequently. Gains and losses arising from changes in fair value are recognised in the consolidated income statement.
Cash and cash equivalents
Cash and cash equivalents comprise cash balances and short-term call deposits.
Interest-bearing borrowings
Interest-bearing bank overdrafts, loans and loan notes are recognised at the value of proceeds received, net of direct issue costs. Finance charges,
including premiums payable on settlement or redemption and direct issue costs, are recognised in the consolidated income statement on an accrual
basis using the effective-interest method.
Trade payables
Trade payables are not interest-bearing, are stated initially at fair value and are subsequently measured at amortised cost using the effective interest
method.
Equity instruments
Equity instruments issued by the Group are recorded at the value of proceeds received, net of direct issue costs.
(h) Inventories
Inventories are valued at the lower of cost and net realisable value. Cost represents expenditure incurred in the ordinary course of business in
bringing inventories to their present condition and location and includes appropriate overheads. Cost is calculated using either the weighted average
or the first-in-first-out method. Net realisable value is based on estimated selling price, less further costs expected to be incurred to completion and
disposal.
(i) 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.
(j) Employee benefits
Retirement benefit costs
Payments to defined contribution schemes are charged as an expense as they fall due. Payments made to state-managed retirement benefit
schemes are dealt with as payments to defined contribution schemes where the Group’s obligations under the schemes are equivalent to those
arising in a defined contribution retirement benefits scheme.
152 G4S plc Integrated Report and Accounts 2018
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The retirement benefit obligation recognised in the consolidated statement of financial position represents the present value of the Group’s total
defined benefit obligation reduced by the fair value of the related scheme assets. The total of all of the Group’s individual schemes that are in a net
asset position is presented separately in the consolidated statement of financial position. The value of any net asset recognised for a defined benefit
scheme is limited to the present value of available refunds and reductions in future contributions to the scheme.
For defined benefit plans, the cost charged to the consolidated income statement consists of current service cost, net interest cost, and past service
cost. The finance element of the pension charge is shown in finance expense and the remaining service cost element is charged as a component of
employee costs in the consolidated income statement. Actuarial and other re-measurement gains and losses are recognised immediately in full
within other comprehensive income.
Share-based payments
The Group issues equity-settled and cash-settled share-based payments to certain employees. The fair value of equity-settled share-based payments
is determined at the date of grant and expensed, with a corresponding increase in equity, on a straight-line basis over the vesting period, based on
the Group’s estimate of the shares that will eventually vest. The amount expensed is adjusted over the vesting period for changes in the estimate of
the number of shares that will eventually vest, excluding changes resulting from any market-related performance conditions. Cash-settled share-
based payments are recognised as a liability at fair value at the date of grant. The value of the liability is re-measured at each reporting date and at
the date the liability is settled. Changes in the liability are recognised directly in the consolidated income statement.
(k) Provisions and contingent liabilities
Provisions are recognised when a present legal or constructive obligation exists for a future liability in respect of a past event and where the amount
of the obligation can be estimated reliably. The amount recognised as a provision is the Group’s best estimate of the likely outflows at the end of
the reporting period.
In respect of claims, onerous customer contracts and litigation, the Group provides for anticipated costs where an outflow of resources is
considered probable and a reasonable estimate can be made of the likely outcome. For all such items, the ultimate liability may vary from the
amounts provided and will be dependent upon the eventual outcome of any settlement. Management exercises judgment in measuring the Group’s
exposures to contingent liabilities (see note 32) through assessing the likelihood that a potential claim or liability will arise and in quantifying the
possible range of financial outcomes.
Where the time value of money is material, provisions are stated at the present value of the expected expenditure using an appropriate discount
rate.
(l) Restructuring costs
A restructuring provision is recognised when the Group has developed a detailed formal plan for the restructuring and has raised a valid
expectation in those affected that it will carry out the restructuring by starting to implement the plan or by announcing its main features to those
affected by it. The measurement of a restructuring provision includes only the direct expenditures arising from the restructuring, which are those
amounts that are both necessarily entailed by the restructuring and not associated with the on-going activities of the entity.
The Group distinguishes in the consolidated income statement between restructuring costs that are recurring and those that relate to one-off or
transformational Group programmes that impact a number of operations.
Recurring restructuring costs that are incurred in the normal course of business are recorded as part of the Group’s results within adjusted profit
before interest, tax and amortisation (Adjusted PBITA).
Restructuring costs that are one-off and individually material or relate to programmes linked to the Group’s wider transformation, and require
approval at executive level, are disclosed separately in the consolidated income statement.
(m) Revenue recognition
The Group has no revenue other than that arising from contracts with customers. For the majority of the Group’s services, including the provision
of manned security and cash security services, the Group’s right to consideration from its customers equates to the value of services supplied to the
customer. Where that is the case, the practical expedient has been applied under IFRS 15 to recognise revenue when the services are provided for
the amount that the Group has a right to invoice for those services.
Technology installations are considered to comprise one performance obligation consisting of a group of inseparable services. Revenue in respect of
such installations is recognised as the services are delivered based on costs incurred as a proportion of the total expected costs of the installation.
Contracts for the provision of security alarms, smart safes and cash recycling equipment are assessed to identify distinct performance obligations
which will typically include one or more of: the outright sale of equipment; the provision of installation and/or maintenance services; equipment
rental and ongoing monitoring. In contracts that include the outright sale of equipment, revenue in respect of the sale and installation is recognised
when the equipment is installed. In countries in which equipment cannot be sold without the provision of on-going maintenance or other services
and in contracts for the rental of equipment, revenue is recognised over the period of the contract. On-going maintenance and monitoring services
represent a series of services with a constant pattern of transfer to the customer over time. Revenue in respect of such services is recognised over
the period of the contract. Where a contract contains a number of distinct performance obligations, the amount of revenue recognised in respect
of each is determined by allocating the total transaction price in the contract to performance obligations based on their relative standalone selling
prices.
Integrated Report and Accounts 2018 G4S plc 153
Integrated Report and Accounts 2018 G4S plc 153
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUED
3. Significant accounting policies continued
(m) Revenue recognition continued
Contracts for facilities management and Care & Justice Services typically require the provision of a group of interrelated goods and services to the
customer over a period of time. Such goods and services are typically considered to represent a single performance obligation as each promise is
satisfied over the same period. Consideration received in respect of such services typically equates to the value of services supplied to the customer
to date and the practical expedient has been applied under IFRS 15 to recognise revenue when services are provided for the amount that the
Group has a right to invoice for those services.
Certain of the Group’s contracts include payments that vary depending on its performance, including payments or penalties that are determined
based on the Group achieving KPIs. In such cases, the amount of revenue recognised is limited to the extent that it is not highly probable that the
Group will ultimately receive payment.
For the majority of the Group’s contracts, invoices are raised in the month or months after the delivery of services. Accrued income arises in
relation to services provided that have not been invoiced at the year end. For some contracts, particularly in facilities management, construction,
and Care & Justice Services activities, payments are received in advance of the performance of the related services and are recognised within
deferred income until the related services are delivered.
(n) Contract acquisition and fulfilment costs
The Group recognises the incremental costs of obtaining a contract with a customer as an asset, to the extent that those costs are expected to be
recovered during the contract. Such capitalised costs are amortised over the contract term. Bid team and other costs incurred prior to winning a
contract are not capitalised but are charged to the consolidated income statement as incurred.
Contract fulfilment costs are capitalised if they relate directly to a contract; result in the creation or enhancement of an asset to be used in the
performance of that contract; and are expected to be recovered under that contract. Capitalised contract fulfilment costs are amortised over the
contract term in line with the delivery of goods or services.
(o) Onerous contracts
Onerous contract provisions are recognised when 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 individually 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.
(p) Interest
Interest income is accrued on a time basis by reference to the principal outstanding and at the effective interest rate applicable. This is the rate that
exactly discounts estimated future cash receipts through the expected life of the financial asset’s net carrying amount. Borrowing costs, also
calculated using the effective-interest method, are recognised as an expense in the consolidated income statement.
(q) 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 of current tax and deferred tax, and excludes charges for
interest on tax and certain penalties on tax settlements, which are reported within finance expenses and administration expenses respectively.
Current tax is based on taxable profit for the year. Taxable profit differs from net profit as reported in the consolidated income statement because
it excludes items of income or expense that are taxable or deductible in other years and it further excludes items that are never taxable or
deductible. The Group’s liability for current tax is calculated using tax rates that have been enacted or substantively enacted by the balance sheet
date.
Deferred tax is the tax expected to be payable or recoverable on differences between the carrying amounts of assets and liabilities in the
consolidated financial statements and the corresponding tax bases used in the computation of taxable profit, and is accounted for using the balance
sheet liability method. Deferred tax liabilities are generally recognised for all taxable temporary differences. Deferred tax assets are recognised to
the extent that it is probable that future taxable profits will be available against which deductible temporary differences can be utilised.
Deferred tax liabilities are recognised for taxable temporary differences arising on investments in subsidiaries and interests in joint ventures, except
where the Group is able to control the reversal of the temporary difference and it is probable that the temporary difference will not reverse in the
foreseeable future.
The carrying amount of potential deferred tax assets is re-assessed at each balance sheet date and recognised to the extent that it is probable that
sufficient taxable profits will be available to allow those assets to be recovered.
Deferred tax is measured based on the tax rates that have been enacted or substantively enacted by the end of the reporting period.
Tax liabilities or refunds may differ from those anticipated due to changes in tax legislation, differing interpretations of tax legislation and
uncertainties surrounding the application of tax legislation. In situations where uncertainties exist, provision is made for tax liabilities and assets on
154 G4S plc Integrated Report and Accounts 2018
154
G4S plc Integrated Report and Accounts 2018
the basis of management judgment following consideration of the available relevant information. Further detail on management’s judgments in
respect of taxation is provided in note 4.
(r) Leasing
Leases are classified as finance leases when the terms of the lease transfer substantially all of the risks and rewards of ownership to the lessee. On
occasion this classification requires a level of judgment. All other leases are classified as operating leases.
Assets held under finance leases are recognised at the inception of the lease at their fair value or, if lower, at the present value of the minimum
lease payments. The corresponding liability to the lessor is included in the consolidated statement of financial position as a finance lease obligation.
Lease payments made or received are apportioned between finance charges or income and the reduction of the lease liability or asset so as to
produce a constant rate of interest on the outstanding balance of the liability or asset.
Rentals payable or receivable under operating leases are charged or credited to income on a straight-line basis over the lease term, as are incentives
to enter into operating leases.
(s) Non-current assets held for sale and discontinued operations
Non-current assets (and disposal groups) classified as held for sale are measured at the lower of carrying amount and fair value less costs to sell.
Non-current assets and disposal groups are classified as held for sale if their carrying amount will be recovered through a sale transaction rather
than through continuing use. This condition is regarded as met only when the sale is highly probable and the asset (or disposal group) is available for
immediate sale in its present condition. The Group must be committed to the sale, which should be expected to qualify for recognition as a
completed sale within one year from the date of classification.
A discontinued operation is a component of the Group’s business that represents a separate major line of business or geographical area of
operations or is a subsidiary acquired exclusively with a view to resale that has been disposed of, has been abandoned or meets the criteria to be
classified as held for sale.
(t) Dividend distribution
Dividends are recognised as distributions to equity holders in the period in which they are paid or approved by the shareholders in general meeting.
(u) Adoption of new and revised accounting standards and interpretations
The Group has applied IFRS 15 – Revenue from Contracts with Customers and IFRS 9 – Financial Instruments for the first time in the year ended
31 December 2018.
IFRS 15 – Revenue from Contracts with Customers
The Group has adopted IFRS 15 – Revenue from Contracts with Customers with effect from 1 January 2018 and has prepared its 2018 Integrated
Report and Accounts in accordance with the requirements of this new standard. The Group has chosen to apply the standard fully retrospectively
and has restated comparatives where appropriate.
The Group derives its revenue principally from providing manned security and cash security services; technology installation; the provision of
security equipment (particularly security alarms, smart safes and cash recycling equipment); and facilities management (including Care & Justice
Services). For the majority of the Group’s services, including the provision of manned security and cash security services, the Group’s right to
consideration from its customers equates to the value of services supplied to the customer. Where that is the case, the practical expedient has
been applied under IFRS 15 to recognise revenue when services are provided for the amount that the Group is entitled to invoice for those
services.
Technology installations represent long-term technology or other installation projects that span one or more reporting years. Under IFRS 15, such
installations are considered to comprise one performance obligation consisting of a group of inseparable services. Revenue in respect of such
installations is recognised as the services are delivered based on costs incurred as a proportion of the total expected costs of the installation.
Contracts for the provision of security alarms, smart safes and cash recycling equipment are assessed to identify distinct performance obligations
which will typically include one or more of: the outright sale of equipment; the provision of installation and/or maintenance services; equipment
rental and ongoing monitoring. In contracts that include the outright sale of equipment, revenue in respect of the sale and installation is recognised
when the equipment is installed. In countries in which equipment cannot be sold without the provision of on-going maintenance or other services
and in contracts for the rental of equipment, revenue is recognised over the period of the contract. On-going maintenance and monitoring services
represent a series of services with a constant pattern of transfer to the customer over time. Revenue in respect of such services is recognised over
the period of the contract.
Contracts for facilities management and Care & Justice Services typically require the provision of a group of interrelated goods and services to the
customer over a period of time. Such goods and services are typically considered to represent a single performance obligation as each promise is
satisfied over the same period. Consideration received in respect of such services typically equates to the value of services supplied to the customer
to date and the practical expedient has been applied under IFRS 15 to recognise revenue as the customer is billed.
In some facilities management contracts, the Group receives payment at the inception of the contract to compensate for mobilisation costs incurred
at the inception of the contract. Historically, such payments have been recognised as revenue as the Group has incurred the related costs. Under
IFRS 15, such amounts have been recorded as deferred income and recognised as services are provided. The effect of this change has been to
increase trade and other payables at 31 December 2017 by £13m (1 January 2017: £12m).
The impact of adopting IFRS 15 on the Group’s consolidated income statement for the year ended 31 December 2017 was an immaterial change
to the presentation of penalties incurred and an immaterial reduction in the amount capitalised with respect to the costs of bidding for and winning
contracts with the effect of reducing revenue by £2m and increasing each of Adjusted PBITA, operating profit, profit before tax, profit after tax,
profit for the year and profit for the year attributable to equity holders of the parent by £1m. The adoption of IFRS 15 had no impact on the
Group’s net cash flow from operating activities for the year ended 31 December 2017.
Integrated Report and Accounts 2018 G4S plc 155
Integrated Report and Accounts 2018 G4S plc 155
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUED
3. Significant accounting policies continued
(u) Adoption of new and revised accounting standards and interpretations continued
The impact of the adoption of IFRS 15 on the Group’s consolidated statement of financial position as at 31 December 2017 and as at 1 January
2017 is presented below:
As at 31 December 2017
Restatement for
IFRS15
£m
As published
£m
Restated As published
£m
£m
As at 1 January 2017
Restatement for
IFRS15
£m
83
240
2,526
2,849
1,416
1,156
2,572
5,421
(1,262)
(1,164)
(2,426)
(23)
(2,118)
(2,141)
(4,567)
(1)
2
–
1
1
–
1
2
(1)
–
(1)
82
242
2,526
2,850
1,417
1,156
2,573
5,423
101
285
2,637
3,023
1,381
1,207
2,588
5,611
(1,263)
(1,164)
(2,427)
(1,260)
(1,044)
(2,304)
(12)
–
(12)
(13)
(35)
(2,118)
(2,153)
(4,580)
(30)
(2,414)
(2,444)
(4,748)
854
(11)
843
863
388
258
204
850
4
854
–
–
(11)
(11)
–
(11)
388
258
193
839
4
843
388
258
196
842
21
863
(1)
2
–
1
2
–
2
3
(2)
–
(2)
(13)
–
(13)
(15)
(12)
–
–
(12)
(12)
–
(12)
Restated
£m
100
287
2,637
3,024
1,383
1,207
2,590
5,614
(1,262)
(1,044)
(2,306)
(43)
(2,414)
(2,457)
(4,763)
851
388
258
184
830
21
851
Consolidated statement of financial position
ASSETS
Non-current assets
Trade and other receivables
Deferred tax asset
Other non-current assets
Current assets
Trade and other receivables
Other current assets
Total assets
LIABILITIES
Current liabilities
Trade and other payables
Other current liabilities
Non-current liabilities
Trade and other payables
Other non-current liabilities
Total liabilities
Net assets
EQUITY
Share capital
Share premium
Reserves
Equity attributable to equity holders of the parent
Non-controlling interests
Total Equity
156 G4S plc Integrated Report and Accounts 2018
156
G4S plc Integrated Report and Accounts 2018
IFRS 9 – Financial Instruments
The Group has adopted IFRS 9 – Financial Instruments with effect from 1 January 2018 and has prepared its Integrated Report and Accounts in
accordance with the requirements of this new standard.
The new standard is applicable to the classification, measurement, impairment and re-categorisation of financial assets and liabilities. It also
introduces a new hedge accounting model.
There has been no material change to the Group's consolidated income statement, statement of other comprehensive income, statement of
changes in equity, statement of financial position or statement of cash flows on adoption. The Group has no financial liabilities held at fair value
other than derivatives. The introduction of an expected loss impairment model has had no material effect given the general quality and short-term
nature of the Group's trade receivables. There has been no re-categorisation of assets on adoption of the new standard.
Hedge accounting
The Group has adopted the new general hedge accounting model in IFRS 9. This requires the Group to ensure that hedge accounting relationships
are aligned with its risk management objectives and strategy, and to apply a more qualitative and forward-looking approach to assessing hedge
effectiveness. Following a review of the Group’s hedging arrangements, the Group has determined that its existing hedges are compliant with the
new requirements. In accordance with the accounting policy, the Group has elected to present separately the cost of hedging reserve in equity.
Transition
Changes in accounting policies resulting from the adoption of IFRS 9 have been applied retrospectively. Other than described above, the Group has
not made any voluntary elections on adoption.
New standards, amendments and interpretations not yet effective
The Group has not early-adopted any standard, amendment or interpretation in the year. A number of new standards, amendments to standards
and interpretations are not yet effective for the year ended 31 December 2018. The directors are currently evaluating the impact of these new
standards on the group financial statements:
Annual Improvements to IFRS Standards 2015-2017 Cycle
IFRS 9 amendments – Prepayment features with negative compensation
IAS 28 amendments – Long term interests in associates and joint ventures
IAS 19 amendments – Plan amendment, curtailment or settlement
IFRS 3 amendments – Definition of a business
IAS 1 and IAS 8 – Definition of material
IFRIC 23 – Uncertainty over income tax treatments
IFRS 16 – Leases
IFRS 16 will be effective for the first time in the Group’s consolidated financial statements for the year ended 31 December 2019. Its principal effect
will be to gross up the Group’s balance sheet to recognise additional right of use assets within property, plant and equipment and additional lease
liabilities in respect of leases that are currently treated as operating leases. The associated operating lease charge that is currently recorded within
operating costs will be removed and replaced with a depreciation charge in respect of the additional assets recognised and an interest charge in
respect of the additional lease creditors recognised.
The Group will apply the standard using the fully retrospective method and will restate its results for comparative periods as if the Group had
always applied the new standard. The only exception is that leases (as defined by IFRS 16) that were in existence at 1 January 2018 but did not
meet the previous definition of leases will continue to apply their historical accounting.
The Group will not apply the standard to short-term leases (being those with an initial term of 12 months or less) or leases of low-value items
(defined as leases of assets with an initial cost of less than £2,500). It will apply the practical expedient to include non-lease components within the
measurement of lease assets and liabilities.
Adopting IFRS 16 requires the Group to exercise judgment. In particular:
IFRS 16 requires the Group to take into account periods covered by options to extend or terminate leases to the extent that it is reasonably
certain that the leases will continue for those terms. In assessing what is reasonably certain, the Group considers past practice, its future needs,
the lease terms, and, in respect of leases of assets that are used to serve sales contracts, the length of the related sales contracts.
IFRS 16 requires the Group to estimate incremental rates of borrowings in respect of leases for which no interest rate is implicit in the lease.
The Group has determined the incremental rates of borrowing for individual leases based on swap rates with matching start-dates, terms and
currencies, adjusted for the country-specific risk of the lessee. No adjustment has been made to reflect the nature of the leased assets on the
basis that a lender would not make a material adjustment to the borrowing rate to reflect the nature of the underlying assets.
Based on the Group’s provisional estimates, it anticipates that it will recognise additional right of use assets of approximately £345m at
31 December 2018 (£385m at 1 January 2018). Additional finance lease creditors of approximately £410m will be recorded at 31 December 2018
(£460m at 1 January 2018) including some that will replace existing property and onerous contract provisions. Of the right of use asset recognised
at 31 December 2018, approximately £225m relates to properties and approximately £90m relates to motor vehicles. The remainder relates to
other operational equipment leased by the Group.
Integrated Report and Accounts 2018 G4S plc 157
Integrated Report and Accounts 2018 G4S plc 157
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUED
3. Significant accounting policies continued
(u) Adoption of new and revised accounting standards and interpretations continued
The Group provisionally estimates that the adoption of IFRS 16 will reduce the operating lease expense for the year ended 31 December 2018 by
approximately £190m and increase the depreciation expense by approximately £155m resulting in a net increase in operating profit of
approximately £35m. In addition, interest on the finance lease liability is expected to increase the interest charge for the year by approximately
£20m. (Note: all amounts stated to the nearest £5m and at 2018 year-end rates of exchange). The Group expects that a significant portion of its
property and onerous contract provisions related to leases will be derecognised and replaced with finance lease creditors. In addition, the Group
expects to make various consequential adjustments as a result of adopting IFRS 16 including: adjusting operating profit to remove the effect of
movements in property and onerous contract provisions related to leases; adjusting prepayments and accruals in respect of leases that have
previously been treated as operating leases; and consequential changes to reflect movements in foreign exchange rates. During 2019, the Group will
also complete its assessment of the tax and deferred tax effects of adopting IFRS 16. The Group will finalise those adjustments in early 2019.
4. Accounting estimates, judgments and assumptions
The preparation of financial statements in conformity with adopted IFRSs requires management to make judgments, estimates and assumptions that
affect the application of the Group’s accounting policies, which are described in note 3, with respect to the carrying amounts of assets and liabilities
at the date of the financial statements, the disclosure of contingent assets and liabilities at the date of the financial statements and the reported
amounts of income and expenses during the reporting period.
Significant judgments
Significant judgments are those made by management when applying its accounting policies that are considered to have the most significant impact
on amounts recognised in the consolidated financial statements.
Those judgments that are considered to have the most significant impact on amounts recognised in the consolidated financial statements, apart
from those involving estimations (which are disclosed separately below), are the following:
Compliance with foreign ownership rules and consolidation of subsidiaries
The Group has a diverse set of complex ownership structures, which are sometimes driven by local laws and regulations relating to foreign
ownership. In some instances the Group operates through local structures with limited direct share ownership of the business but exercises control
through shareholder agreements.
Judgment is required in determining whether certain Group entities qualify for consolidation under IFRS10 – Consolidated Financial Statements, and
in some instances professional and legal advice is sought to support these judgments. Consolidation of any of these entities would be at risk if the
Group’s ability to enforce its rights of control was successfully challenged.
These judgments have been applied in determining how the Group consolidates businesses with an aggregated revenue of c.£700m, Adjusted
PBITA of c.£50m and equity shareholders’ funds of c.£200m. The impact on the Group’s earnings (after tax) of equity accounting rather than full
consolidation would not be material.
Classification of leases
The classification of leases as operating or finance leases is based on the criteria set out in IAS 17 – Leases, which defines a series of attributes
which, when contained within a lease, may result in its classification as a finance lease. Judgment is required in assessing leases at inception as to
whether individual attributes, in aggregate or in isolation, are such that the substance of the lease is that of a finance lease. Details of the Group’s
finance leases are disclosed in note 27 and the Group’s operating lease commitments are set out in note 37.
Alternative Performance Measures
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 the normal course of business and more comparable period to period. Adjusted PBITA excludes strategic restructuring costs,
amortisation of acquisition-related intangible assets and specific and other separately disclosed items which the Group believes should be disclosed
separately by virtue of their size, nature or incidence. Judgment is required when defining those items to be disclosed separately and when applying
the classification criteria to each period’s results. Further details on separately disclosed items are set out in note 8.
Significant estimates and assumptions
Significant estimates and associated assumptions are those that have a significant risk of resulting in a material adjustment to the carrying amounts of
assets and liabilities within the next financial year. Significant estimates are made taking into account historical experience and various other factors
that are believed to be reasonable under the circumstances, including current and expected economic conditions, and, in some cases, actuarial
techniques. Estimates and underlying 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 2018 consolidated financial statements are set out
below:
Onerous contracts
The Group delivers certain long-term services that are complex in nature. Some of the contracts to deliver these services may evolve to become
loss-making, such that net unavoidable losses are expected to be incurred over their life.
Where a contract is expected to be loss-making over its remaining term, the net present value of estimated future losses is determined in order to
calculate an onerous contract provision. The identification and measurement of such provisions is subject to inherent risk, given the extended time
periods often involved and the number of variables which are not all within the Group’s control.
158 G4S plc Integrated Report and Accounts 2018
158
G4S plc Integrated Report and Accounts 2018
In particular, estimation is required in assessing future expected revenue and costs on such contracts, including:
determining the expected impact of any profit improvement plans where sufficient evidence exists of benefits being delivered by those plans;
determining the expected outcome of any contractual or commercial disputes; and
determining an appropriate discount rate to apply to material future cash flows.
The level of uncertainty in the estimates and assumptions supporting expected future revenues and costs can vary with the complexity of each
contract and with the form of service delivery.
For further details of how the Group has applied judgments and estimates to significant onerous contract provisions refer to note 32 on pages 195
to 197.
Carrying value of goodwill
The Group tests goodwill for impairment on an annual basis or more frequently if there are indications that amounts may be impaired. The
impairment analysis for such assets is based 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.
Taxation
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 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. The tax liability provided is management’s best 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
probability weighting is applied in determining the amount provided. In all cases it is assumed that the local tax authorities have, or will be provided
with, full information. Therefore the tax liability is not reduced for “detection risk”. Further details about the range of the potential tax exposure to
which the Group is subject are set out in note 13.
The Group has tax losses and other deductible temporary differences, mainly in the UK and USA, that have the potential to reduce tax payments in
future years. Deferred tax assets are recognised to the extent that their recovery is probable, having regard to the projected future taxable 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 by the business, for example in assessing the carrying value of goodwill. Judgment is applied on a case-by-case basis due
to the jurisdictional nature of taxation. This analysis is considered afresh at each balance sheet date.
Valuation of retirement benefit obligations
The valuation of defined retirement benefit schemes is arrived at using the advice of qualified independent actuaries who use the projected unit
credit method for determining the Group’s obligations. This methodology requires the use of a variety of assumptions and estimates, including the
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 benefit obligations, including an analysis of the sensitivity of the calculations to the
key assumptions, are presented in note 31.
Labour laws and commercial agreements
The Group is involved in disputes in a number of countries, mainly related to activities incidental to its operations. Currently there are a number of
such disputes, including class actions, open in relation to the application of local labour law, commercial agreements with customers and
subcontractors and claims and compliance matters, in some cases in the course of litigation. In addition the interpretation of labour laws and
regulations in a number 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, based on legal counsel advice, the Group estimates that
it is probable that the dispute will result in an outflow of economic resources, provision is made based on the Group’s best 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 32 on pages 195 to 197.
In certain instances it is not possible to determine a reliable estimate or a reasonable range of potential outcomes. For these cases, disclosure of the
relevant items as contingent liabilities is provided in note 32.
Integrated Report and Accounts 2018 G4S plc 159
Integrated Report and Accounts 2018 G4S plc 159
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUED
5. Revenue
The Group’s revenue by type of service and reportable segment (see note 6) can be analysed as follows:
Year ended 31 December 2018
Sale of goods
Rendering of services
Revenue from construction contracts
Total
Year ended 31 December 2017 Restated1
Sale of goods
Rendering of services
Revenue from construction contracts
Total
Africa
£m
10
396
–
406
Africa
£m
8
391
–
399
Americas
£m
58
2,246
139
2,443
Americas
£m
56
2,351
86
2,493
Asia
£m
6
853
23
882
Asia
£m
6
866
24
896
Europe
& Middle East
£m
37
2,530
77
2,644
Total Secure
Solutions
£m
111
6,025
239
6,375
Europe
& Middle East
£m
38
2,616
93
2,747
Total Secure
Solutions
£m
108
6,224
203
6,535
1. Revenue for the year ended 31 December 2017 has been restated for the effects of IFRS 15 – see note 3.
The Group’s revenue by customer type can be analysed as follows:
Year ended 31 December 2018
Major corporates
Government
Financial institutions
Retail, leisure and consumers
Private energy/utilities
Transport, ports and aviation
Total
1. Revenue for the year ended 31 December 2017 has been restated for the effects of IFRS 15 – see note 3.
Each of the Group’s segments made sales to all customer types both in 2018 and 2017.
Assets and liabilities related to contracts with customers
Current assets
Amounts due from construction contract customers
Accrued income
Trade debtors
Loss allowance
Total contract assets
Liabilities
Amounts due to construction contract customers (current)
Deferred income (current)
Deferred income (non-current)
Total contract liabilities
1. Restated for the effects of IFRS 15 – see note 3.
Note
23
23
23
23
28
28
28
2018
£m
14
231
1,065
(55)
1,255
(2)
(72)
(15)
(89)
Cash
Solutions
£m
34
1,103
–
1,137
Cash
Solutions
£m
173
1,118
–
1,291
2018
£m
2,556
1,615
1,249
1,256
429
407
7,512
2017
Restated1
£m
17
168
1,071
(61)
1,195
(2)
(64)
(18)
(84)
Total
£m
145
7,128
239
7,512
Total
£m
281
7,342
203
7,826
2017
Restated1
£m
2,594
1,615
1,341
1,412
463
401
7,826
2016
Restated1
£m
17
153
1,060
(65)
1,165
(3)
(78)
(22)
(103)
During the year the Group recognised £58m of revenue that was held in deferred income (or amounts payable to construction contract
customers) as at 31 December 2017 (2017: £58m related to amounts as at 31 December 2016), and £nil (2017: £3m) of revenue in relation to
performance obligations satisfied in prior years.
As at 31 December 2018, the Group has recorded £3m (2017: £2m) of capitalised contract fulfilment costs, included within other debtors. The
Group did not incur any material contract acquisition costs during the current or prior years.
The increase in accrued income in the year to 31 December 2018 primarily arises because of the timing of invoicing for services in new contracts in
the UK and US Secure Solutions businesses.
160 G4S plc Integrated Report and Accounts 2018
160
G4S plc Integrated Report and Accounts 2018
6. Operating segments
As indicated in the 2017 Integrated Report and Accounts, from 1 January 2018 the Group has reorganised the group-wide management of its
businesses to create a Global Cash Solutions division and to consolidate its Secure Solutions business into four regions:
Africa;
Americas (combining the previous North America and Latin America regions);
Asia (including India and Bangladesh that formerly reported under the Middle East & India region); and
Europe & Middle East (combining the previous Europe, UK & Ireland and Middle East & India regions except for India and Bangladesh that now
report under the Asia region).
The Cash Solutions business is managed and reported separately to the Group Executive Committee. Whilst it operates in various geographic
regions, the nature of the products and services provided and the type of customer are similar across those regions.
Prior year comparatives have been restated accordingly to present segmental results on a consistent basis. For each of the reportable segments, the
Group Executive Committee (the chief operating decision maker) reviews internal management reports on a regular basis.
Segment information is presented below:
Revenue by reportable segment
Africa
Americas2
Asia
Europe & Middle East4
Total Secure Solutions
Cash Solutions2,3,4
Total Revenue
Operating profit by reportable segment
Africa
Americas2
Asia
Europe & Middle East
Total Secure Solutions
Cash Solutions2,3
Operating profit before corporate costs
Corporate costs
Adjusted profit before interest, tax and amortisation
(Adjusted PBITA)
Specific items (net)
California class action settlement
Guaranteed minimum pension equalisation charge
Restructuring costs
(Loss)/profit on disposal/closure of subsidiaries/businesses
Amortisation of acquisition-related intangible assets
Operating profit
Total segment
revenue
2018
£m
408
2,447
889
2,663
6,407
1,144
7,551
Inter-segment
revenue
2018
£m
(2)
(4)
(7)
(19)
(32)
(7)
(39)
Continuing
operations
2018
£m
Discontinued
operations
2018
£m
31
127
63
175
396
114
510
(50)
460
(22)
(100)
(35)
(31)
(15)
(4)
253
–
2
–
–
2
–
2
–
2
–
–
–
–
–
–
2
External
revenue
2018
£m
406
2,443
882
2,644
6,375
1,137
7,512
Total segment
revenue
2017
Restated1
£m
406
2,498
904
2,763
6,571
1,295
7,866
Inter-segment
revenue
2017
£m
(7)
(5)
(8)
(16)
(36)
(4)
(40)
External revenue
2017
Restated1
£m
399
2,493
896
2,747
6,535
1,291
7,826
Continuing
operations
2017
Restated1
£m
Discontinued
operations
2017
£m
Total
2017
Restated1
£m
29
123
60
182
394
147
541
(49)
492
(34)
–
–
(20)
74
(10)
502
–
(6)
–
–
(6)
–
(6)
–
(6)
–
–
–
–
–
–
(6)
29
117
60
182
388
147
535
(49)
486
(34)
–
–
(20)
74
(10)
496
Total
2018
£m
31
129
63
175
398
114
512
(50)
462
(22)
(100)
(35)
(31)
(15)
(4)
255
1. The revenue and operating profit for the year ended 31 December 2017 have been restated to reflect the Group’s reorganisation as described above and for the effects of
IFRS 15 – see note 3.
2. As part of the disposal of the Colombia Cash business in 2018, a small number of contracts that were previously reported in the Cash Solutions division were transferred to
the Colombia Secure Solutions business and integrated into their operations. Results from these contracts have been re-classified to be reported within the Americas region in
the Secure Solutions division and prior year comparatives have been restated accordingly.
3. Includes a benefit of £8m from the early completion of a bullion centre contract in the UK Cash Solutions business (2017: £3m from the same contract).
4. Revenue in the UK, being the Group’s country of domicile, was £1,304m (2017: £1,298m).
Inter-segment sales are charged at prevailing market prices.
The Group has no transactions with a single external customer that amount to 10% or more of total Group revenue in the current or prior years.
Refer to note 7 for details on discontinued operations.
Integrated Report and Accounts 2018 G4S plc 161
Integrated Report and Accounts 2018 G4S plc 161
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUED
6. Operating segments continued
Non-current assets
The following information is analysed by reportable segment and by the geographical area in which the assets are located:
Non-current assets1
By reportable segment
Africa
Americas
Asia
Europe & Middle East2
Total Secure Solutions
Cash Solutions2
Total segment non-current assets1
Corporate
Total non-current assets1
Other non-current assets3
Less: Non-current assets held for sale
Total non-current assets
2018
£m
62
645
134
851
1,692
690
2,382
52
2,434
435
(9)
2,860
2017
Restated4
£m
58
627
111
871
1,667
737
2,404
47
2,451
425
(26)
2,850
1. Non-current assets comprise goodwill, other acquisition-related intangible assets, non-acquisition-related intangible assets, property, plant and equipment and investments in
joint ventures.
2. Non-current assets in the UK, being the Group’s country of domicile, amounted to £815m (2017: £817m).
3. Other non-current assets comprise trade and other receivables, investments, retirement benefit surpluses and deferred tax assets.
4. Non-current assets for the year ended 31 December 2017 have been restated for the effects of IFRS 15 – see note 3.
Other information
By reportable segment
Africa
Americas
Asia
Europe & Middle East
Total Secure Solutions
Cash Solutions
Total segment
Corporate
Total
Depreciation
and
amortisation
2018
£m
6
15
6
37
64
51
115
2
117
Capital
additions
2018
£m
11
17
11
31
70
46
116
14
130
Depreciation
and
amortisation
2017
£m
6
18
7
44
75
55
130
6
136
Capital
additions
2017
£m
7
16
6
29
58
40
98
10
108
7. Discontinued operations
The profit from discontinued operations of £2m in the current year relates to the recovery in 2019 of receivables that had been provided for as at
1 January 2018, in relation to historical disposals of businesses classified as discontinued operations at the time of sale (2017: loss of £6m comprising
impairments of trade receivables and costs and charges incurred or expected to be incurred). Discontinued operations incurred no tax charge
during the year (2017: £nil). None of the Group’s businesses currently held for sale or sold or closed during the year meet the criteria to be
classified as discontinued operations in the current year (2017: 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 2018 (2017: £nil).
162 G4S plc Integrated Report and Accounts 2018
162
G4S plc Integrated Report and Accounts 2018
8. Operating profit
The consolidated income statement can be analysed as follows:
Continuing operations
Revenue
Cost of sales
Gross profit
Administration expenses2
Net impairment losses on financial and contract assets2
Share of profit after tax from joint ventures
Operating profit
2018
£m
7,512
(6,208)
1,304
(1,047)
(11)
7
253
2017
Restated1
£m
7,826
(6,429)
1,397
(893)
(11)
9
502
1. Comparative results have been restated for the adoption of IFRS 15, see note 3.
2. Comparative results have been re-presented to show separately the net impairment losses on financial and contract assets that were previously included within
administration expenses.
Operating profit includes items that are separately disclosed for the year ended 31 December 2018 relating to:
Specific items charges of £32m (2017: £34m) include £12m related to additional provisions in Asia in respect of historical employee gratuities
and end of service benefits and £11m related to the reassessment of estimated settlement amounts in respect of historical workers’
compensation claims in the Americas. In addition, this includes a £9m onerous contract charge related to two UK Care & Justice contracts,
reflecting the estimated losses over the expected remaining contract terms;
Specific items charges incurred during the year ended 31 December 2017 of £34m included £19m primarily relating to the anticipated total
losses over the next 15 to 20 years in respect of certain UK government contracts, £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 disputes in respect
of prior years in the Americas;
Specific items credits of £10m (2017: £nil) include a £5m release of onerous contract provisions in the UK for which the related charges had
previously been recorded as specific items, following the implementation of operational efficiencies in the contracts leading to a reduction in
expected future losses. In addition, a further £5m related to successful court claims made by the Group in the Americas;
Following the UK High Court Ruling in the case of Lloyds Banking Group Pension Trustees Limited v Lloyds Bank plc (and others) in October
2018, the Group incurred a charge of £35m (2017: £nil) in respect of the equalisation of benefits for historical Guaranteed Minimum Pension
obligations between males and females in the UK;
In January 2019 the Group agreed the settlement of a class action relating to claims for employee meal and rest breaks for the period 2001 to
2010 in California. This settlement is subject to the final approval of the Superior Court of the State of California. The amount to be settled is
between US$100m and US$130m with the precise amount to be determined during the settlement administration process. A provision of
£100m has been established in the accounts for the year ended 31 December 2018 representing management’s best estimate of the amount of
the class action settlement and any related costs;
Investment in restructuring programmes of £31m (2017: £20m) relates to the 2018-2020 strategic productivity programme announced in 2017
which is being implemented across the Group, mainly in Europe & Middle East, the Americas and Global Cash Solutions. In addition, the Group
incurred non-strategic severance costs of £9m (2017: £10m) which are included within cost of sales and administration expenses as appropriate;
Disposal loss of £15m (2017: profit of £74m) relating to the disposal of a number of the Group’s operations including its businesses in Hungary
and the Philippines, its archiving business in Kenya and the Cash Solutions businesses in the United Arab Emirates, Colombia and Saudi Arabia. In
2017, the Group disposed of a number of operations including the businesses in Israel and Bulgaria and its Youth Services business in North
America; and
Amortisation of acquisition-related intangible assets of £4m (2017: £10m) is lower than the prior year as certain intangible assets recognised on
legacy acquisitions became fully amortised in 2017.
Integrated Report and Accounts 2018 G4S plc 163
Integrated Report and Accounts 2018 G4S plc 163
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUED
9. Profit from operations
Profit from continuing operations has been arrived at after charging/(crediting):
Cost of sales
Cost of inventories recognised as an expense
Administration expenses
Net specific items
Guaranteed minimum pension equalisation charge
California class action settlement
Restructuring costs
Net loss/(profit) on disposal/closure of subsidiaries/businesses
Amortisation of acquisition-related intangible assets
Depreciation of property, plant and equipment
Amortisation of non-acquisition-related intangible assets
Research and development expenditure
Operating lease rentals payable (restated)1
Share-based payments
Notes
8
8
8
8
8, 17
8
19
18
38
2018
£m
90
22
35
100
31
15
4
93
20
4
197
8
2017
£m
98
34
–
–
20
(74)
10
104
22
4
172
10
1. As a result of the detailed work carried out to assess the impact of IFRS 16 – Leases, effective 1 January 2019, the Group has identified that the operating lease rentals payable
that were previously disclosed for the year ended 31 December 2017 as £104m were understated. As a result, it has re-presented the operating lease rentals payable above.
The adjustment has no effect on the total of administrative expenses, or the profit for the year to 31 December 2017.
10. Auditor’s remuneration
Fees payable to the company’s auditor for the audit of the parent company and consolidated financial statements
Fees payable to the company’s auditor and its associates for other services:
The audit of the company’s subsidiaries1
All other services2
2018
£m
1
7
1
2017
£m
1
7
1
1. 2018 fees included £nil (2017: £1m) in respect of prior years.
2. Other services of £0.6m (2017: £0.7m) relate mainly to other assurance services of £0.5m (2017: £0.5m) which include the half year review.
The Audit Committee Report on pages 98 to 104 outlines the company’s established policy for ensuring that audit independence is not
compromised through the provision by the company’s auditor of other services.
164 G4S plc Integrated Report and Accounts 2018
164
G4S plc Integrated Report and Accounts 2018
11. Staff costs and employees
The average monthly number of employees, including executive directors was:
By reportable segment
Africa
Americas
Asia
Europe & Middle East
Total Secure Solutions
Cash Solutions
Head office
Total average number of employees (excluding joint ventures)
Average number of employees employed by joint ventures
Total average number of employees (including joint ventures)
Their aggregate remuneration, comprised:
Wages and salaries
Social security costs
Employee benefits
Total staff costs (excluding joint ventures)
Joint venture staff costs
Total staff costs (including joint ventures)
2018
Number
116,188
117,802
175,693
103,411
513,094
34,873
265
548,232
11,648
559,880
2018
£m
4,505
477
212
5,194
63
5,257
2017
Number
119,514
123,134
177,704
103,078
523,430
37,492
248
561,170
12,501
573,671
2017
£m
4,629
501
233
5,363
70
5,433
Information on directors’ remuneration, long-term incentive plans, pension contributions and entitlements is set out in the Directors’ Remuneration
report on pages 105 to 127.
Integrated Report and Accounts 2018 G4S plc 165
Integrated Report and Accounts 2018 G4S plc 165
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUED
12. Net finance expense
Interest and other income on cash, cash equivalents and investments
Other finance income
Finance income
Interest on bank overdrafts and loans
Interest on loan notes
Net interest (payable)/receivable on loan-note related derivatives1
Gain arising from fair value adjustment to the hedged loan note items
Loss arising from change in fair value of derivative financial instruments hedging loan notes
Interest on obligations under finance leases
Other interest charges2
Total Group borrowing costs
Finance costs on defined retirement benefit obligations
Finance expense
Net finance expense
2018
£m
14
2
16
(16)
(81)
(7)
6
(6)
(2)
(9)
(115)
(11)
(126)
(110)
20171
£m
12
–
12
(18)
(87)
4
14
(14)
(3)
(12)
(116)
(11)
(127)
(115)
1. In the prior year, the net interest receivable on loan note related derivatives was presented within finance income. In the current year it has been included within finance
expense, and the prior year comparatives re-presented accordingly.
2. Other interest charges include £nil (2017: £2m) relating to discounts unwound on provisions.
13. Tax
Current tax expense
Current year
Adjustments in respect of prior years (note (vii))
Total current tax expense
Deferred tax (credit)/expense (see note 33)
Current year
Re-assessment of deferred tax recoverability on losses (note (vi))
Adjustments in respect of prior years (note (vii))
Total deferred tax (credit)/expense
Total income tax expense for the year
2018
£m
87
(12)
75
(30)
4
6
(20)
55
2017
£m
89
8
97
42
(5)
(6)
31
128
UK corporation tax is calculated at 19% (2017: 19%) of the estimated assessable profits for the year. Overseas tax is calculated at the corporation
tax rates prevailing in the relevant jurisdictions.
166 G4S plc Integrated Report and Accounts 2018
166
G4S plc Integrated Report and Accounts 2018
The tax charge for the year can be reconciled to the profit per the consolidated income statement as follows:
Profit before tax
Continuing operations1
Discontinued operations
Total profit before tax1
Tax at UK corporation tax rate of 19% (2017: 19%)
Items that are not deductible and other additions to taxable profit (note (i))
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 year (note (iv))
Impact of US tax reforms (note (v))
Re-assessment of deferred tax recoverability on losses (note (vi))
Adjustment in respect of prior years – current and deferred tax (note (vii))
Total income tax charge
Effective tax rate for continuing and discontinued operations
1. Restated for the effect of IFRS 15 – see note 3.
The effective tax rate for continuing operations was 38% (2017: 33%).
2018
£m
143
2
145
28
15
5
13
(3)
–
(2)
1
–
4
(6)
55
38%
2017
Restated1
£m
387
(6)
381
74
20
1
23
(5)
(2)
(1)
2
19
(5)
2
128
34%
(i) Items that are not deductible and other additions to taxable profit – £15m (2017: £20m): reflects the tax effect of items which, in management’s
judgment, are potentially disallowable for the purposes of determining local taxable profits. This includes unrelieved withholding taxes of £1m
(2017: £8m) relating to withholding tax deducted on domestic or cross-border payments in excess of the profits tax arising in the recipient
company.
(ii) Losses on disposal of businesses not relieved – £5m (2017: £1m): relates to losses arising on the disposal of businesses that are not allowable for
tax or for which there are insufficient taxable profits available in the foreseeable future to utilise those losses.
(iii) Different tax rates of subsidiaries operating in non-UK jurisdictions – £13m (2017: £23m): arise because of 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 – £1m (2017: £2m): relates to current-year losses not recognised as deferred tax assets on the basis
that there are insufficient taxable profits available to utilise them in the foreseeable future.
(v) Impact of US tax reforms – £nil (2017: £19m): The Tax Cuts and Jobs Act introduced significant changes in US tax laws taking effect on 1 January
2018. For 2017, the changes in legislation resulted in a one-off charge to the income statement of £19m which related 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 were no longer expected to be
utilisable in future periods against foreign source income.
(vi) Re-assessment of deferred tax recoverability on losses – £4m (2017: £(5)m): relates to the re-assessment of deferred tax assets on historical tax
losses during the year as a result of updated group forecasts and business plans.
(vii) Adjustment in respect of prior years – current and deferred tax – £(6)m (2017: £2m): relates to (i) changes in provisions for unresolved tax issues
as a result of settlements with tax authorities; and (ii) a re-assessment of the recoverability of certain tax balances.
Issues relating to taxation
The calculation of the Group’s total tax charge involves consideration of certain items whose tax treatment cannot be ultimately determined until
final resolution has been reached through negotiation with the relevant tax authorities, or via a domestic or international dispute resolution process.
The global nature of the Group’s operations means that the most significant tax risk is in relation to challenges from tax authorities in respect of the
pricing of cross-border transactions and the Group’s interpretation of the OECD’s arm’s-length principle. This risk is largely driven by the inherently
subjective nature of transfer pricing and the divergent views taken by tax authorities. In determining the appropriate level of provisions in respect of
such challenges, the Group applies a risk-based approach which considers factors such as the quantum of the charge, the countries party to the
transaction and the relevant statutes of limitation. An assessment is also made of the likelihood that compensating adjustments will be obtained
under the relevant tax treaties to mitigate the level of double taxation which could arise.
Integrated Report and Accounts 2018 G4S plc 167
Integrated Report and Accounts 2018 G4S plc 167
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUED
13. Tax continued
As the Group operates in a significant number of countries, determining the appropriate level of judgment is typically influenced by the Group’s
evolving experience of tax controversy in different countries. The Group has open tax periods in a number of countries involving a number of
issues, with the most material disputes typically being in respect of cross-border transactions. As at 31 December 2018, the Group had total tax
exposures of approximately £134m (2017: £153m) of which £25m (2017: £48m) is provided against. The Group believes that it has made
appropriate provision for open tax periods which have not yet been agreed by tax authorities. The final agreed liabilities may vary from the amounts
provided, as these are dependent upon the outcomes of the domestic and international dispute resolution processes in the relevant countries. The
Group typically has limited control over the timing of resolution of uncertain tax positions with tax authorities. Acknowledging this inherent
unpredictability, and on the basis of currently available information, the Group does not expect material changes to occur to the level of provisions
against uncertain tax positions during the next twelve months.
The potential tax impacts which could arise as a consequence of the UK withdrawing from the European Union are dependent on the manner of
the UK’s withdrawal, but on the basis of current information the Group does not anticipate that significant additional tax liabilities will arise.
The following taxation charge has been recognised directly in equity within the consolidated statement of comprehensive income:
Tax relating to defined retirement benefit schemes
Change in fair value of net-investment and cash-flow hedging financial instruments
Total tax charged to other comprehensive income
14. Dividends
Amounts recognised as distributions to equity holders of the parent in the year
Final dividend for the year ended 31 December 2016
Interim dividend for the six months ended 30 June 2017
Final dividend for the year ended 31 December 2017
Interim dividend for the six months ended 30 June 2018
Pence
per share
DKK
per share
5.82
3.59
6.11
3.59
0.5029
0.2948
0.5097
0.2969
Proposed final dividend for the year ended 31 December 2018
6.11
0.5321
2018
£m
(6)
(2)
(8)
2018
£m
–
–
95
55
150
95
2017
£m
(4)
–
(4)
2017
£m
90
55
–
–
145
–
The proposed final dividend is subject to approval by shareholders at the Annual General Meeting. If so approved, it will be paid on 14 June 2019
to shareholders who are on the register on 3 May 2019. The Danish kroner exchange rate shown above for the dividend is that at 11 March 2019.
168 G4S plc Integrated Report and Accounts 2018
168
G4S plc Integrated Report and Accounts 2018
15. Earnings per share attributable to equity shareholders of the parent
From continuing and discontinued operations
Earnings
Profit for the year attributable to equity shareholders of the parent
Weighted-average number of ordinary shares2 (m)
Earnings per share from continuing and discontinued operations (pence)
Basic and diluted
From continuing operations
Earnings
Profit for the year attributable to equity shareholders of the parent
Adjustment to exclude (profit)/loss for the year from discontinued operations (net of tax)
Profit from continuing operations
Earnings per share from continuing operations (pence)
Basic and diluted
From discontinued operations
Earnings
Profit/(loss) for the year from discontinued operations (net of tax)
Earnings/(loss) per share from discontinued operations (pence)
Basic and diluted
2018
£m
82
1,547
2017
Restated1
£m
237
1,548
5.3p
15.3p
82
(2)
80
237
6
243
5.2p
15.7p
2
(6)
0.1p
(0.4)p
1. Restated for the effect of IFRS 15 – see note 3.
2. Excluding shares held by the Group’s Employee Benefit Trust and accounted for as treasury shares (see note 35).
16. Acquisitions
The Group has not made any material acquisitions in the current or prior year. During the year, the Group has invested £2m in the acquisition of
two minor Secure Solutions businesses in Asia and Europe & Middle East (2017: invested £1m in minor acquisitions), and has also paid £2m in
respect of acquisitions completed in prior years (2017: £nil). In addition, during the year, shareholder agreements were re-negotiated for certain
joint ventures resulting in the Group obtaining control of these operations.
The Group committed to invest £21m in the acquisition of non-controlling interests in certain operations, primarily in Asia (2017: invested £16m
primarily in Europe & Middle East).
Integrated Report and Accounts 2018 G4S plc 169
Integrated Report and Accounts 2018 G4S plc 169
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUED
17. Disposals and closures
During the year ended 31 December 2018 the Group sold nine businesses including the Group’s businesses in Hungary and the Philippines, the
archiving business in Kenya, and the Cash Solutions businesses in the United Arab Emirates, Colombia and Saudi Arabia, realising net cash
consideration of £45m. The Group also closed a small number of minor operations during the year, which together with the businesses sold
generated Adjusted PBITA of £(9)m in 2018 up to the date of disposal or closure (for the year ended 31 December 2017: £3m).
In 2017 the Group sold nine businesses, including the Youth Services business in North America, the children’s homes business in the UK, the cash
businesses in Peru and Paraguay, and the Group’s businesses in Israel and Bulgaria, realising net cash consideration of £156m. A further four
businesses were closed during the prior year.
The net assets and net (loss)/profit on disposal/closure of operations disposed of or closed were as follows:
Goodwill
Other acquisition-related intangible assets
Property, plant and equipment
Other non-current assets
Current assets
Liabilities
Net assets of operations disposed of/closed
Less: recycling from currency translation reserve
Net impact on the consolidated statement of financial position due to disposals/closures
Fair value of retained investment in former joint venture
(Loss)/profit on disposal/closure of subsidiaries/businesses
Total consideration
Satisfied by:
Cash received
Net disposal costs paid
Additional net consideration received relating to disposals completed in prior years
Net cash consideration received in the year
Deferred consideration receivable
Accrued disposal and other costs
Total consideration
2018
£m
22
–
23
4
51
(38)
62
(1)
61
–
(15)
46
48
(4)
1
45
6
(5)
46
2017
£m
52
1
13
17
78
(61)
100
(18)
82
(3)
74
153
166
(10)
–
156
4
(7)
153
170 G4S plc Integrated Report and Accounts 2018
170
G4S plc Integrated Report and Accounts 2018
18. Intangible assets
2018
Cost
At 1 January 2018
Additions
Disposals
Acquisition of a subsidiary
Re-classifications
Exchange differences
At 31 December 2018
Accumulated amortisation and
impairment losses
At 1 January 2018
Amortisation charge
Disposals
Exchange differences
At 31 December 2018
Carrying amount
At 1 January 2018
At 31 December 2018
2017
Cost
At 1 January 2017
Additions
Disposals
Write-off of fully amortised intangible assets
Transferred to held for sale
Re-classifications
Exchange differences
At 31 December 2017
Accumulated amortisation and
impairment losses
At 1 January 2017
Amortisation charge
Write-off of fully amortised intangible assets
Transferred to held for sale
Exchange differences
At 31 December 2017
Carrying amount
At 1 January 2017
At 31 December 2017
Acquisition-related intangible assets
Goodwill
£m
Trademarks
£m
Customer-
related
£m
Non-acquisition-
related
intangible assets
£m
Technology
£m
2,080
–
(15)
4
1
35
2,105
(166)
–
1
(1)
(166)
1,914
1,939
2,157
–
(2)
–
(9)
–
(66)
2,080
(167)
–
–
1
–
(166)
1,990
1,914
3
–
–
–
–
–
3
(2)
–
–
–
(2)
1
1
34
–
–
(32)
–
1
–
3
(32)
(2)
32
–
–
(2)
2
1
61
7
–
–
–
(2)
66
(53)
(4)
–
2
(55)
8
11
674
–
–
(599)
–
–
(14)
61
(658)
(8)
599
–
14
(53)
16
8
–
–
–
–
–
–
–
–
–
–
–
–
–
–
9
–
–
(9)
–
–
–
–
(9)
–
9
–
–
–
–
–
Total
£m
2,400
38
(20)
4
1
35
2,458
(389)
(24)
6
–
(407)
256
31
(5)
–
–
2
284
(168)
(20)
5
(1)
(184)
88
100
2,011
2,051
255
24
–
(17)
(7)
1
–
256
(169)
(22)
17
6
–
(168)
3,129
24
(2)
(657)
(16)
2
(80)
2,400
(1,035)
(32)
657
7
14
(389)
86
88
2,094
2,011
Integrated Report and Accounts 2018 G4S plc 171
Integrated Report and Accounts 2018 G4S plc 171
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUED
18. Intangible assets continued
Goodwill allocation
Goodwill acquired 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 acquisition of Securicor by Group 4 Falck.
Goodwill impairment testing
The Group tests goodwill for impairment on an annual basis or more frequently if there are indications that it 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.
The Group has historically identified CGUs for goodwill impairment testing purposes on a country-level basis including significant business units. As a
result of the Group’s re-organisation into a Secure Solutions division and a Cash Solutions division from 1 January 2018, a number of CGUs that
previously represented entire countries have been divided into separate Cash Solutions and Secure Solutions CGUs for the Group’s 2018 goodwill
impairment test. The revised CGUs are consistent with the way in which the Group’s Chief Operating Decision Maker now reviews performance.
As a result, goodwill of £445m that was previously held at a country level has been allocated to new CGUs based on their relative fair values
(£243m to Secure Solutions and £202m to Cash Solutions).
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.
Forecast cash flows
All operating countries in the Group are required to submit a budget for the next financial year (for the year ending 31 December 2019) and
strategic plan forecasts for the two years following the budget year (i.e. for the years ending 31 December 2020 and 31 December 2021) for both
their Secure Solutions and Cash Solutions businesses.
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 future 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 – to achieve
midpoint between
years 3 and 5
Example
8%
7%
6%
4%
1. Budgets and strategic plan forecasts are reviewed by the group board.
2. Sourced from the 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 applies the
long-term inflation rate of 2%.
172 G4S plc Integrated Report and Accounts 2018
172
G4S plc Integrated Report and Accounts 2018
Discount rates
The following 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 between the UK and that CGU’s
country and by applying an appropriate country-specific risk premium sourced primarily
from the IMF and New York University websites as well 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 whole. 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-wide 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 between the yield on a BBB-rated 15+ year UK benchmark bond and the UK
risk-free rate.
The weighted-average cost of capital is calculated by weighting the cost of equity and
the cost of debt by the applicable debt to equity ratio at the year end.
31 Dec 2018
1.77% in UK
2.3% in UK
31 Dec 2017
1.75% in UK
2.3% in UK
0.75 for the
Group
0.75 for the
Group
1.3% in UK
1.3% in UK
9.5% in UK
9.1% in UK
The table below sets out the pre-tax discount rates and growth rates used for the Group’s CGUs with significant goodwill balances:
Brazil Secure Solutions
US Commercial Security Solutions
Netherlands Secure Solutions
UK Central Government Services
UK Secure Solutions
UK Integrated Solutions
UK Business & Outsourcing Solutions
Netherlands Cash Solutions
UK Cash Solutions
Other (all allocated)
Total goodwill
Discount rate
2018
16.2%
11.0%
7.3%
10.0%
8.8%
10.0%
8.9%
7.3%
9.1%
Discount rate
2017
15.6%
10.1%
8.2%
9.1%
8.7%
9.9%
8.9%
8.2%
8.9%
Long-term
growth rate1
2018
4.0%
2.2%
2.1%
0.0%
2.0%
2.0%
2.0%
2.1%
2.0%
Long-term
growth rate1
2017
4.0%
2.3%
1.6%
2.0%
2.0%
2.0%
2.0%
1.6%
2.0%
Goodwill
2018
£m
70
430
76
225
107
79
65
86
205
596
1,939
Goodwill
2017
£m
77
405
75
225
107
79
65
85
205
591
1,914
1. Lower of long-term country inflation rate per the IMF and implied year 3 business forecast growth rate, restricted to a minimum of 0%.
Integrated Report and Accounts 2018 G4S plc 173
Integrated Report and Accounts 2018 G4S plc 173
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUED
18. Intangible assets continued
Sensitivity to key 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% (for example, increasing the UK base rate from
9.5% to 10.5% and 12.5% with all other variables being equal) 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 Group in total and for each
of its countries that represent significant goodwill balances:
Brazil Secure Solutions2
US Commercial Security Solutions
Netherlands Secure Solutions
UK Central Government Services
UK Secure Solutions
UK Integrated Solutions
UK Business & Outsourcing Solutions
Netherlands Cash Solutions
UK Cash Solutions2
Other2 (all allocated)
Total
Additional impairment
Base
discount rate
2018
16.2%
11.0%
7.3%
10.0%
8.8%
10.0%
8.9%
7.3%
9.1%
Goodwill
2018
£m
70
430
76
225
107
79
65
86
205
596
1,939
1%
increase
2018
£m
(2)
–
–
–
–
–
–
–
(1)
(2)
(5)
3%
increase
2018
£m
(7)
–
–
–
–
–
–
–
(20)
(4)
(31)
Base
growth
rate1
2018
4.0%
2.2%
2.1%
0.0%
2.0%
2.0%
2.0%
2.1%
2.0%
Additional impairment
3%
1%
decrease
decrease
2018
2018
£m
£m
(17)
(8)
–
–
–
–
–
–
–
–
–
–
–
–
–
–
(58)
(31)
(14)
(6)
(89)
(45)
1. Lower of the long-term country growth rate per the IMF and the implied year 3 business forecast growth rate, restricted to a minimum of 0%.
2. For certain CGUs, including Brazil Secure Solutions and UK Cash Solutions presented separately above, and South Africa Cash Solutions (included within ‘other’ above, with a
goodwill balance of £16m), the impairment model indicated a potential impairment when applying sensitivities as presented in the table above. For the UK Cash Solutions and
Brazil Secure Solutions CGUs 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 2018. For the South Africa Cash Solutions CGU, management is satisfied that the carrying value of goodwill is supported by value in use
valuations taking into account expected performance improvement plans.
174 G4S plc Integrated Report and Accounts 2018
174
G4S plc Integrated Report and Accounts 2018
19. Property, plant and equipment
2018
Cost
At 1 January 2018
Additions
Disposals
Acquisition of a subsidiary
Transferred to held for sale (net)
Re-classifications
Exchange differences
At 31 December 2018
Accumulated depreciation and impairment losses
At 1 January 2018
Depreciation charge
Disposals
Acquisition of a subsidiary
Transferred to held for sale (net)
Impairment
Re-classifications
Exchange differences
At 31 December 2018
Carrying amount
At 1 January 2018
At 31 December 2018
2017
Cost
At 1 January 2017
Additions
Disposals
Transferred to held for sale
Re-classifications
Exchange differences
At 31 December 2017
Accumulated depreciation and impairment losses
At 1 January 2017
Depreciation charge
Disposals
Transferred to held for sale
Re-classifications
Exchange differences
At 31 December 2017
Carrying amount
At 1 January 2017
At 31 December 2017
Land and
buildings
£m
Equipment
and vehicles
£m
246
10
(10)
3
(17)
–
2
234
(109)
(12)
5
(1)
8
(2)
–
(1)
(112)
137
122
814
82
(104)
5
(2)
(5)
9
799
(556)
(81)
89
(3)
2
(1)
5
(9)
(554)
258
245
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
Total
£m
1,060
92
(114)
8
(19)
(5)
11
1,033
(665)
(93)
94
(4)
10
(3)
5
(10)
(666)
395
367
Total
£m
1,188
84
(151)
(46)
4
(19)
1,060
(751)
(104)
145
32
(4)
17
(665)
437
395
The net book value of equipment and vehicles held under finance leases was £21m (2017: £26m). Accumulated depreciation on these assets was
£113m (2017: £109m) and the depreciation charge for the year was £13m (2017: £16m).
The rights over assets held on finance leases are effectively security for lease liabilities. These rights revert to the lessor in the event of default.
Integrated Report and Accounts 2018 G4S plc 175
Integrated Report and Accounts 2018 G4S plc 175
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUED
19. Property, plant and equipment continued
The net book value of equipment and vehicles includes £26m (2017: £25m) of assets leased by the Group to third parties under operating leases.
Accumulated depreciation on these assets was £27m (2017: £28m) and the depreciation charge for the year was £8m (2017: £9m).
The net book value of land and buildings comprises freeholds of £62m (2017: £68m), long leaseholds of £15m (2017: £17m) and short leaseholds
of £45m (2017: £52m).
20. Investment in joint ventures
The following summarised aggregate financial information represents the Group’s interest in joint ventures 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 ventures
Group’s share of:
Profit from continuing operations
Total comprehensive income
21. Inventories
Raw materials
Work in progress
Finished goods including consumables
Total inventories
2018
£m
8
7
7
2018
£m
9
14
90
113
2017
£m
20
9
9
2017
£m
8
12
84
104
22. Investments
Investments of £65m (2017: £62m) comprise mainly listed securities and certificates of deposit stated at fair value based on quoted market prices
consistent with Level 1 of the valuation hierarchy as explained in note 3(g). These amounts include £41m (2017: £42m) held by the Group’s
wholly-owned captive insurance subsidiaries where use of the investments is restricted to the settlement of claims against those subsidiaries.
23. Trade and other receivables
Within current assets
Accrued income
Trade debtors2
Loss allowance
Receivables from customers in respect of cash-processing operations
Other debtors2
Prepayments
Amounts due from construction contract customers2
Derivative financial instruments at fair value
Total trade and other receivables included within current assets
Within non-current assets
Derivative financial instruments at fair value
Other debtors2
Total trade and other receivables included within non-current assets
Notes
5
5
5
25
5
29
29
2018
£m
231
1,065
(55)
6
103
64
14
1
1,429
43
45
88
2017
Restated1
£m
168
1,071
(61)
7
106
64
17
45
1,417
40
42
82
1. Restated for the effect of IFRS 15 – see note 3.
2. Due to the short-term nature of financial assets included within trade and other receivables, their carrying amount is considered to be the same as their fair value. Contractual
maturities of current trade and other receivables are less than one year.
176 G4S plc Integrated Report and Accounts 2018
176
G4S plc Integrated Report and Accounts 2018
Credit risk on trade receivables
The Group’s customers are both large in number and dispersed geographically in around 90 countries. The Group performs various services to a
number of UK Government agencies which, in total, comprised approximately 6% of the total trade debtor balance as at 31 December 2018
(2017: 6%). The Group considers these individual Government agencies to be separate customers due to the limited economic integration
between each agency. Management is therefore satisfied that across the Group’s total trade debtors as at 31 December 2018 there is no significant
concentration risk. Group companies are required to follow the Group Finance Manual guidelines with respect to assessing the credit-worthiness of
potential customers. These guidelines include processes such as obtaining approval for credit limits over a set amount, performing credit checks and
assessments and obtaining additional security where required.
Credit terms vary across the Group and can range from 0 to 90 days to reflect the different risks within each country in which the Group operates.
Impairment of financial assets
The Group applies the IFRS 9 simplified approach to measuring expected credit losses which uses a lifetime expected loss allowance for all trade
receivables and other contract assets (being unbilled work in progress).
To measure the expected credit losses, trade receivables and other contract assets have been grouped based on shared credit risk characteristics
and the days past due.
The expected loss rates are based on the payment profiles of sales over a period of at least 36 months before the end of the relevant reporting
year and the corresponding historical credit losses experienced within this period. The historical loss rates are adjusted to reflect current and
forward-looking information on macroeconomic factors that the Group considers would affect the ability of its customers to settle the receivables.
The Group has identified the GDP rates of the countries in which it sells its goods and services to be the most relevant factors, and accordingly
adjusts the historical loss rates based on expected changes in GDP rates.
On that basis, the loss allowance was determined as follows for both trade receivables and other contract assets:
Expected loss rate
Gross carrying amount - trade receivables and other
contract assets (see note 5)
Loss allowance 31 December 2018
Expected loss rate
Gross carrying amount - trade receivables and other
contract assets (see note 5)
Loss allowance 31 December 2017
Current
£m
0.1%
979
(1)
Current
£m
0.3%
947
(3)
1-30 days
overdue
£m
0.7%
138
(1)
1-30 days
overdue
£m
0.7%
142
(1)
31-60 days
overdue
£m
2.0%
61-180 days
overdue
£m
4.7%
Over 181 days
overdue
£m
61.3%
49
(1)
64
(3)
80
(49)
31-60 days
overdue
£m
2.2%
61-180 days
overdue
£m
5.9%
Over 181 days
overdue
£m
74.6%
45
(1)
51
(3)
71
(53)
The closing loss allowance for trade receivables and other contract assets as at 31 December 2018 reconciles to the opening loss allowance
as follows:
At 1 January
Increase in loss allowance1
Amounts written off during the year
Unused amounts reversed2
Exchange differences
At 31 December
2018
£m
(61)
(14)
15
5
–
(55)
Total
£m
4.2%
1,310
(55)
Total
£m
4.9%
1,256
(61)
2017
£m
(65)
(21)
16
6
3
(61)
1. In 2017, the increase in loss allowance included £4m in relation to discontinued operations.
2. Unused amounts reversed in 2018 includes £2m relating to discontinued operations, refer to note 7.
The Group does not hold any collateral over these balances The Group’s DSO measure (days’ sales outstanding) for continuing operations based
on revenue from the last 90 days of the year is 55 days (2017: 52 days).
Integrated Report and Accounts 2018 G4S plc 177
Integrated Report and Accounts 2018 G4S plc 177
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUED
24. Disposal groups classified as held for sale
As at 31 December 2018, disposal groups classified as held for sale related to a minor operation in Asia, which was sold in January 2019, and assets
classified as held for sale related to property located in Europe & Middle East.
As at 31 December 2017, disposal groups classified as held for sale include the assets and liabilities associated with minor operations in Africa, Asia,
the Americas and Europe & Middle East.
The major classes of assets and liabilities comprising the operations classified as held for sale are as follows:
Assets
Goodwill
Property, plant and equipment and non-acquisition-related intangible assets
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 loans
Trade and other payables
Retirement benefit obligations
Deferred tax liability
Obligations under finance leases
Total liabilities of disposal groups classified as held for sale
Net assets of disposal groups
2018
£m
2017
£m
–
9
–
–
–
–
9
–
(1)
–
–
–
(1)
8
9
16
1
2
17
8
53
(2)
(12)
(3)
(1)
(1)
(19)
34
25. 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. These services include the
collection, segregated storage and delivery of customer cash, with title to the cash handled remaining with the customer throughout the process.
The cash involved in these services 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. These 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 as shown in the following table:
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)
2018
£m
59
(22)
(43)
6
–
2017
£m
74
(19)
(62)
7
–
Whilst these cash and bank balances are not formally restricted by legal title, they are restricted by the Group’s own internal policies to ensure that
they are not 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 balances due to and from customers in respect of unsettled
transactions, within cash, cash equivalents and bank overdrafts, and hence have no impact on the Group’s statutory cash flow.
178 G4S plc Integrated Report and Accounts 2018
178
G4S plc Integrated Report and Accounts 2018
A reconciliation of cash, cash equivalents and bank overdrafts at the end of the year per the consolidated statement of financial position to the
corresponding balances 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 bank overdrafts included within disposal groups classified as held for sale
Total cash, cash equivalents and bank overdrafts
Add:
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
Cash, cash equivalents and bank overdrafts at the end of the year in the consolidated statement of cash flow
2018
£m
1,015
(305)
–
710
(43)
6
673
2017
£m
902
(284)
8
626
(62)
7
571
Cash and cash equivalents comprise principally short-term money market deposits, current account balances and Group-owned cash held in ATM
machines. At 31 December 2018 cash and cash equivalents earned interest at a weighted-average rate of 0.95% (2017: 0.6%). The credit risk on
cash and cash equivalents is limited because wherever possible, and in accordance with Group Treasury policy, the cash is placed with bank
counterparties that hold investment grade credit ratings assigned by international credit-rating agencies.
Cash and cash equivalents of £77m (2017: £71m) are held by the Group’s wholly-owned captive insurance subsidiaries. Their use is restricted to
the settlement of claims against the Group’s captive insurance subsidiaries.
26. Bank overdrafts, bank loans and loan notes
Within current liabilities
Bank overdrafts
Bank loans
Loan notes
Total bank overdrafts, bank loans and loan notes included within current liabilities
Within non-current liabilities
Bank loans
Loan notes
Total bank overdrafts, bank loans and loan notes included within non-current liabilities
2018
£m
305
12
464
781
293
1,533
1,826
2017
£m
284
8
655
947
5
1,486
1,491
Integrated Report and Accounts 2018 G4S plc 179
Integrated Report and Accounts 2018 G4S plc 179
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUED
26. Bank overdrafts, bank loans and loan notes continued
The table below sets out the details of Group’s loan notes and bank loans all of which are measured at amortised cost.
Private placement 2008
Private placement 2008
Private placement 20071
Private placement 20071
Private placement 2008
Total private loan notes
Public bond 20122
Public bond 2009
Public bond 2016
Public bond 20172
Public bond 2018
Total public loan notes
Term credit facility
Revolving credit facility3
Other bank loans
Total bank loans
GBP
USD
USD
USD
USD
EUR
GBP
EUR
EUR
EUR
44m
224m
145m
105m
74.5m
500m
350m
500m
500m
550m
USD
GBP
Various
350m
750m
Various
Jul-18
Jul-18
Mar-19
Mar-22
Jul-20
Dec-18
May-19
Jan-23
Jun-24
May-25
Aug-21
Aug-23
Various
Interest
%
7.56
6.78
5.96
6.06
6.88
2.625
7.75
1.5
1.5
1.88
Floating
Floating
Floating
2018
Carrying amount
£m
–
–
114
89
59
262
–
350
448
447
490
1,735
275
–
30
305
2017
Carrying amount
£m
44
166
111
87
55
463
445
350
443
440
–
1,678
–
–
13
13
1. $250m (£196m) of private loan notes are held in a fair value hedge relationship and are remeasured to reflect the fair value of the hedged risk. The effect of this
remeasurement was a cumulative £7m increase being included in the carrying amount shown above (2017: increase of £13m).
2. As at December 2018 €100m (£90m) of the May 2017 public bonds are held in a fair value hedge relationship and are remeasured to reflect the fair value of the hedged
interest rate risk. The effect of this remeasurement was a cumulative £1m increase being included in the carrying amount shown above (2017: £nil). As at December 2017
€120m (£107m) of the December 2012 public bond was also held in a fair value hedge relationship and remeasured to reflect the fair value of the hedged interest rate risk.
The effect of this remeasurement was a cumulative £1m being included in the carrying amount shown above.
3. During the year the Group amended the available revolving credit facility, reducing it from £1bn to £750m while extending the maturity for a further one and a half years to
August 2023.
In May 2018 the Group issued a €550m public bond which matures in May 2025 and pays an annual coupon of 1.875%. At the same time the
Group entered into a cross currency swap to hedge the foreign currency risk on €400m of this bond and designated this relationship as a cash flow
hedge. Details of the Group’s hedging policy are set out in note 29.
The Group’s average cost of gross borrowings, net of interest hedging, was 3.9% (2017: 4.1%).
Compliance with loan covenants
The Group has complied with the financial covenants of its borrowing facilities during the 2018 and 2017 reporting periods (see note 30 for
details).
Fair value
The carrying amounts of bank overdrafts and current bank loans are considered to be the same as their fair values due to their short-term nature.
The carrying amounts of non-current bank loans other than the term credit facility are considered to be materially the same as their fair values. The
carrying amount and fair value of the loan notes and term credit facility are summarised in the table below:
Public loan notes
Private loan notes
Term credit facility
1. Fair value hierarchy level, as explained in note 3(g).
Carrying amount
2018
£m
1,735
262
275
Level1
1
2
2
Fair value
2018
£m
1,729
267
281
Carrying amount
2017
£m
1,678
463
–
Fair value
2017
£m
1,742
467
–
The fair values of the Group’s public loan notes are determined using Level 1 inputs as explained in note 3(g). The fair values of Group’s private
loan notes and the term credit facility are measured using techniques consistent with Level 2 of the valuation hierarchy and are calculated using
discounted cash flow models. The relevant currency-yield curve is used to forecast the floating-rate cash flows anticipated under the instrument,
which are discounted back to the balance sheet date.
Risk exposures
Details of the Group’s exposure to risks arising from current and non-current borrowings are set out in note 30.
180 G4S plc Integrated Report and Accounts 2018
180
G4S plc Integrated Report and Accounts 2018
27. Obligations under finance leases
Amounts payable under finance leases:
Within one year
In the second to fifth years inclusive
After five years
Less: future finance charges on finance leases
Present value of lease obligations
Less: amount due for settlement within 12 months (presented within current
liabilities)
Amount due for settlement after 12 months (presented within
non-current liabilities)
Minimum lease
payments
2018
£m
Minimum lease
payments
2017
£m
Present value of
minimum lease
payments
2018
£m
Present value of
minimum lease
payments
2017
£m
13
16
1
30
(3)
27
15
20
1
36
(1)
35
11
15
1
27
(11)
16
15
19
1
35
(15)
20
The Group leases certain of its fixtures and equipment under finance leases. The weighted-average lease term is six years (2017: six years). For the
year ended 31 December 2018, the weighted-average effective borrowing rate was 3.5% (2017: 5.7%). Interest rates are fixed at the related
contract dates. All leases are on a fixed repayment basis and no arrangements have been entered into for contingent rental payments.
The Group’s obligations under finance leases are secured by the lessors’ charges over the leased assets.
28. Trade and other payables
Within current liabilities:
Trade creditors2
Amounts due to construction-contract customers
Other taxation and social security costs
Holiday pay and other wage-related accruals2
Liabilities to customers in respect of cash-processing operations2
Other creditors2
Other accruals2
Deferred income
Derivative financial instruments at fair value
Total trade and other payables included within current liabilities
Within non-current liabilities:
Derivative financial instruments at fair value
Deferred income
Other creditors2
Total trade and other payables included within non-current liabilities
Notes
5, 23
25
5
29
29
5
2018
£m
242
2
198
358
43
87
235
72
–
1,237
11
15
12
38
2017
Restated1
£m
249
2
206
370
62
62
241
64
7
1,263
6
18
11
35
1. Restated for the effect of IFRS 15 – see note 3.
2. The financial liabilities included within trade and other payables are held at amortised cost and their carrying amount is considered to be materially the same as their fair value,
primarily due to their short-term nature. The contractual maturities of current trade and other payables are less than one year.
Trade and other payables principally comprise amounts outstanding for trade purchases and on-going costs. The average credit period taken for
trade purchases for continuing operations is 39 days (2017: 42 days).
Integrated Report and Accounts 2018 G4S plc 181
Integrated Report and Accounts 2018 G4S plc 181
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUED
29. Derivative financial instruments
The carrying values of derivative financial instruments at the balance sheet date are presented below:
Interest rate swaps - Fair value hedges
Interest rate swaps - Not in a hedging relationship
Cross currency swaps - Cash flow hedges
Cross currency swaps - Net investment hedges
Total
Current portion
Non-current portion
Total
Assets
2018
£m
9
–
35
–
44
1
43
44
Liabilities
2018
£m
–
1
–
10
11
–
11
11
Assets
2017
£m
15
–
54
16
85
45
40
85
Liabilities
2017
£m
1
1
9
2
13
7
6
13
Classification of derivatives
Derivatives are only used for economic hedging purposes and not as speculative investments. The Group’s exposure to financial risk includes:
interest rate risk on the Group’s variable rate borrowings; fair value risk on the Group’s fixed rate borrowings; commodity risk in relation to the
Group’s diesel consumption; and foreign exchange risk on transactions, including translation of the Group’s results and net assets measured in
foreign currencies. The Group manages these risks using a range of derivative financial instruments which may include interest rate swaps, fixed rate
agreements, commodity swaps, commodity options, forward currency contracts and currency swaps.
Derivatives are presented as current assets or liabilities to the extent they are to be settled within 12 months after the end of the reporting period.
Changes in the fair value of derivative instruments that are not designated or do not qualify for hedge accounting are recognised in the consolidated
income statement immediately.
The Group's hedge accounting policy is set out in note 3(g). Further information about the derivatives used by the Group is provided in note 30.
Fair value
Derivative financial instruments are stated at fair value, measured using techniques consistent with Level 2 of the valuation hierarchy as explained in
note 3(g). Their fair values are calculated using discounted cash flow models. The relevant currency yield curve is used to forecast the floating rate
cash flows anticipated under the instrument, which are discounted back to the balance sheet date.
Hedging reserves
The hedging reserves include the cash flow hedge reserve and the cost of hedging reserve. The cash flow hedge reserve records the effective
portion of gains or losses on derivatives that are designated and qualify as cash flow hedges. The cost of hedging reserve includes the deferred
currency basis spread from cross currency interest rate swaps used for cash flow hedging and also the deferred currency basis spread and forward
points from cross currency interest rate swaps used for net investment hedging (see note 3(g)).
The amount deferred for the year from cash flow hedges net of tax is £nil (2017: £nil) and from net investment hedges is £3m (2017: £nil).
The Group’s hedging reserves are disclosed in note 35 and are analysed in detail below:
At 1 January
Add: change in fair value2
Less: transferred to income statement3
Less: deferred tax
At 31 December
Cost of hedging
reserve1
2018
£m
–
(4)
–
1
(3)
Cash flow hedge
reserve1
2018
£m
–
32
(17)
(3)
12
Total hedging
reserves
2018
£m
–
28
(17)
(2)
9
Cost of hedging
reserve1
2017
£m
–
–
–
–
–
Cash flow hedge
reserve1
2017
£m
–
21
(21)
–
–
Total hedging
reserves
2017
£m
–
21
(21)
–
–
1. Following the adoption of IFRS 9 Financial Instruments, the Group has separately presented the cost of hedging reserve that was previously incorporated into the cash flow
hedge reserve, as explained in note 3(g). The balance of the cost of hedging reserve as at 31 December 2017 was £nil and is unchanged compared with the balance prior to
the adoption of IFRS 9.
2. Recognised in other comprehensive income.
3. The amount transferred to the income statement was offset by an equal and opposite foreign exchange movement arising on the hedge loan notes so that the net impact on
the consolidated income statement was nil.
182 G4S plc Integrated Report and Accounts 2018
182
G4S plc Integrated Report and Accounts 2018
Hedge effectiveness
Hedge effectiveness is determined at the inception of the hedge relationship and periodically thereafter to ensure that an economic relationship
exists between the hedged item and hedging instrument.
Cross currency interest rate swaps
The Group uses the cumulative dollar offset method to assess the effectiveness of its hedges. This method calculates the ratio of the cumulative
changes in the fair value of the hedging instrument (excluding credit risk and excluding currency basis spread), divided by the cumulative changes in
fair value of the hypothetical derivative (which does not include credit risk or currency basis) attributable to changes in the hedged risk. The
hypothetical derivative is used as a proxy for the net present value of the hedged future cash flows of the hedged item and would result in the
hedging instrument perfectly hedging the hedged risk based on market prices at the date of designation.
There was no ineffectiveness recorded during 2018 or 2017 in relation to cross currency swaps.
Interest rate swaps
The hedging instrument is carried at its fair value with any changes in fair value taken to profit or loss. The change in fair value of the hedged risk, as
measured by the change in fair value of hedged cash flows attributable to changes in the base currency Libor curve, adjusts the carrying amount of
the debt and is also recorded in profit or loss.
The net effect recorded in the consolidated income statement for 2018 was £nil (2017: £nil).
30. Financial risk
The board provides written principles for overall risk management, as well as policies covering specific areas such as foreign exchange risk, interest
rate risk, use of derivative financial instruments and non-derivative financial instruments, and investment of excess liquidity. The Group's financial risk
management is predominantly delegated to and controlled by a central treasury department (Group Treasury) under policies approved by the
board of directors. Group Treasury evaluates and hedges financial risks in close co-operation with the Group's operating units.
Where all relevant criteria are met, hedge accounting is applied to remove mismatches between the accounting for hedging instruments and
hedged items. The effect of this accounting is effectively to recognise interest expense at a floating rate for the hedged fixed rate loan notes and to
recognise Euro bond debt at a fixed currency exchange rate to Sterling.
The Group documents the economic relationship between derivatives designated as hedging instruments and hedged items at the inception of the
hedge, including its risk management objective and strategy for undertaking the hedge transaction. The Group further documents the expected
outcome of the hedge i.e. whether forecast cash flows offset for cash flow hedges, fair value movements offset for fair value hedges and foreign
exchange movements offset for net investment hedges.
Capital management
In April 2018, Standard & Poor’s revised the Group’s long-term credit rating to BBB- (stable) (2017: BBB- (negative)). The Group’s policy is to
continue to manage its capital structure to retain 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 2018 the ratio was 2.7x (2017: 2.4x).
In May 2018 the Group issued a €550m public bond which matures in May 2025 and pays an annual coupon of 1.875%. In August 2018 the Group
arranged a US$350m term facility, maturing in August 2021, which was fully drawn. It also amended the available revolving credit facility, reducing it
from £1bn to £750m while extending the maturity for a further one and a half years to August 2023. As at 31 December 2018 there were no
drawings from this facility.
The debt maturities in 2019 comprise the US$145m US Private Placement notes repaid in March 2019 and the £350m public bond due in May
2019. Overall the debt portfolio has a medium to long-term debt maturity profile. While the Group is currently well placed to access finance from
the debt-capital markets and from the bank market, if required, a £300m bridge facility has also been arranged in January 2019 for one year.
Borrowings are principally in Sterling, US Dollars and Euros reflecting the geographies of the Group's significant operational assets and profits.
The committed bank facilities and the private loan notes are subject to one financial covenant (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 covenant may lead to an acceleration of maturity.
The Group has complied with the financial covenants of its borrowing facilities during the 2018 and 2017 reporting periods. The calculation of the
Revolving Credit Facility covenant is based on historical frozen GAAP as at 31 December 2017 and so will be unchanged on adoption of (i.e.
calculated excluding the effect of) IFRS 16 - Leases.
Integrated Report and Accounts 2018 G4S plc 183
Integrated Report and Accounts 2018 G4S plc 183
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUED
30. Financial risk continued
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 26.
The percentage of the available committed Revolving Credit Facility that was undrawn during the course of the year was as follows:
31 December 2017
31 March 2018
30 June 2018
30 September 2018
31 December 2018
100%
100%
100%
100%
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. The risk is further reduced by opening negotiations either to replace or extend any major medium-term facility at least
12 months before the maturity date.
Maturity profile of loans and borrowings
The table below analyses the Group’s financial liabilities presented within borrowings into relevant maturity groupings based on their contractual
undiscounted cash flow maturities. Details about non-borrowings financial liabilities are included in note 28.
Within 1 year
£m
Between
1 and 3 years
£m
Between
3 and 5 years
£m
Over 5 years
£m
Contractual maturities as at 31 December 2018
Non-derivatives
Bank overdrafts1
Bank loans
Private loan notes
Public bonds
Finance lease liabilities
Total non-derivatives
Derivatives
Interest rate swaps2
Cross currency swaps3:
(Inflow)
Outflow
Total derivatives
Contractual maturities as at 31 December 2017
Non-derivatives
Bank overdrafts1
Bank loans
Private loan notes
Public bonds
Finance lease liabilities
Total non-derivatives
Derivatives
Interest rate swaps2
Cross currency swaps3:
(Inflow)
Outflow
Total derivatives
283
23
126
400
13
845
(4)
(24)
40
12
–
308
72
45
13
438
(4)
(48)
80
28
–
–
85
495
3
583
(2)
(291)
320
27
265
8
239
497
15
1024
(8)
(379)
348
(39)
–
5
182
404
14
605
(5)
(35)
56
16
–
–
91
27
5
123
(4)
(36)
55
15
(1)
(11)
Total
£m
283
336
283
1,909
30
2,841
(1,455)
1,526
60
Total
£m
265
13
512
1,835
35
2660
–
5
–
969
1
975
(1,092)
1,086
(7)
–
–
–
907
1
908
1
(16)
(1,005)
940
(64)
(1,455)
1,399
(72)
Within 1 year
£m
Between
1 and 3 years
£m
Between
3 and 5 years
£m
Over 5 years
£m
1. Excluding cash and overdraft balances in respect of cash-processing operations (see note 25).
2. Interest rate swaps are net settled.
3. Cross currency swaps are gross settled.
184 G4S plc Integrated Report and Accounts 2018
184
G4S plc Integrated Report and Accounts 2018
Analysis of the Group’s financial assets and liabilities presented within borrowings by currency is as follows:
Bank overdrafts
Bank loans
Loan notes
At 31 December 2018
Bank overdrafts
Bank loans
Loan notes
At 31 December 2017
Sterling
£m
226
2
350
578
145
–
394
539
Euros
£m
18
2
1,385
1,405
17
–
1,328
1,345
US dollars
£m
8
285
262
555
86
2
419
507
Others
£m
53
16
–
69
36
11
–
47
Total
£m
305
305
1,997
2,607
284
13
2,141
2,438
Set-off of financial assets and liabilities
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. There were no material amounts offset in the consolidated statement of financial position or associated with enforceable master
netting agreements.
Market risk
Currency risk and forward-currency contracts
The Group conducts business in many countries but, wherever possible, each business operates and conducts its financing activities in local currency
limiting transactional currency risk. The Group presents its consolidated financial statements in Sterling and is therefore subject to foreign-exchange
risk due to the translation of the results and net assets of its foreign subsidiaries.
Cross currency swaps held in cash flow hedges
Cross currency swaps are designated as cash flow hedges against the final settlement of Euro-denominated public bonds to mitigate the functional
currency cash flow exposure on its principal and interest payments. The Group’s policy is to hedge against movements in spot rates. Inherent
forward points are seen as an unavoidable cost of hedging and are recognised in other comprehensive income and included in the cost of
hedging reserve.
Nominal value
£266m
£25m
£284m
£244m
£346m
£350m
Hedged risk
€325m
US$50m
€350m
€270m
€400m
€400m
Maturity
May-17
Jul-18
Dec-18
Jan-23
Jun-24
May-25
Hedge ratio
1:1
1:1
1:1
1:1
1:1
1:1
1. Used to determine effectiveness.
Change in value
of hedging
instrument
2018
£m
–
1
(2)
8
12
13
Change in value
of hedged item1
2018
£m
–
(1)
2
(8)
(12)
(13)
Change in value
of hedging
instrument
2017
£m
(4)
(4)
10
8
11
–
Change in value
of hedged item1
2017
£m
4
4
(10)
(8)
(11)
–
Effective
exchange rate
1.2217
1.9750
1.2322
1.1088
1.1570
1.1440
Hedging: net investment hedges
Treasury policy is to manage significant translation risks in respect of net operating assets held in foreign currencies and its consolidated net
debt/Adjusted EBITDA ratio by holding foreign currency denominated loans and cross currency swaps.
Adjustments arising on the translation of foreign currency loans and on changes in the fair value of cross currency swaps meeting hedge accounting
criteria are recognised in equity to match translation adjustments on foreign currency equity investments as they qualify as net investment hedges.
Translation adjustments arising on intercompany loans the Group has identified as quasi-equity in nature are also recognised in equity.
Items held in net investment hedge
Hedging instrument
Loan notes
Public bonds
Cross currency swaps
Bank overdrafts and revolving credit facility Short-term and Aug-23
Maturity
Mar-17 – Mar-22
May-17 – May-25
Jun-24
Hedge ratio
1:1
1:1
1:1
1:1
Change in value of
hedging instrument
2018
£m
(17)
(6)
(20)
1
Change in value of
hedged item
2018
£m
17
6
20
(1)
Change in value of
hedging instrument
2017
£m
37
(12)
15
16
Change in value of
hedged item
2017
£m
(37)
12
(15)
(16)
Integrated Report and Accounts 2018 G4S plc 185
Integrated Report and Accounts 2018 G4S plc 185
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUED
30. Financial risk continued
At 31 December 2018 the nominal amount of the hedging instruments held in net investment hedge was £931m (2017: £1,128m) and the nominal
amounts of the hedged risk were US$645m and €473m (2017: US$948m and €480m). The items held in a net investment hedge mitigate the net
asset translation exposure arising from movements in non-functional currencies. Where applicable, any ‘costs of hedging’ are deferred to the cost of
hedging reserve (note 3(g)).
At 31 December 2018, the Group had hedged approximately 74% (2017: 91%) of US dollar denominated net assets and 84% (2017: 90%) of Euro
denominated net assets.
Sensitivity
Applying the relative movements in US dollar and Euro foreign exchange rates against Sterling in 2018 compared with 2017 to carrying values at
31 December 2018, the fair value net gain on the cross currency swaps which hedge part of the currency loan notes would have increased by
£10m (2017: £33m) with a direct impact on the consolidated income statement. This would be offset by an equal and opposite revaluation to the
underlying bonds. Any of the underlying bonds not in a cash flow hedge are in a net investment hedge relationship so that ultimately there is no
impact on the consolidated income statement.
Interest-rate risk and interest-rate swaps
A significant portion of the Group’s debt is issued at fixed rate, but where there are borrowings at floating rates the Group is exposed to cash flow
interest rate risk. This risk is largely offset by cash holdings also at floating rates. Therefore group policy is to maintain a proportion of its debt
(within the range 25% - 75%) at fixed rate, using interest rate swaps where necessary. As at 31 December 2018, 69% (2017: 73%) of the Group’s
borrowings were held at fixed rates.
Interest rate swaps are currently held to convert part of the fixed loan note and public bond debt to variable rate. These are held in a fair value
hedge relationship with the debt items as identified in note 26. A summary of these is shown below:
Debt item hedged
Public bond 2012
Loan notes – USPP 2007
Loan notes – USPP 2007
Public bond 2017
Maturity
Dec-18
Mar-19
Mar-22
Jun-24
Notional
amount
€120m
US$145m
US$105m
€100m
Fixed rate
%
Variable rate basis
bps
2.625 Euribor +156.7 to 157.3
Libor +62.8 to 64.01
Libor +64.01
Euribor +64.01
5.96
6.06
1.5
Rate after hedging
%
1.296–1.304
3.162–3.176
3.220–3.238
0.835–0.841
Debt item hedged
Loan notes - USPP 2007
Public Bond 2012
Public Bond 2009
Loan notes - USPP 2008
Public bond 2012
Loan notes – USPP 2007
Loan notes – USPP 2007
Public bond 2017
Notional
Maturity
amount
Mar-17 US$200m
€90m
May-17
£350m
May-17
£44m
Jul-17
Dec-18
€120m
Mar-19 US$145m
Mar-22 US$105m
€100m
Jun-24
Fixed rate
Variable rate basis
%
bps
5.86
Libor +56.73 to 57.03
2.875 Euribor +148.95 to 149.2
Libor +62.25 to 62.65
7.75
Libor +59.53 to 59.84
7.56
2.625 Euribor +156.65 to 157.3
Libor +62.76 to 64.01
Libor +64.01
Euribor +64.01
5.96
6.06
1.5
Rate after hedging
%
1.812–1.815
1.278–1.280
6.791–6.831
6.475–6.506
1.245–1.301
2.081–2.093
2.137–2.156
0.888–0.894
Change in value
of hedging
instrument
2018
£m
1
4
2
(1)
Change in value
of hedged item
2018
£m
(1)
(4)
(2)
1
Hedge
ratio
1:1
1:1
1:1
1:1
Change in value
of hedging
instrument
2017
£m
3
–
1
–
2
5
3
–
Hedge
ratio
1:1
1:1
1:1
1:1
1:1
1:1
1:1
1:1
Change in value
of hedged item
2017
£m
(3)
–
(1)
–
(2)
(5)
(3)
–
The swap contracts require settlement of net interest receivable or payable semi-annually. The settlement dates coincide with the dates that
interest is payable on the underlying debt with the exception of the public bond where interest is paid annually. All four public notes have a coupon
step-up of 1.25% which is triggered if the credit rating of G4S plc falls below investment grade.
Sensitivity
The Group's core borrowings are held in US dollar, Euro and Sterling. Although the impact of rising interest rates is partly shielded by fixed rate
loans and interest rate swaps which provide certainty on the majority of the exposure, some interest rate risk remains. A 1% increase in interest
rates across all borrowings would lead to an additional interest charge of approximately £7m (2017: £6m).
Commodity risk and commodity swaps
The Group’s principal commodity risk relates to the fluctuating level of diesel prices, particularly affecting its Cash Solutions businesses. Commodity
swaps and commodity options are, on occasion, used to fix synthetically part of the exposure and reduce the associated cost volatility. The hedging
programme is under evaluation and, as a consequence, there was no commodity hedging in place at 31 December 2018.
186 G4S plc Integrated Report and Accounts 2018
186
G4S plc Integrated Report and Accounts 2018
Counterparty credit risk
The Group’s strategy for credit risk management is to set minimum credit ratings for counterparties and to monitor these on a regular basis.
For treasury-related transactions, the Group’s policy limits the aggregate credit risk assigned to a counterparty. The utilisation of a credit limit is
calculated by applying a weighting to the notional value of each transaction outstanding with each counterparty based on the type and duration of
the transaction. The total mark-to-market value outstanding with each counterparty is also closely monitored against policy limits assigned to each
counterparty. For short-term transactions (under one year), the financial counterparty must be investment-grade rated by either the Standard &
Poor’s or Moody’s rating agencies. For long-term transactions, unless otherwise approved, the financial counterparty must have a minimum rating of
BBB+/Baa1 from Standard & Poor’s or Moody’s.
Treasury transactions are dealt with through the Group’s relationship banks, all of which have a strong investment grade rating. Therefore, the credit
risk on derivative transactions is not significant.
The Group operates a multi-currency notional pooling cash management system with a wholly-owned subsidiary of an A-rated bank. At year end,
credit balances of £336m (2017: £271m) were pooled with debit balances of £263m (2017: £260m), resulting in a net pool credit balance of £73m
(2017: £11m). There exists a legal right of set-off under the pooling agreement and an overdraft facility of £3m (2017: £3m). In accordance with
IFRS Interpretations Committee 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. Exceptionally, where required by local country 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, the Group considers there to be minimal concentration risk.
31. 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-employer and funded and unfunded defined benefit schemes.
Defined contribution arrangements
The majority of the retirement benefit arrangements operated by the Group are of a defined contribution structure, where the employer
contribution and resulting income statement charge is fixed at a set level or is a set percentage of employees’ pay. Contributions made to defined
contribution schemes in 2018 and charged to the consolidated income statement totalled £59m (2017: £67m).
In the UK, following the closure of the defined benefit schemes to new entrants in 2004, the main scheme for new employees is a contracted-in
defined contribution scheme.
Multi-employer arrangement
In the Netherlands, most employees are members of the Security Industry Wide Pension Fund (IWPF). G4S employees make up about a quarter of
the active membership of this scheme. Withdrawal from the scheme is only possible under certain strict conditions determined by Dutch law and
by the pension fund board of the IWPF.
The scheme pays a pension based on the average of a member’s earnings over their career in the industry. Pensionable salary is subject to a cap
and an offset that reflects social security levels.
Annual pension increases for members are “conditional”, meaning they are set as a percentage of the relevant inflation measure for the pension
concerned, where the percentage depends on the funding level.
The current solvency ratio is 107.7% (December 2018) which exceeds the minimum solvency level of 104.2%. According to Dutch law the plan’s
funding must aim to target a required funding ratio within 10 years, that level is 122.3 % (as at 31 December 2018).
The scheme is funded by an annual contribution that is set by 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. The employer pays 60% of contributions and the employees the remaining 40%. As of
1 January 2019 the premium is 37.6% of pensionable salaries.
The financing rules specify that an employer is not obliged to pay any further premiums in respect of previously accrued benefits. This means that in
case of insufficient funding, the benefits of participants could, in theory, be reduced. However the board of the IWPF has some flexibility in setting
the contribution level, for example it could maintain a contribution rate that is above the calculated minimum and use the difference to improve the
funding level. Any reduction in premium due to surplus would only be possible at much higher solvency levels than present.
It is not possible to identify the Group’s share of the IWPF’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.
Premiums paid to the scheme by the Group and charged to the consolidated income statement in 2018 totalled £11m (2017: £11m). The
estimated premium expected to be paid to the scheme during 2019 is approximately £12m.
The parties to the collective agreement governing the IWPF have agreed that it will be converted to a “Collective Defined Contribution” scheme
from 2020, with a fixed contribution rate equal to the 2018 level. Details of the new arrangement will be determined in 2019. Separately, the
Dutch government has been negotiating with employers’ organisations and trades unions on proposed changes to the country’s pension system.
Whilst current discussions have stalled, G4S will monitor any further proposals including for any potential cost implications.
The Netherlands Cash Solutions Pension Plan (“the Cash Solutions scheme”) is a separate scheme operated by the Group in respect of members’
service to 2016, at which date members joined the IWPF. Benefits (including pension indexation) have to be at least equivalent to the IWPF’s
benefits.
Integrated Report and Accounts 2018 G4S plc 187
Integrated Report and Accounts 2018 G4S plc 187
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUED
31. Retirement benefit obligations continued
Defined benefit arrangements
The Group operates several funded defined retirement benefit schemes where the benefits are based on employees’ length of service. Whilst the
Group’s primary scheme is in the UK, it also operates the Cash Solutions scheme in the Netherlands and other less material plans elsewhere. For
funded arrangements, the assets of defined benefit schemes are held in separate trustee-administered funds or similar structures in the countries
concerned.
Consolidated income statement
The amounts recognised in the consolidated income statement in relation to the material funded schemes are included within the following
categories:
Cost of sales
Administration expenses
Net finance costs
Specific items (guaranteed minimum pension equalisation charge)
Total for material funded defined benefit schemes
2018
£m
4
1
7
35
47
2017
£m
4
2
8
–
14
There are also various less material unfunded arrangements, for which the Group does not hold related assets separate from the Group. In
aggregate, other unfunded arrangements incurred £15m (2017: £10m) of costs within cost of sales and finance costs of £4m (2017: £3m).
Consolidated statement of comprehensive income
Re-measurements of the net defined benefit obligation are recognised in full in the consolidated statement of comprehensive income in the year in
which they arise. These comprise the impact on the net defined benefit liability of changes in demographic and financial assumptions compared with
the start of the year, actual experience being different to those assumptions and the return on plan assets above the amount included in the net
pension interest expense. During the year the Group recognised a total net re-measurement gain of £38m (2017: £26m) within other
comprehensive income (OCI) comprising a re-measurement gain of £38m (2017: gain of £29m) relating to material funded defined benefit
schemes offset by a re-measurement loss of £nil (2017: loss of £3m) relating to unfunded or other funded defined benefit schemes.
188 G4S plc Integrated Report and Accounts 2018
188
G4S plc Integrated Report and Accounts 2018
Consolidated statement of financial position
The Group’s net defined benefit deficit recognised in the consolidated statement of financial position at 31 December 2018 was £364m (2017:
£381m), or £302m (2017: £318m) net of applicable tax in the relevant jurisdictions.
The defined benefit obligations (DBO) and assets for defined benefit schemes are as follows:
2018
UK sections:
Securicor
Group 4
GSL
Total UK
Netherlands
Total for material funded defined benefit schemes
Total provision for unfunded and other funded defined benefit schemes
Total net provision for all defined benefit schemes
2017
UK sections:
Securicor
Group 4
GSL
Total UK
Netherlands
Total for material funded defined benefit schemes
Total provision for unfunded and other funded defined benefit schemes
Total net provision for all defined benefit schemes
DBO
£m
Assets
£m
(Deficit)/surplus
£m
(1,781)
(394)
(257)
(2,432)
(97)
(2,529)
1,564
323
332
2,219
62
2,281
(217)
(71)
75
(213)
(35)
(248)
(116)
(364)
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)
UK defined benefit scheme
The defined benefit scheme in the UK accounts for 86% (2017: 88%) of the net balance sheet liability for material funded defined retirement benefit
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 responsibility on 20 July 2004 with the acquisition of Securicor plc, and the GSL section, for which
the Group assumed responsibility on 12 May 2008 with the acquisition of GSL.
The UK scheme is closed to future accrual apart from some sub-sections of the GSL section, and for most members defines the pension based on
final salary. Certain sub-sections of the GSL section have historically remained open to provide a facility to accept former public-sector employees
who join the Group through outsourcings. In the Group 4 and Securicor sections, members retain their link to final salary where appropriate on
their benefits accrued up to closure in 2011.
As at 5 April 2018 (the effective date of the actuarial funding valuation that is currently in progress) the participants of the UK pension scheme
sections can be analysed as follows:
At 5 April 2018
Active participants
Number
Average age
Deferred participants
Number
Average age
Pensioner participants
Number
Average age
Securicor
section
Group 4
section
–
N/A
7,295
54.6
9,733
73.4
–
N/A
3,083
54.0
3,466
72.2
GSL
section
372
50.4
1,140
51.6
1,102
66.6
Total
372
50.4
11,518
54.1
14,301
72.6
There is a mix of fixed and inflation-dependent pension increases (in payment and deferment) which vary from member to member according to
their membership history and the section of the scheme.
Integrated Report and Accounts 2018 G4S plc 189
Integrated Report and Accounts 2018 G4S plc 189
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUED
31. Retirement benefit obligations continued
The discounted weighted-average duration of the accrued liabilities of the sections is as follows:
Securicor
Group 4
GSL
2018
Years
17
17
19
2017
Years
18
17
19
The chart below provides an illustrative view of how the benefit payments from the UK pension scheme are expected to reduce the obligation
over time. It shows the percentage of the 31 December 2018 DBO that relates to benefits that remain to be paid out at each future date.
i
i
g
n
n
a
m
e
r
O
B
D
8
1
0
2
r
e
b
m
e
c
e
D
1
3
f
o
e
g
a
t
n
e
c
r
e
P
100
80
60
40
20
0
8
1
0
2
0
2
0
2
2
2
0
2
4
2
0
2
6
2
0
2
8
2
0
2
0
3
0
2
2
3
0
2
4
3
0
2
6
3
0
2
0
4
0
2
2
4
0
2
4
4
0
2
6
4
0
2
8
4
0
2
0
5
0
2
2
5
0
2
4
5
0
2
6
5
0
2
8
5
0
2
0
6
0
2
2
6
0
2
4
6
0
2
6
6
0
2
8
6
0
2
0
7
0
2
2
7
0
2
4
7
0
2
6
7
0
2
8
7
0
2
Year ending 31 December
The scheme is set up under UK law and governed by a Trustee company which is responsible for the scheme’s investments, administration and
management. The Board of the Trustee company comprises an independent chairman and further appointees who are made up of scheme
membership representatives and company appointees.
A funding valuation is carried out for the scheme’s Trustee every three years by an independent firm of actuaries and the 5 April 2018 valuation is
currently underway. The current schedule of deficit recovery contributions as set out in the previous April 2015 valuation, provides for a
contribution of approximately £52m during 2019. During the April 2018 valuation process a new schedule of future contributions will be
negotiated; the company has guaranteed any contributions due from its subsidiaries.
In addition, the company has pledged a share of any material disposal proceeds to the pension scheme (to be shared in the same proportion as the
pension scheme deficit bears to overall group indebtedness).
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
benefits have been paid in the normal course of events. Therefore no adjustments for asset ceiling or additional liabilities 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.
On 26 October 2018, the High Court handed down its judgment in the “Lloyds case” relating to equalisation of member benefits for the gender
effects of Guaranteed Minimum Pensions (“GMP equalisation”). While the judgment relates to the Lloyds Banking Group schemes, it is expected to
create a precedent for other UK defined benefit schemes with GMPs. The judgment confirmed that GMP equalisation was required and provided
some clarification on legally acceptable methods for achieving equalisation. Consequently, the DBO has been increased by £35m, which has been
separately disclosed in the consolidated income statement.
Principal risks
The Group’s pension schemes create a number of risk exposures. Annual increases in benefits are, to a varying extent from scheme to scheme,
dependent on inflation so the main uncertainties affecting the level of benefits payable are future inflation levels (including the impact of inflation on
future salary increases) and the actual longevity of the membership. Benefits payable will also be influenced by a range of other factors including
member decisions on matters such as when to retire and the possibility to draw benefits in different forms.
190 G4S plc Integrated Report and Accounts 2018
190
G4S plc Integrated Report and Accounts 2018
A key risk is that additional contributions are required if the investment returns fall short of those anticipated when setting the contributions to the
pension plans. For the UK funding valuation those assumed investment returns (for funding valuations) are set based on fixed margins over the
LIBOR swap curve. The management of the UK pension fund assets has been delegated to an asset manager, who manages the assets against a
liability benchmark. The key parameters of this mandate can be summarised as follows:
Risk
Asset mix
Description
The plan assets may fall in value.
Interest rate risk
The plan assets may fall in value as a result of a fall in
interest rates.
Inflation risk
The plan assets may fall in value as a result of rise in
inflation.
Currency risk
Regulatory risk
Actuarial
assumptions risk
Any plan assets held in foreign currencies are
exposed to changes in foreign currency exchange
rates.
All pension schemes are regulated by the relevant
jurisdictions. These include extensive legislation and
regulatory mechanisms that are subject to change
and may impact the Group’s pension schemes.
Actuarial assumptions made on a range
of demographic and financial matters that are used to
project the expected benefit payments including
future inflation, salary growth and life expectancy.
The DBO and service cost are also very sensitive to
the IAS 19 discount rate, which determines the
discounted value of the projected benefit payments.
The discount rate depends on market yields on high-
quality corporate bonds.
Mitigation
The assets are managed dynamically over time rather than a set
strategic allocation.
Managed with the benchmark of hedging 100% of these risks as a
percentage of the asset value through the use of debt instruments
(government bonds) and derivatives.
Managed with the benchmark of hedging 100% of these risks as a
percentage of the asset value through the use of debt instruments
(government bonds) and derivatives.
Managed with the objective of hedging at least 70% of the overseas
currency exposure in the portfolio through the use of forward foreign
currency contracts.
G4S monitors changes in regulations in the UK and the Netherlands
to assess the potential impact these changes could have on the
Group’s material pension schemes.
The UK pension trustees have adopted investment strategies to
mitigate changes in key assumptions applied to the valuation of
pension liabilities for funding purposes. These strategies mainly hedge
against interest rate and inflation expectations generally, as described
above, but do not specifically seek to hedge against changes in credit
spreads that also affect the IAS 19 discount rate. As a result the
difference between the market value of the assets and the valuation
of the pension obligations under IAS 19 may be volatile.
Financial assumptions and sensitivity analysis
The weighted averages for each of the principal assumptions used for the purposes of the actuarial valuations were as follows:
Key assumptions used at 31 December 2018
Discount rate
Expected rate of salary increases
Pension increases in payment (for the UK, at RPI* with a limit of 5% p.a.)
Inflation (RPI for UK)
Key assumptions used at 31 December 2017
Discount rate
Expected rate of salary increases
Pension increases in payment (for the UK, at RPI* with a limit of 5% p.a.)
Inflation (RPI for UK)
UK
years
2.85%
3.3%
3.1%
3.2%
2.55%
3.3%
3.1%
3.2%
Netherlands
years
2.0%
N/A
**
1.7%
2.0%
N/A
1.2%
1.8%
* RPI with a limit of 5% p.a. is the most common level of increase in the UK arrangements. Assumptions for other increases are derived from the above inflation assumption for
RPI, and an annual CPI assumption of 2.2% (2017: 2.2%) as appropriate.
** Pension increase assumption is a ladder starting from 0% p.a. in 2019 increasing to 1.7% p.a. in 2032.
IAS 19 specifies that pension liabilities should be discounted at appropriate high quality corporate bond rates. The Group considers that it is
appropriate to consider AA-rated corporate bonds as high quality and has therefore used discount rates based on yields on such bonds
corresponding to the liability profile of the respective schemes.
Integrated Report and Accounts 2018 G4S plc 191
Integrated Report and Accounts 2018 G4S plc 191
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUED
31. Retirement benefit obligations continued
The effect of a movement in the discount rate applicable in the UK would alter reported liabilities (before associated deferred tax adjustments) by
approximately the amounts shown in the table below.
Sensitivity analysis
Discount rate assumption being 0.5% higher
Discount rate assumption being 0.5% lower
Increase/(decrease) in the
DBO of the UK scheme
2018
£m
(186)
213
Increase/(decrease) in the
DBO of the UK scheme
2017
£m
(220)
242
The effect of a movement in RPI inflation applicable in the UK would alter reported liabilities (before associated deferred tax adjustments) by
approximately the amounts shown in the table below:
Sensitivity analysis
Inflation assumption being 0.5% higher
Inflation assumption being 0.5% lower
Increase/(decrease) in the
DBO of the UK scheme
2018
£m
83
(84)
Increase/(decrease) in the
DBO of the UK scheme
2017
£m
90
(95)
The above sensitivities allow for inflation-dependent assumptions such as salary growth and relevant pension increases to vary corresponding to the
inflation assumption variation. Due to the caps and floors on pension increases a certain movement in the inflation assumption will not generally
result in the same movement in the pension increase assumption.
Demographic assumptions and sensitivity analysis
In addition to the above, the Group uses appropriate mortality assumptions when calculating the schemes’ obligations. The mortality tables used for
the scheme in the UK are: Birth year table S2P[M/F]A Base with future improvements in line with CMI_2017 Core projections, based on a long-
term improvement rate of 1.25% p.a. and allowing for individual scaling factors based on the mortality analysis carried out as part of the last funding
valuation.
The resulting assumed life expectancy of a male member of the UK schemes currently aged 65 is 21 years. The assumed life expectancy at 65 of a
male currently aged 52 is 22 years. At those ages, the assumed life expectancy for a female member is between two and three years longer than for
a male member.
The effect of a one-year change in this UK life expectancy assumption is to alter reported liabilities (before associated deferred tax adjustments) by
approximately £122m (2017: £123m).
The selection of these movements to illustrate the sensitivity of the DBO to key assumptions should not be interpreted as the Group expressing
any specific view of the probability of such movements happening.
192 G4S plc Integrated Report and Accounts 2018
192
G4S plc Integrated Report and Accounts 2018
Analysis of amounts recognised in the Group’s consolidated statement of financial position
The amounts recognised in the Group’s consolidated statement of financial position in respect of the material funded defined benefit schemes, and
in the various components of income, other comprehensive income and cash flow are as follows:
2018
Amounts recognised in the consolidated statement of financial position at the beginning of the
year
DBO
£m
Assets
£m
Provision
£m
(2,691)
2,408
(283)
Amounts recognised in income:
Current service cost
Past service costs – equalisation of benefits
Interest on obligations and assets
Administration costs paid from plan assets
Total amounts recognised in the consolidated income statement
Re-measurements:
Actuarial gain – change in financial assumptions
Actuarial gain – change in demographic assumptions
Actuarial loss – experience
Return on assets
Re-measurement effects recognised in the consolidated statement of comprehensive income*
Cash:
Employer contributions
Benefits paid from plan assets
Net cash
(4)
(35)
(67)
(1)
(107)
126
58
(22)
–
162
–
108
108
–
–
60
–
60
–
–
–
(124)
(124)
44
(108)
(64)
(4)
(35)
(7)
(1)
(47)
126
58
(22)
(124)
38
44
–
44
Other:
Impact of exchange rates
Amounts recognised in the consolidated statement of financial position at the end of the year
(1)
(2,529)
1
2,281
–
(248)
* Total re-measurements recognised in OCI of £38m are shown net of re-measurement losses relating to other unfunded schemes of £nil.
Integrated Report and Accounts 2018 G4S plc 193
Integrated Report and Accounts 2018 G4S plc 193
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUED
31. Retirement benefit obligations continued
2017
Amounts recognised in the consolidated statement of financial position at the beginning of the year
DBO
£m
(2,740)
Assets
£m
2,399
Provision
£m
(341)
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 gain – change in financial assumptions
Actuarial loss – change in demographic assumptions
Actuarial gain – experience
Return on assets
Re-measurement effects recognised in the consolidated statement of comprehensive income*
Cash:
Employer contributions
Benefits paid from plan assets
Net cash
(4)
(67)
(2)
(73)
22
(3)
16
–
35
–
91
91
–
59
–
59
–
–
–
(6)
(6)
43
(91)
(48)
(4)
(8)
(2)
(14)
22
(3)
16
(6)
29
43
–
43
Other:
Impact of exchange rates
Amounts recognised in the consolidated statement of financial position at the end of the year
(4)
(2,691)
4
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.
Employer contributions in 2018 included £41m (2017: £40m) 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:
2018
Equity
Government bonds
Other
Total
2017
Equity
Government bonds
Other
Total
UK
£m
525
72
1,622
2,219
UK
£m
552
72
1,721
2,345
Netherlands
£m
9
38
15
62
Netherlands
£m
10
39
14
63
Total
£m
534
110
1,637
2,281
Total
£m
562
111
1,735
2,408
194 G4S plc Integrated Report and Accounts 2018
194
G4S plc Integrated Report and Accounts 2018
A more granular, approximate split of assets of the UK scheme at 31 December 2018 is as follows:
Equity
Private equity
Government bonds
Credit
Property
Macro-orientated
Multi-strategy
Derivatives
Cash and cash equivalents
Total UK assets
2018
£m
336
189
72
87
98
249
181
329
678
2,219
2017
£m
409
143
72
83
83
243
202
382
728
2,345
Multi-strategy assets are held in a pooled fund structure, which is a multi-asset fund investing across all asset classes.
Within the UK pension fund, the Equity, Credit, Macro-orientated and Multi-strategy sub-categories consist of pooled vehicles investing
predominantly in assets with quoted prices in active markets. All government bonds are issued by the UK government and have quoted prices in
active markets. Other UK investments are predominantly unquoted.
Derivatives include a range of interest-rate and inflation-linked swaps, forward-currency contracts, equity-index total return swaps, equity options,
and futures. Investing in interest-rate and inflation-linked swaps is designed to mitigate the impact of future changes in interest rates and inflation.
None of the pension scheme assets are held in the Group’s own financial instruments or in any assets held or used by the Group.
The fair value of directly-held securities (equities and bonds) is taken as the closing price on an actively-traded market. Fair value of holdings in
pooled funds is provided by the investment manager, who calculates the price based on the aggregate value of the underlying assets held by the
fund (based on closing prices of the securities on an actively-traded market) and the number of units issued.
32. Provisions and contingent liabilities
At 1 January 2018
Additional provision in the year
Utilisation of provision
Transfers and reclassifications
Unused amounts reversed
Exchange differences
At 31 December 2018
Included in current liabilities
Included in non-current liabilities
Employee
benefits
£m
20
6
(3)
(2)
–
(1)
20
Restructuring
£m
4
31
(29)
(2)
–
–
4
Claims
£m
104
150
(38)
–
(5)
5
216
Onerous
customer
contracts
£m
62
11
(17)
–
(5)
–
51
Property
and other
£m
52
12
(18)
3
(3)
1
47
Total
£m
242
210
(105)
(1)
(13)
5
338
202
136
338
Judgment is required in quantifying the Group’s provisions, particularly in connection with claims and onerous customer contracts, which are based
on a number of assumptions and estimates where the ultimate outcome may be different from the amount provided. Each of these provisions
reflects the Group’s best estimate of the probable exposure at 31 December 2018 and this assessment has been made having considered the
sensitivity of each provision to reasonably possible changes in key assumptions. Subject to the approval of the California class action settlement by
the Superior Court of the State of California, the Group is satisfied that it is unlikely that changes in these key assumptions will have a material
impact on the Group’s overall provisioning position in the next 12 months.
Integrated Report and Accounts 2018 G4S plc 195
Integrated Report and Accounts 2018 G4S plc 195
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUED
32. Provisions and contingent liabilities continued
Employee benefits
The provision for employee benefits is in respect of any employee benefits which accrue over the working lives of the employees, typically including
items such as long service awards and termination indemnity schemes.
The Group’s net obligation in respect of long-term service benefits other than retirement benefits represents the present value of the future benefit
that employees have earned at the balance sheet date, less the fair value of scheme assets out of which the obligations are to be settled directly.
Restructuring
Restructuring provisions include amounts for redundancy payments, and the costs of closure of activities in acquired businesses and discontinued
operations. The timing of settlement of restructuring provisions is uncertain but is generally likely to be short-term. During the year the Group
incurred restructuring costs of £31m (2017: £20m) within specific items relating to the multi-year strategic productivity programme across the
Group. In addition, the Group incurred non-strategic reorganisation costs of £9m (2017: £10m) 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 outflow of funds in the
future, 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.
During the year the Group recognised additional provisions of £150m including £100m relating to the settlement of a class action in respect of
claims for meal and rest breaks for the period 2001 to 2010 in California, presented within specific items in the consolidated income statement. The
settlement of the class action in California is subject to approval by the Superior Court which is expected to be received during 2019. Assuming
that approval is obtained during 2019, the payment will be made in late 2019 or early 2020. The Group will continue to review the level of
provision in respect of this claim as the court process progresses during 2019.
The Group’s wholly-owned captive insurance subsidiaries in Guernsey and the US underwrite part of the Group’s Cash Solutions, general liability,
workers’ compensation and auto liability policies. In the year the Group provided £34m (2017: £36m) in relation to claims made under these
policies which comprise a significant number of unrelated claims, most of which are individually immaterial. Claims provisions cover a wide range of
claims or possible claims and are subject to regular actuarial review and adjustment as appropriate. Settlement of these provisions is highly probable
but both the value of the final settlements and their timing are dependent upon the outcome of on-going processes to determine both liability and
quantum in respect of each claim.
Onerous customer contracts
The Group recognised as specific items additional onerous contract provisions of £11m (2017: £19m) relating primarily to anticipated losses in
respect of two UK Care & Justice Services contracts. The provision at the end of December 2018 represents the anticipated total losses in respect
of these two contracts and the COMPASS asylum seeker contract, together with two smaller PFI contracts that are expected to run for the next
15 to 20 years.
It is expected that around 60% of the Group’s total provision for onerous contracts will be utilised by the end of 2019, mainly as the COMPASS
contract comes to an end in August 2019. Given the short period remaining to the finalisation of this contract, any potential future changes to key
assumptions made when estimating its future losses are not expected to have a significant impact.
Unused amounts reversed in the year of £5m are mainly related to two other PFI contracts where profit improvement plans implemented in prior
periods have led to reductions in expected future losses, although these are reflected only to the extent that they have been implemented and are
delivering the expected savings. Profit improvement plans that have been designed but which have not yet been embedded successfully in the
contract delivery have not been considered when estimating future expected losses. This is consistent with the Group’s policy which requires
evidence that profit improvement plans will be successfully implemented before they are reflected in anticipated future cash flow projections for
onerous contract provisioning purposes. There is no single change in key variables that could materially affect future expected losses on these
contracts.
The onerous contract provision includes items that are subject to commercial and/or contractual disputes and may be subject to early termination,
penalty clauses, or other contractual penalties. Whilst the outcome of such contracts is inherently uncertain, the Group is satisfied that it is unlikely
that changes in these contracts will have a material impact on the Group’s overall provision in the next 12 months.
Management believes that the current level of provision is balanced and that any significant potential downside from possible changes to key
assumptions could be offset by further progress made in those profit improvement plans that have not been considered following the Group’s
policy described above. The discount rates applied when calculating onerous contract provisions for these contracts were between 1.4% and 1.7%.
196 G4S plc Integrated Report and Accounts 2018
196
G4S plc Integrated Report and Accounts 2018
Property and other
Included within property and other provisions are future liabilities for long-term idle leased properties, for properties sub-let at a shortfall, for the
cost of replacing or reinstalling assets where there is a present contractual requirement, and for customer claims on contracts that are related to the
performance on a contract but do not form part of onerous customer contract provisions. Whilst settlement of these obligations is considered
probable, there is uncertainty over their value and duration.
Included in property and other provisions are contract-related provisions of £30m (2017: £35m) and property-related provisions of £17m (2017:
£17m).
Contingent liabilities
The Group is involved in disputes in a number of countries, mainly in respect of activities related to its operations. Currently there are a number of
disputes open in relation to the application of local labour law, commercial agreements with customers and subcontractors and claims and
compliance matters, in some cases in the course of litigation. In addition, the interpretation of labour laws and regulations in a number of 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 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 or claims in the future and where, based on legal counsel advice, the Group estimates that it is probable that the dispute
will result in an outflow of economic resources, provision is made based on the Group’s best estimate of the likely financial 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 outflow
of economic resources, no provision is recognised.
The Group is party to a number of on-going litigation processes, in relation to interpretation of local labour law and regulations in a number of
countries, where it is expected that these matters will not be resolved in the near future. At this stage, the Group’s view is that these cases will
either be resolved in a manner favourable to the interests of the Group or, due to the nature and complexity of the cases, it is not possible to
estimate the potential economic exposure. In addition, in the ordinary course of business, other contingent liabilities exist where the Group is
subject to commercial claims and litigation from a range of parties in respect of contracts, agreements, regulatory and compliance matters, none
of which are expected to have a material impact on the Group.
The investigation opened by the Serious Fraud Office (SFO) in 2013 in respect of the Group's Electronic Monitoring contract remains on-going and
the Group continues to engage and co-operate fully with the investigation. Based on currently available information, the Group is unable to make a
reliable estimate of the financial effect of the SFO's investigation, and no provision has been made in respect of it.
The Group is currently involved in a number of claims in India, mainly related to periods prior to 2011, in relation to the interpretation of the basis
for payments to the India Provident Fund. These disputes are currently awaiting court resolution. Based on the Group’s internal and external legal
advice, and taking into account the judgment passed by the Supreme Court of India in respect of a different Provident Fund related question on 28
February 2019, the Group believes it has a strong legal position that will prevail in the courts such that no economic outflow is expected to occur
and hence no provision has been booked at the year end. The aggregate of the Provident Fund related claims amount to approximately £50m.
Integrated Report and Accounts 2018 G4S plc 197
Integrated Report and Accounts 2018 G4S plc 197
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUED
33. Deferred tax
The following are the major deferred tax liabilities and assets recognised by the Group and movements thereon during the year:
At 1 January 2018 – restated1
(Charge)/credit to the consolidated income statement
Charge to equity
Exchange differences and other adjustments
At 31 December 2018
At 1 January 2017 – as reported
Impact of the adoption of IFRS 151
At 1 January 2017 - restated1
Credit/(charge) to the consolidated income statement
Disposal of subsidiaries
Charge to equity
Exchange differences
At 31 December 2017 - restated1
1. Restated for the impact of adoption of IFRS 15, see note 3.
Property, plant
and equipment
£m
32
(1)
–
–
31
Retirement
benefit
obligations
£m
63
7
(6)
–
64
18
-
18
14
–
–
–
32
69
–
69
(2)
–
(4)
–
63
Tax losses
£m
92
(8)
–
–
84
110
–
110
(18)
–
–
–
92
Other
temporary
differences
£m
46
22
(2)
(3)
63
75
2
77
(25)
(1)
–
(5)
46
Total
£m
233
20
(8)
(3)
242
272
2
274
(31)
(1)
(4)
(5)
233
Certain deferred tax assets and liabilities have been offset where permitted. The following is the analysis of the deferred tax balances (after offset):
Deferred tax liabilities
Deferred tax assets
Net deferred tax liability included in assets of disposal groups classified as held for sale
Net deferred tax assets
1. Restated for the impact of adoption of IFRS 15, see note 3.
2018
£m
(6)
248
–
242
2017
Restated1
£m
(8)
242
(1)
233
At 31 December 2018, the Group had unutilised tax losses of approximately £781m (2017: £780m) potentially available for offset against future
profits. A deferred tax asset of £84m (2017: £92m) has been recognised in respect of approximately £469m (2017: £508m) of gross losses based
on profitability from approved budgets and business plans.
No deferred tax asset has been recognised in respect of the remaining £312m (2017: £272m) of gross losses due to the uncertainty of available of
future profit streams in the relevant jurisdictions, and the fact that a significant proportion of such losses remains unagreed by the relevant tax
authorities. In certain cases, there are continuing structural issues which prevent the utilisation of losses within the foreseeable future. Losses which
will never be utilised, for example due to the operation of statute, are not included in the above figures.
Approximately £72m (2017: £54m) of the gross unrecognised losses relate to the UK tax group. Utilisation of such losses is dependent upon the
profitability of particular trading and corporate entities. The financial projections used in assessing the future profitability 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 £25m (2017: £20m) which will expire between 2019 and 2028. Other losses may be carried
forward indefinitely.
At 31 December 2018, the Group has capital losses available to carry forward of approximately £2.7bn (2017: £2.6bn). These losses have no
expiry date and currently only £144m (2017: £20m) has been agreed with the relevant tax authorities. A deferred tax asset of £2m (2017: £nil) has
been recognised on £13m of capital losses. No deferred tax assets have been recognised in respect the remainder of these losses as the likelihood
of their future utilisation is considered to be remote.
At 31 December 2018, the aggregate amount of undistributed earnings of non-UK subsidiaries and joint ventures on which temporary differences
may exist was £1,424m (2017: £1,416m). A deferred tax liability of £2m (2017: £2m) has been recognised on undistributed earnings, based on
expected distributions from such subsidiaries and joint ventures.
Other temporary differences vary by country and include items relating to the local tax treatment of fixed assets, employee benefits, and provisions.
198 G4S plc Integrated Report and Accounts 2018
198
G4S plc Integrated Report and Accounts 2018
34. Share capital
G4S plc
Issued and fully paid ordinary shares of 25p each
Ordinary shares in issue
At 1 January
At 31 December
35. Other reserves
At 1 January 2018
Total comprehensive income attributable to equity shareholders of the parent
Recycling of cumulative translation adjustments
Own shares awarded
Own shares purchased
At 31 December 2018
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
Other reserves include:
2018
£
387,898,609
2017
£
387,898,609
2018
Number
1,551,594,436
1,551,594,436
2017
Number
1,551,594,436
1,551,594,436
Hedging
reserves
£m
–
9
–
–
–
9
Translation
reserve
£m
(44)
3
(1)
–
–
(42)
Merger
reserve
£m
426
–
–
–
–
426
Reserve for
own shares
£m
(12)
–
–
9
(11)
(14)
Total other
reserves
£m
370
12
(1)
9
(11)
379
–
–
–
–
–
–
–
43
(69)
24
(42)
–
–
(44)
426
–
–
–
–
–
426
(13)
–
–
–
11
(10)
(12)
456
(69)
24
(42)
11
(10)
370
Hedging reserves
The hedging reserves comprise the cash flow hedge reserve and the costs of hedging reserve, see note 29 for details. The cash flow hedge reserve
contains the effective portion of the cumulative net change in the fair value of cash flow hedging instruments related to hedged transactions that
have not yet occurred (net of tax). The Group defers the currency basis spread in cross currency swaps and the forward points in net investment
hedges in the cost of hedging reserve.
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 £1m (2017:
£42m) of cumulative translation adjustments and £nil (2017: £24m) 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.
Reserve for own shares
An Employee Benefit Trust established by the Group held 5,342,225 shares at 31 December 2018 (2017: 4,362,068 shares) to satisfy the vesting of
awards under the performance share plan and performance-related schemes (see note 38). During the year 4,119,842 shares (2017: 3,489,049
shares) were purchased by the trust, and 3,139,685 shares (2017: 3,971,224 shares) were used to satisfy the vesting of awards under the schemes.
At 31 December 2018, the cost of shares held by the trust was £14,004,478 (2017: £12,330,829), whilst the market value of these shares was
£10,521,512 (2017: £11,646,722). 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 2018 the parent company of the Group had distributable reserves of £684m (2017: £885m).
Integrated Report and Accounts 2018 G4S plc 199
Integrated Report and Accounts 2018 G4S plc 199
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUED
36. Analysis of net debt
A reconciliation of net debt to amounts in the consolidated statement of financial position is presented below:
Cash and cash equivalents
Receivables from customers in respect of cash-processing operations1
Net cash and overdrafts included within net assets of disposal groups held for sale
Bank overdrafts
Liabilities to customers in respect of cash-processing operations2
Total cash, cash equivalents and bank overdrafts
Investments
Net debt (excluding cash and overdrafts) included within net assets of disposal groups held for sale
Bank loans
Loan notes
Obligations under finance leases
Fair value of loan note derivative financial instruments
Net debt
1. Included within trade and other receivables.
2. Included within trade and other payables.
An analysis of movements in net debt in the year is presented below:
Increase/(decrease) in cash, cash equivalents and bank overdrafts per consolidated statement of cash flow
Sale of investments
Net (increase)/decrease in borrowings
Repayment of finance leases
(Increase)/decrease in net debt resulting from cash flows
New finance leases
Net debt (excluding cash, cash equivalents and bank overdrafts) in disposed entities
Net (increase)/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
2018
£m
1,015
6
–
(305)
(43)
673
65
–
(305)
(1,997)
(27)
33
(1,558)
2018
£m
58
–
(103)
14
(31)
(10)
2
(39)
(32)
(1,487)
(1,558)
2017
£m
902
7
8
(284)
(62)
571
62
(3)
(13)
(2,141)
(35)
72
(1,487)
2017
£m
(87)
(3)
235
23
168
(3)
(3)
162
21
(1,670)
(1,487)
200 G4S plc Integrated Report and Accounts 2018
200
G4S plc Integrated Report and Accounts 2018
37. Operating lease arrangements
The Group as lessee
As at 31 December 2018, the Group had outstanding commitments under non-cancellable operating leases, which fall due as follows:
Within one year
In the second to fifth years inclusive
After five years
Total operating lease commitments
2018
£m
135
243
103
481
2017
Restated1
£m
108
246
125
479
1. As a result of the detailed work carried out to assess the impact of IFRS16 – Leases, effective 1 January 2019, the Group identified that the non-cancellable operating lease
rentals falling due within one year that were previously disclosed as £99m at 31 December 2017 and the total operating lease commitments previously disclosed of £470m
were understated. As a result, it has re-presented the commitments above. The adjustment has no effect on the statement of the financial position at 31 December 2017 or
the results for the year then ended.
The Group leases a number of its office properties, vehicles and other operating equipment under operating leases. Property leases are negotiated
over an average term of around ten years, at rates reflective of market rentals. Periodic rent reviews take place to bring lease rentals into line with
prevailing market conditions. Some, but not all, lease agreements have an option to renew the lease at the end of the lease term. The above
disclosure excludes rentals for optional extension periods and which the Group can avoid by exercising lease break clauses. Leased vehicles and
other operating equipment are negotiated over an average lease term of four years.
38. 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 109.
Under the Group’s LTIP, Relative Total Shareholder Return (a market performance condition) constitutes 30% (2017: 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. To reflect the targeted achievement of median ranking, 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-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
2018
Number
2,912,326
771,618
(541,475)
(240,277)
–
2,902,192
LTIP
2018
Number
15,299,231
6,874,519
(3,267,335)
(726,287)
(1,728,716)
16,451,412
Total
2018
Number
18,211,557
7,646,137
(3,808,810)
(966,564)
(1,728,716)
19,353,604
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
The weighted-average remaining contractual life of conditional share allocations outstanding at 31 December 2018 was 13 months (2017: 15
months). The weighted-average share price at the date of allocation of shares allocated conditionally during the year was 258.9p (2017: 283.1p) 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 248.5p (2017: 279.0p).
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 2018 was £8m (2017: £10m), all of which (2017: £9m) arose from equity-settled share-based payments.
The total carrying amount for the liabilities arising from share-based payment transactions as at 31 December 2018 was £4m (31 December 2017:
£6m).
Integrated Report and Accounts 2018 G4S plc 201
Integrated Report and Accounts 2018 G4S plc 201
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUED
39. Related party transactions
Transactions and balances with joint ventures
Transactions between the company and its subsidiaries have been eliminated on consolidation and are not disclosed in this note. Details of
transactions between the Group and other related parties are disclosed below. All transactions with related parties are entered into in the normal
course of business.
Transactions with joint ventures included revenue recorded of £60m (2017: £56m) and purchases recorded of £nil (2017: £6m). Amounts due
from related parties include £2m (2017: £5m) from joint ventures. Amounts due to related parties include £nil (2017: £2m) to joint ventures.
No expense (2017: £nil) has been recognised in the year for impairment in respect of amounts owed by related parties.
The Group has a legal interest in a number of joint ventures and joint arrangements, where the economic interest was divested by the Global
Solutions Group prior to its acquisition by G4S plc in 2008. Transactions with these entities during the year comprised:
White Horse Education Partnership Limited
Integrated Accommodation Services plc
Fazakerley Prison Services Limited
Onley Prison Services Limited
UK Court Services (Manchester) Limited
East London Lift Company Limited
Total
2018
Services/sales to
£m
3
50
41
17
2
2
115
2017
Services/sales to
£m
3
46
39
17
2
1
108
The Group had outstanding balances of £12m due from these entities at 31 December 2018 (2017: £11m).
Transactions with post-employment benefit schemes
Details of transactions with the Group’s post-employment benefit schemes are provided in note 31. Unpaid contributions owed to schemes
amounted to £0.2m at 31 December 2018 (31 December 2017: £0.3m).
Transactions with other related parties
In the normal course of the Group’s business the Group provides services to and receives services from certain non-controlling interests on an
arm’s-length basis.
Remuneration of key management personnel
The Group’s key management personnel are deemed to be the non-executive directors and those individuals, including the executive directors,
whose remuneration is determined by the Remuneration Committee. Their remuneration is set out below. Further information about the
remuneration of individual directors included within key management personnel is provided in the audited part of the Directors’ Remuneration
report on pages 105 to 127.
Short-term employee benefits
Post-employment benefits
Other long-term benefits
Share-based payment
Total
2018
£
8,168,995
21,788
33,514
4,596,918
12,821,215
2017
£
11,112,484
121,781
27,833
7,349,358
18,611,456
40. Events after the balance sheet date
In January 2019 the Group arranged a bridging facility of £300m for one year, to finance upcoming debt maturities as described in note 30.
In January 2019 the Group agreed the settlement of a class action relating to claims for employee meal and rest breaks for the period 2001 to 2010
in California - see note 32 for details.
202 G4S plc Integrated Report and Accounts 2018
202
G4S plc Integrated Report and Accounts 2018
41. Significant investments
The companies listed below are those which were part of the Group at 31 December 2018 and which, in the opinion of the directors, significantly
affected the Group’s results and net assets during the year. A comprehensive list of all Group undertakings is disclosed on pages 204 to 216.
The principal activities of the companies listed below are indicated according to the following key:
Secure Solutions
Cash Solutions
Subsidiary undertakings
G4S Soluciones de Seguridad S.A.
G4S Custodial Services Pty Limited
G4S Secure Solutions AG (Austria)
G4S Secure Solutions SA/NV
G4S Cash Solutions (Belgium) NV
G4S Interativa Service Ltda
Vanguarda Segurança e Vigilância Ltda
G4S Secure Solutions (Canada) Limited
G4S Secure Solutions Colombia S.A.
G4S Security Services A/S
G4S Care and Justice Services (UK) Limited
G4S Cash Centres (UK) Limited
G4S Cash Solutions (UK) Limited
G4S Facilities Management (UK) Limited
G4S Risk Management Limited
G4S Secure Solutions (UK) Limited
AS G4S Baltics
G4S Secure Solutions (India) Pvt. Limited1,3
G4S Kenya Limited
G4S Security Solutions S.A.R.L.
Safeguards G4S Sdn Bhd2,3
G4S Cash Solutions BV
G4S Security Services BV
G4S Peru S.A.C.
Al Majal Service Master LLC3
G4S Cash Solutions (SA) (Pty) Limited
G4S Secure Solutions (SA) (Pty) Limited3
G4S Security Services (Thailand) Limited
G4S Secure Solutions LLC3
G4S Retail Solutions (USA) Inc.
G4S Secure Solutions (USA) Inc.
G4S Technology LLC
S
C
Product
segment
Country of incorporation
Ultimate
ownership
Argentina
S
Australia
S
Austria
S
Belgium
S
Belgium
C
Brazil
S
Brazil
S
Canada
S
Colombia
S
Denmark
S
England
S
England
C
England
C
England
S
England
S
England
S
Estonia
S+C
India
S
Kenya
S+C
Luxembourg
S+C
Malaysia
S+C
Netherlands
C
Netherlands
S
Peru
S
Saudi Arabia
S
South Africa
C
South Africa
S
S
Thailand
S United Arab Emirates
USA
C
USA
S
USA
S
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%
75%
72%
98%
49%
100%
100%
100%
These businesses operate principally in the country in which they are incorporated.
1. G4S Secure Solutions (India) Pvt. Limited has a year end of 31 March.
2. Safeguards G4S Sdn Bhd has a year end of 30 June.
3. By virtue of shareholder agreements, options, pre-emption rights and other contractual arrangements, the Group has the power to govern the financial and operating policies,
so as to obtain the benefits from the activities of these companies. These are therefore consolidated as full subsidiaries.
Integrated Report and Accounts 2018 G4S plc 203
Integrated Report and Accounts 2018 G4S plc 203
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUED
42. Details of Related Undertakings of G4S plc
Subsidiaries
Entities listed below are subsidiaries at 31 December 2018, 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 below are trading entities
Company Name
Byls Bridge Office Park, Building 11, 13
Candela Street, Highveld Ext 73,
0157 Centurion, South Africa
SECURICOR GRAY SECURITY SERVICES
(ANGOLA) (PTY) LTD
Rua di reita da Samba, No 58, Corimba,
Samba Luanda, Angola
G4S SERVICOS DE SEGURANCA
(ANGOLA) LIMITADA
Timoteo Gordillo 5697/5611, C1439 GKA
Buenos Aires, Argentina
G4S SOLUCIONES DE SEGURIDAD S.A.
G4S SERVICIOS DE SEGURIDAD S.A.
PROTECCION E INVERSIONES, S.A.
G4S APPLIED SECURITY S.A.
G4S CONTROL SYSTEMS S.A.
Peru 338 San Fernando del Valle de
Catamarca, K4700AKJ Catamarca, Argentina
INDOMEGA S.A.
MANAR S.A.
Jose Demaria 4470 (C1425AEB), Buenos
Aires, Argentina
G4S SOLUCIONES GLOBALES S.A.
Lavalle 1528, 3º "E" (C1048AAL), Ciudad
Autónoma de Buenos Aires, Argentina
G4S DETCON S.A.
c/o HLB Mann Judd, Level 19, 207b Kent
Street, 2000 Sydney, Australia
G4S INTERNATIONAL LOGISTICS
(AUSTRALIA) PTY LTD
P.O. Box 7332 (Level 3, 182-184 Bourke
Road), NSW 2015. Alexandria, Australia
G4S COMPLIANCE & INVESTIGATIONS
PTY LTD
Level 4 616 St Kilda Road, Melbourne, 3004
Victoria, Australia
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
Country of
Incorporation
% owned
by group
% owned
by plc
Angola
100
Angola
63
Argentina
Argentina
Argentina
Argentina
Argentina
100
92
93.3
100
100
Argentina
Argentina
99.9
100
Argentina
100
Argentina
99.4
Australia
100
Australia
100
Australia
Australia
Australia
Australia
Australia
Australia
100
100
100
100
100
100
Peilsteinerstr. 5-7, A-5020 Salzburg, Austria
G4S SECURITY SYSTEMS GMBH
Austria
100
Dresdner Strasse 91/1, A-1200 Vienna,
Austria
G4S SECURE SOLUTIONS AG (AUSTRIA)
G4S DIENSTLEISTUNGS GMBH
Villa 925, Road 3830, Manama, Qudaybiyah
338, P. O. Box 15193 Adliya, Bahrain
G4S SECURE SOLUTIONS BAHRAIN W.L.L
2235 West Tower BFH Manama, Bahrain
G4S REGIONAL CONSULTANCY
SERVICES (NAMESA) WLL
Austria
Austria
100
100
Bahrain
34.3
Bahrain
100
204 G4S plc Integrated Report and Accounts 2018
Company Name
House # KA 79, Joar Sahara, Dhaka, 1212
Dhaka, Bangladesh
G4S SECURE SOLUTIONS BANGLADESH
(P) LTD
Apartment 10/A, Rupsha Tower, 7 Kamal
Ataturk Avenue, Banani, Dhaka, Bangladesh
FIRST SELECT BANGLADESH LIMITED(iii)
Brighton, Spring Garden, St. Michael,
Barbados
G4S SECURE SOLUTIONS
(BARBADOS) LTD
Buro & Design Center PB 77 Heizel
Esplanade 1020 Brussels, Belgium
G4S CASH SOLUTIONS (BELGIUM) SA/NV
G4S SUPPORT SERVICES SA/NV
G4S SECURE SOLUTIONS SA/NV
G4S CARGO SOLUTIONS SA/NV
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
Abtsdreef 10, 2940 Stabroek, Belgium
G4S SAFETY SYSTEMS N.V.
ASC SAFETY SERVICES B.V./B.A.
Marcelo terceros Banzer S/N, 3er Anillo
Ext. Equipetrol, (Frente Hotel Casa Blanca),
Santa Cruz, Bolivia
G4S BOLIVA S.A.
C/o Grant Thornton Business Services
(Pty) Ltd, Acumen Park, Plot 50370,
Fairgrounds Gaborone Botswana
G4S (BOTSWANA) LTD
FIDELITY CASH MANAGEMENT SERVICES
(BOTSWANA) PTY LTD
Plot 50370, Fairgrounds Office Park,
Gaborone, Botswana
G4S FACILITIES MANAGEMENT
BOTSWANA (PTY) LTD
Rua Rui Barbosa 70, 2º andar, 01326-010
São Paulo, Brazil
G4S BRAZIL HOLDING LTDA
Rua Rui Barbosa 70, 3º andar, Bela Vista,
São Paulo, Brazil
G4S MONITORAMENTO E
SISTEMAS LTDA.
Rua Maria José 69, Bela Vista, 01324-010
São Paulo, Brazil
G4S SERVIÇOS LTDA.
Rua Rui Barbosa 191,1º andar, 01326-010
São Paulo, Brazil
G4S ENGENHARIA E SISTEMAS LTDA
Country of
Incorporation
% owned
by group
% owned
by plc
100
Bangladesh
100
Bangladesh
40
Barbados
51
Belgium
Belgium
Belgium
Belgium
Belgium
Belgium
Belgium
Belgium
Belgium
Belgium
Belgium
Belgium
Belgium
Belgium
Belgium
100
100
100
100
100
100
100
100
50.4
100
100
100
100
100
100
Bolivia
99.9
Botswana
Botswana
70
100
Botswana
34.2
Brazil
100
Brazil
100
Brazil
100
Brazil
100
Company Name
Rua Santa Rosa, 911, Bairro Santa Paula,
Sao Caetano do Sul, Sao Paulo, Brazil
G4S INTERATIVA SERVICE LTDA.
Rua Rui Barbosa 70-A, 01326-010
São Paulo, Brazil
G4S VANGUARDA SEGURANÇA E
VIGILÂNCIA LTDA
Rua Maria José 133, Bela Vista, 01324-010
São Paulo, Brazil
EMPRESA NACIONAL DE
SEGURANCA LTDA
Rua Rui Barbosa 70, 1º andar, Bela Vista
01326-010 São Paulo, Brazil
G4S PARTICIPAÇÕES LTDA
CITCO Building, Wickhams City, P.O.
Box 662, Road Town, Tortola,
British Virgin Islands
G4S GROUP HOLDING (ASIA) LTD
Flat/ RM 101B & 104/F, Tower 2, The
Harbourfront, 22 Tak Fung Street,
Kowloon, Hong Kong
G4S SECURE SOLUTIONS (ASIA) LTD
1395 University Blvd, 33458 Jupiter, FL,
United States
G4S HOLDINGS LTD
G4S (BVI) HOLDCO (COLOMBIA II) LTD
ASHINO HOLDINGS LTD
Craigmuir Chambers, P.O. Box 71, Road
Town, Tortola, British Virgin Islands
ARMORGROUP (SPECIAL CLEARANCE
SERVICES) LTD
Kingston Chambers, P.O. Box 173, Road
Town Tortola, British Virgin Islands
HILL & ASSOCIATES CONSULTANTS LTD
P.O. Box 957, Offshore Incorporations
Centre, Road Town, Tortola,
British Virgin Islands
HILL & ASSOCIATES CONSULTANTS
(MIDDLE EAST) LTD
Old Airport Road, Bonapriso Doula,
Cameroon
G4S SECURITY SERVICES CAMEROON
PLC
150 Ferrand Drive, Suite 600, M3C 3E5
Toronto, Ontario, Canada
G4S SECURE SOLUTIONS
(CANADA) LTD. (G4S SOLUTIONS DE
SECURITE
(CANADA) LTEE)
5255 Orbitor Drive, L4W 5M6 Mississauga
Ontario, Canada
INDO BRITISH GARMENTS
(CANADA) LTD
Country of
Incorporation
% owned
by group
% owned
by plc
Brazil
100
Brazil
100
Brazil
100
Brazil
100
British Virgin
Islands
100
British Virgin
Islands
British Virgin
Islands
British Virgin
Islands
British Virgin
Islands
British Virgin
Islands
British Virgin
Islands
100
100
100
100
100
100
British Virgin
Islands
100
Cameroon
48.54
Canada
100
Canada
100
Company Name
Sterling Trust (Cayman) Limited, Whitehall
House, 238 North Church Street, k1-1102
Grand Cayman, Cayman Islands
SERVICE MASTERS LTD
Country of
Incorporation
% owned
by group
% owned
by plc
Cayman Islands
100
No 48/85, Avenue Kolwezi, Gombe,
Kinshasa, DRC
G4S CENTRAFRIQUE SECURITE
SOLUTION SURL
Central African
Republic
Avda. Zañartu 1680, Ñuñoa – Santiago,
Chile
G4S HOLDINGS CHILE S.A.
G4S SECURITY SERVICES REGIONES, S.A.
G4S SECURITY SERVICES LIMITADA
ARRIENDOS FAST CAR, LTDA.
CAPACITACIÓN Y DESARROLLO, LTDA.
13F, Hui Shang Building, 1286 Min Sheng
Road, Pudong New District, 200122,
Shanghai, China
G4S FACILITIES MANAGEMENT LTD.
G4S MANAGEMENT SERVICES
(SHANGHAI) CO. LTD
West Floor 9, Bus Tower 1001, Lianhau
branch, Futian District, 518036 Shenzhen,
China
SHENZHEN G4S DONAR TECHNOLOGY
CO. LTD
Room 01-4 Tower A 8F, Yi Cheng
International Centre No.10 Rong Hua
Middle Road Beijing Development Area,
100176 Beijing, China
G4S SECURITY SYSTEMS (BEIJING)
CO. LTD
Room 710A, 7/F, Nan Fang Securities
Building, 140 -148 Ti Yu Dong Lu,
Tian He District, Guangzhou, China
G4S TECHNOLOGY (CHINA) LTD
6A, Huamin Empire Plaza, No. 728 Yan An
Road (W), 200050 Shanghai, China
HILL & ASSOCIATES (PRC) LTD
17-1 Bai Ma Miao Xiang, Shangcheng
District, Hangzhou, China
G4S ZHEJIANG SECURE SOLUTIONS
CO. LTD
Room 204-7, 2/Floor, China Diamond
Exchange Center Building, Tower B, No.
1701 Century Boulevard, Pudong New
Area, Shanghai, China
G4S INTERNATIONAL LOGISTICS
(SHANGHAI) CO. LTD
Avenida 26 No 69A-51 Torre A,
Int 1 Piso 3, Bogota, Colombia
G4S SECURE SOLUTIONS COLOMBIA S.A.
G4S HOLDING COLOMBIA SA
G4S TECHNOLOGY COLOMBIA S.A.
EBC INGENIERIA S.A.S
100
100
100
100
100
100
100
100
Chile
Chile
Chile
Chile
Chile
China
China
China
100
China
75
China
100
China
100
China
90
China
100
Colombia
Colombia
Colombia
Colombia
100
100
100
100
Integrated Report and Accounts 2018 G4S plc 205
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUED
42. Details of Related Undertakings of G4S plc continued
Subsidiaries continued
Company Name
Avenida 26 No. 69A – 51 Torre A, Int 1,
Piso 2, Bogota, Colombia
G4S RISK MANAGEMENT COLOMBIA S.A.
Sabana Sur Yamuni 200 Sur de Frente a
Consejo Nacional de Produccion, San Jose,
Costa Rica
GFOURS S.A.
WACKENHUT SERVICIOS DE
SEGURIDAD, S.A.
WACKENHUT SERVICIO DE
ESCOLTAS, S.A.
G FOUR S GRUPO DE SERVICIOS
ESPECIALES DE SEGURIDAD, S.A.
G FOUR S CONSULTOR EN
SEGURIDAD, S.A.
Cinco Esquinas de Tibas de la Clinica,
Clorito Picado 150 mts. Oeste, San Jose,
Costa Rica
G CUATRO S VALOURS S.A.
G CUATRO S CASH SOLUTIONS S.A.
Kaya Flamboyan 6, Curaçao, Dutch West
Indies, Curacao
G4S GULF HOLDINGS NV
Diianiras 17, 2045 Strovolos Nicosia, P.O.
Box 23989 1687, Nicosia, Cyprus
G4S SECURE SOLUTIONS (CYPRUS) LTD
G4S AVIATION (CYPRUS) LTD
P.O. Box 23989, 1687 Nicosia, Cyprus
G4S HOLDING CYPRUS LTD
Country of
Incorporation
% owned
by group
% owned
by plc
Colombia
94
Costa Rica
Costa Rica
Costa Rica
Costa Rica
Costa Rica
100
100
100
100
100
Costa Rica
Costa Rica
100
100
Curacao
100
Cyprus
Cyprus
74
80
Cyprus
100
Na Kosince 2257/9, 180 00 Prague 8, Czech
Republic
G4S SECURE SOLUTIONS (CZ), A.S.
G4S CASH SOLUTIONS (CZ) A.S.
G4S SERVICES S.R.O.
Czech Republic
Czech Republic
Czech Republic
108, Boulevard du 30 Juin, Gombe, Kinshasa,
Democratic Republic of Congo
G4S (DRC) S.A.R.L.
Roskildevej 157, DK-2620 Albertslund,
Denmark
G4S HOLDINGS (DK) A/S
G4S INTERNATIONAL (DK) A/S
G4S SECURITY SERVICES A/S
G4S KYHLENSO A/S
G4S VIKINGA SURAMERICANA APS
G4S SURAMERICANA HOLDING APS
Paseo de los Locutores #36,
Ensanche Piantini, Santo Domingo,
Dominican Republic
G4S SECURE SOLUTIONS
G4S CASH SOLUTIONS
Democratic
Republic of
Congo
Denmark
Denmark
Denmark
Denmark
Denmark
Denmark
Dominican
Republic
Dominican
Republic
100
100
100
95
100
100
100
100
100
100
95
95
Gral. Giacomo Roca N33-92 y Bosmediano,
Quito, Ecuador
G4S SECURE SOLUTIONS (ECUADOR)
CIA LTDA.
Luis Cordero E12-114 y Toledo, Quito,
Ecuador
G4S HOLDING (ECUADOR) S.A.
Ecuador
99.9
Ecuador
99.9
206 G4S plc Integrated Report and Accounts 2018
Company Name
Calle Moscú E09-8 y Av. República del
Salvador, Quito, Ecuador
DEFENCE SYSTEMS ECUADOR DSE
CIA LTDA
G4S FACILITY MANAGEMENT CIA LTDA
Av. Principal la Perla S52-136 y Quinta
Transversal Quito Ecuador
CEFOSEG CIA. LTDA.
2nd District, 90th Street, Area 6, 5th
Settlement, New Cairo, Cairo, Egypt
G4S SECURE SOLUTIONS (EGYPT) LLC
Head Office: Ismalia Public Free Zone Area,
Egypt
INDO BRITISH GARMENTS EGYPT S.A.E.
7 El Sherka El Porsaidia St., Auba Boula Sq.
Ard El Golf, Heliopolis, Cairo, Egypt
FS INVESTMENTS LLC
3A Nabatat Street, Garden City, Cairo,
Egypt
G4S LOTUS FACILITIES MANAGEMENT
COMPANY
12 Suhag St. Extension of Harun El-Rasheed
St., Heliopolis, Cairo, Egypt
G4S FACILITIES MANAGEMENT (EGYPT)
LLC
Av. Olimpica 3765, San Salvador, El Salvador
G4S SECURE SOLUTIONS EL SALVADOR
S.A. DE C.V.
Paldiski mnt 80, 10617 Tallinn, Estonia
AS G4S BALTICS
AS G4S GRUPP
AS G4S EESTI
Töökoja 1, 11313 Tallinn, Estonia
ALARMTEC AS
Tarta mnt 80j, 10112 Tallinn, Estonia
AS ÜHISTEENUSED
Fabianinkatu, 29B, Helsinki, 00100, Finland
G4S SECURE SOLUTIONS FINLAND OY
100
18 R Pasquier, 75008 Paris, France
G4S INTERNATIONAL HOLDINGS
(FRANCE) SAS
9 Place de la Madeleine 75008 Paris, France
G4S AVIATION SECURITY (FRANCE) SAS
G4S SECURE SOLUTIONS FRANCE SAS
Quartier Ambowe, BP 4000 Libreville,
Gabon
G4S GABON SECURE SOLUTIONS S.A.
28.5
Country of
Incorporation
% owned
by group
% owned
by plc
Ecuador
Ecuador
99
99.9
Ecuador
100
Egypt
85
Egypt
99
Egypt
99
Egypt
51
Egypt
100
El Salvador
100
Estonia
Estonia
Estonia
100
100
100
Estonia
100
Estonia
100
Finland
100
France
100
France
France
100
100
Gabon
99.9
9 Booster Street, Fajara,
SK Serrekunda, Gambia
G4S SECURE SOLUTIONS (GAMBIA) LTD
Gambia
100
Rathenaustrasse 53, D-63263
Neu-Isenburg, Germany
G4S INTERNATIONAL LOGISTICS
(GERMANY) GMBH
Germany
100
Company Name
C/o Baker Tilly GmbH & Co KG AG
Wirtschaftspruefungsgesellschaft
Valentinskamp 88 20355 Hamburg, Germany
G4S SECURITY HOLDINGS DE GMBH
G4S IMMOBILIEN-VERWALTUNGS GMBH
G4S SECURITY SOLUTIONS (GERMANY)
GMBH
31 Second Labone Street, Labone,
Accra, Ghana
G4S SECURITY SERVICES (GHANA) LTD
G4S (GHANA) LTD
G4S SECURE SOLUTIONS (GHANA) LTD
G4S RISK MANAGEMENT (AFRICA) LTD
7, Sorou Str., 144 52 Metamorphosis,
Athens, Greece
G4S SECURE SOLUTIONS SA
G4S HELLAS HOLDING SA
G4S CASH SOLUTIONS SA
G4S TELEMATIX SA
G4S AVIATION AND PORTS SECURE
SOLUTIONS SA
G4S RMS LTD
G4S SECURITY SYSTEMS AND
MONITORING SERVICES (GREECE) SA
5 klm, Spaton-Loutsas aven., 190 19
Spata, Greece
WSW SKYKAP SERVICES SA
National Road Palaiokastritsas, 491 00
Kerkiras, Greece
HELLAS GUARD S.A. UNDER
LIQUIDATION
35 Kountouriotou, 555-35 Thessaloniki,
Greece
CSI DEFENSE LTD
Maurice Bishop Highway Grand Anse St.
George’s, Grenada
G4S SECURE SOLUTIONS
(GRENADA) LTD.
1851A Army Drive, Harmon, Guam, 96913,
Guam
G4S SECURE SOLUTIONS (GUAM), INC.
G4S SECURITY SYSTEMS (GUAM) INC.
Avenida Petapa 42-51, Zona 12 Guatemala
City, Guatemala
WACKENHUT DE GUATEMALA SA
WACKENHUT ELECTRONICA SA
G4S DOCUMENTA, S.A.
FACILITY SERVICES, S.A.
G4S SECURE SOLUTIONS, S.A.
Homefield Rue de L’Epinel Forest, GY8
0HL, Guernsey
G4S SECURE SOLUTIONS
(GUERNSEY) LTD
P.O. Box 384, 4th Floor, The Albany, South
Esplanade, GY1 4NF St.
Peter Port, Guernsey
G4S INSURANCE (GUERNSEY) LTD
Commune de Ratoma, Kipe Centre
Emetteur, Pres de la Seg, Conakry, Guinea
G4S SECURITY SERVICES (GUINEA) SARL
Country of
Incorporation
% owned
by group
% owned
by plc
5.2
Germany
Germany
Germany
Ghana
Ghana
Ghana
Ghana
Greece
Greece
Greece
Greece
Greece
Greece
Greece
100
100
100
100
100
100
49
100
100
100
39.4
100
100
100
Greece
42.5
Greece
18
Greece
50
Grenada
51
Guam
Guam
100
100
Guatemala
Guatemala
Guatemala
Guatemala
Guatemala
50
47.5
50
28
50
Guernsey
100
Guernsey
100
100
Guinea
75
Company Name
1/F, Securicor Ctre, 481 Castle Peak Rd,
Cheung Sha Wan, Kowloon, Hong Kong
G4S (HONG KONG – HOLDING) LTD
VERDI LTD
G4S SECURE SOLUTIONS (HONG
KONG) LTD
G4S GURKHA SERVICES LTD
HONG KONG SECURITY LTD
G4S DOCUMENT MANAGEMENT
SERVICES (HONG KONG) LTD
G4S FACILITY SERVICES (HONG
KONG) LTD.
G4S CASH SOLUTIONS (HONG
KONG) LTD
SECURICOR MACAU INVESTMENT LTD
G4S GROUP HOLDING (CHINA) LTD
STARPOINT INVESTMENTS LTD
G4S SECURITY SYSTEMS (HONG
KONG) LTD
GREAT STEP INVESTMENT LTD
VICTORY STEP GROUP LTD
G4S TECHNOLOGY (HONG KONG) LTD
Unit 02, 7/F, Beautiful Group Tower, 77
Connaught Rd Central, Hong Kong
G4S INTERNATIONAL LOGISITICS
(HONG KONG) LTD
Suite 1701-08, Tower 2, Times Square, 1
Matheson Street, Causeway Bay, Hong Kong
HILL & ASSOCIATES LTD
C-16, Community Centre, Janakpuri, Behind
Janak Cinema, 110058 New Delhi, India
G4S CENTRAL MONITORING SERVICES
(INDIA) PVT. LTD
G4S SECURE SOLUTIONS (INDIA)
PVT. LTD
INDO-BRITISH GARMENTS (P) LTD
G4S CASH SOLUTIONS (INDIA) PVT LTD
G4S FLEET MANAGEMENT SERVICES
(INDIA) PVT. LTD
G4S SECURITY SYSTEMS (INDIA) PVT. LTD
G4S CORPORATE SERVICES (INDIA)
PVT. LTD.
FIRST SELECT (P) LTD
G4S FACILITY SERVICES (INDIA) PVT. LTD
MONITRON SUPPORT SERVICES
PVT. LTD
Office Unit No.301, Third Floor,
A-Wing,Eureka Tower, Building No. 7, Mind
Space, Link Road, Malad (west), 400064
Mumbai, India
MONITRON SECURITY (P) LTD
Block B3, 3rd Floor, DLF World Tech Park,
DLF IT SEZ, Silokhera122001 Gurgaon,
Haryana, India
G4S IT SERVICES (INDIA) PVT. LTD
Plot No. 43, Road No. 14, Banjara Hills,
500034 Hyderabad, India
PROTEX SECURITY SERVICES (AP)
PVT. LTD
INVESTIGATION AND SECURITY
SERVICES (INDIA) PVT. LTD
Upper Ground Floor, Tower B, Building No.
10, DLF Cyber City, 122002 DLF Phase II,
Gurgaon, Haryana, India
HILL & ASSOCIATES (INDIA) PVT. LTD
Country of
Incorporation
% owned
by group
% owned
by plc
Hong Kong
Hong Kong
Hong Kong
Hong Kong
Hong Kong
Hong Kong
Hong Kong
Hong Kong
Hong Kong
Hong Kong
Hong Kong
Hong Kong
Hong Kong
Hong Kong
Hong Kong
100
100
100
100
100
100
100
100
100
100
100
100
100
75
100
Hong Kong
100
Hong Kong
100
18.5
India
India
India
India
India
India
India
India
India
India
100
49
100
100
100
100
100
100
100
49.5
India
100
India
100
84.5
India
India
48.9
46.6
India
100
Integrated Report and Accounts 2018 G4S plc 207
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUED
42. Details of Related Undertakings of G4S plc continued
Subsidiaries continued
Company Name
C-30, Chirag Enclave, , 110048 New Delhi,
India 110048 New Delhi, India
SOPEDU SECURITY PRIVATE LIMITED
The Security Center- Unit 407, Cilandak
Commercial Estate KKO, 12560 Jakarta,
Indonesia
PT G4S SECURITY SERVICES
PT G4S EURONET (INDONESIA)
PT G4S SECURITY SOLUTION SERVICES
Jl. Ciputat Raya No. 18, Pondok Pinang,
Kebayoran Lama, 12310 Jakarta, Indonesia
PT G4S CASH SERVICES
Menara Jamsostek Fl.22, Jl. Jend. Gatot
Subroto No. 38, Kuningan Barat, Jakarta
Selatan, Indonesia
PT CASINTRANS PERDANA
Gedung Setiabudi 2 Lt.3A Suite 3A-01 Jl.
H.R. Rasuna, Said Kav.62, 12920 Jakarta,
Indonesia
PT HILL KONSULTAN INDONESIA
Jl. Administrasi Negara 1A No. 30,
Bendungan Hilir, Tanah Abang, 10210
Jakarta, Indonesia
PT ARGENTA ADHILOKA PRATAMA
Unit 5 Calmount Buisness Park, Ballymount,
Dublin 12, Ireland
GROUP 4 SECURICOR GLOBAL RISKS LTD
G4S SECURE SOLUTIONS (IRE) LTD
G4S SUPPORT SERVICES (IRELAND) LTD
G4S HOLDINGS (IRELAND) LTD
G4S MONITORING (IRE) LTD
A1 SECURITY TECHNOLOGIES LTD
G4S FACILITIES MANAGEMENT (IRE) LTD
ALARM MONITORING SERVICES LTD
G4S FINANCE (IRELAND) LTD
GDJS SECURITY LTD
Bluebell Industrial Estate, Bluebell Ave,
Dublin 12, Ireland
G4S CASH SOLUTIONS IRELAND LTD
Unit B Offices, City West Shopping Centre,
Dublin 24, D24 P650, Ireland
G4S COMPLIANCE AND
INVESTIGATIONS (IRELAND) LIMITED
IOM Buisness Park, Ballacottier, Braddon,
Isle of Man, IM2 2SE
G4S SECURE SOLUTIONS (ISLE OF
MAN) LTD
Country of
Incorporation
% owned
by group
% owned
by plc
India
100
Indonesia
Indonesia
Indonesia
97
53
51
Indonesia
83.9
Indonesia
100
Indonesia
99
Indonesia
86.7
Ireland
Ireland
Ireland
Ireland
Ireland
Ireland
Ireland
Ireland
Ireland
Ireland
100
100
100
100
100
100
100
100
100
100
Ireland
100
Ireland
100
Company Name
3 Boulevard Valerie Giscard d'Estaing, 01 BP
6065 ABJ 01 Abidjan, Ivory Coast
G4S SECURE SOLUTIONS (CI) SA
Rue B31, Lot 29, Cocody danga Nord
Abidjan, 20 BP 845 Abidjan 20 Abidjan,
Ivory Coast
ARMORGROUP COTE D'IVOIRE SA
Country of
Incorporation
% owned
by group
% owned
by plc
Ivory Coast
97.5
Ivory Coast
100
6-8 East Avenue, 5 Kingston W.I., Jamaica
G4S JAMAICA LTD
Jamaica
100
202, Musashino Hills, 2299-4 Fussa, Fussa-
shi, 1970011 Fussa-shi, Japan
G4S SECURE SOLUTIONS JAPAN K.K
2-2-15, #403, Minami-Aoyama, Minato-ku,
107-0062 Tokyo, Japan
HILL & ASSOCIATES (JAPAN) KK
Third Floor, 37 Esplanade, JE2 3QA St
Helier, Jersey
G4S HOLDINGS INDIA LTD(iii)
The Security Centre Rue des Pres Trading
Estate, JE2 7QP St Saviour, Jersey
G4S SECURE SOLUTIONS (JERSEY) LTD
The Old Chapel, Sacre Coeur, Rouge
Bouillon St Helier, Jersey, JE2 3ZA
G4S INTERNATIONAL EMPLOYMENT
SERVICES LTD
# 12, Mithqual El Fayez St., Third Circle,
Jebel, P.O. Box 831358, 11183 Amman,
Jordan
G4S SECURE SOLUTIONS
INTERNATIONAL INC (JORDAN) LTD.
Roxy Al Ozaizi Street – Dana Center 2,
11183 Amman, Jordan
G4S SECURE SOLUTIONS INT. (JORDAN)
FOR INTEGRATED SOLUTIONS
Witu Rd off Lusaka Rd, P O Box 30242,
GPO 00100 Nairobi, Kenya
G4S KENYA LTD
G4S FIRE SERVICES (KENYA) LTD
Plot No. LR 209/368/10, Armor House,
Lenana Road, P.O. Box 2714 Nairobi, Kenya
ARMORGROUP KENYA LTD
Japan
100
Japan
100
Jersey
100
Jersey
100
Jersey
100
Jordan
50
Jordan
60
Kenya
Kenya
100
100
Kenya
100
P.O. Box 22063, 13081 Safat, Kuwait
GROUP 4 SECURITY SOLUTIONS CO.WLL
Kuwait
48.51
Isle of Man
100
P.O. Box 117, 13002 Safat , Kuwait
AL MULLA SECURITY SERVICES KSCC
14 Scacham St., Petch Tikva, Israel
G4S ISRAEL PPP LTD
Israel
100
111, Arlozorov Street, Tel Aviv-Yafo, Israel,
6209809
G4S INTERNATIONAL LOGISTICS
(ISRAEL) LTD
Israel
100
20 B.P., 845 Abidjan 20, Ivory Coast
WACKENHUT SA
Ivory Coast
97.5
208 G4S plc Integrated Report and Accounts 2018
Stigu Str 10, LV-1021, Riga, Latvia
AS G4S LATVIA
AS G4S CASH SERVICES LATVIA
Saliba Building Awkar Dbayeh, 70-461,
Antelias Beirut, Lebanon
GROUP 4 SECURITY SERVICES LEBANON
SAL
G4S SECURITY SYSTEMS LEBANON SAL
397 Hilton Hill Road Maseru, Lesotho
G4S SECURE SOLUTIONS LESOTHO
(PTY) LTD
G4S CASH SOLUTIONS LESOTHO
(PTY) LTD
Kuwait
49
Latvia
Latvia
100
100
Lebanon
Lebanon
50
50.5
50.6
Lesotho
Lesotho
100
100
Company Name
J.Jasinskio 16C, LT-01112 Vilnius, Lithuania
UAB G4S LIETUVA
14 Rue du Père Raphaël – P.O. Box 1513,
L-1015 Luxembourg
G4S SECURITY SOLUTIONS S.A.R.L.
G4S GENERAL SERVICES SA
G4S FINANCE (LUXEMBOURG) SARL
Avenida Venceslau de Morais, 185-191, 1
Andar A, Macau
G4S (MACAU – HOLDING) LTD
Avenida Venceslau de Morais, 157, BL 2,2,
Edificio Centro Ind. Keck Seng, Fase II, 2
Andar H, Macau
HILL & ASSOCIATES (MACAU) LTD
G4S SECURE SOLUTIONS (MACAU) LTD
GREAT WALL SECURITY SERVICES LTDA.
GREAT WALL PROPERTY MANAGEMENT
SERVICES LTD
GREAT WALL HOLDINGS LTD
Lot II, 161 HC Ambohijatovo Ivandry
Immeuble Millenium, 10101 101
Antananarivo Renivohitra C.U., Madagascar
G4S MADAGASCAR SOLUTIONS DE
SECURITE SARL
Chirimba Industrial Area, P O Box 720,
Blantyre, Malawi
G4S SECURE SOLUTIONS (MALAWI) LTD
G4S PREMIER GUARDING SERVICES
(MALAWI) LTD
25-2, Jalan PjU 1/42A, Dataran Prima, 47301
Petaling Jaya, Malaysia
G4S MALAYSIA SDN. BHD
ALMO SYSTEMS SDN BHD
Suite 226, 1st floor, FAS Business Avenue,
No.1, Jalan Perbandaran, 47301 Petaling Jaya,
Malaysia
GROUP 4 FALCK CMS SDN BHD
No 1 & 1A, 2nd Floor (Room 2), Jalan Ipoh
Kecil, 50350 Kuala Lumpur, Malaysia
SAFEGUARDS G4S SDN BHD
SECURICOR (MALAYSIA) SDN BHD
SAFEGUARDS G4S (SABAH) SDN BHD
SAFEGUARDS G4S (SARAWAK) SDN BHD
SAFEGUARDS G4S SECURITY SYSTEMS
SDN BHD
910 (Suite 1), Block B, Phileo Damansara
2, No 15, Jalan 16/11, Off Jalan Damansara,
Petaling Jaya,46350 Selangor Darul Ehsan,
Malaysia
GWENKENS SECURITY SERVICES SDN
BHD
SAFEGUARDS G4S ACADEMY SDN BHD
GWENKENS CENTRAL MONITORING
SDN BHD
1st Floor, Lot 6, Jalan 225, Sec 51A, Petaling
Jaya, 46100 Selangor, Malaysia
G4S MANAGEMENT SERVICES (ASIA
PACIFIC) SDN BHD
2nd floor, No 2-4 Jalan Manau, 50460 Kuala
Lumpur, Malaysia
HILL CORPORATE SERVICES SDN BHD
Country of
Incorporation
% owned
by group
% owned
by plc
Lithuania
100
Luxembourg
Luxembourg
Luxembourg
100
100
100
100
Macau
100
Macau
Macau
Macau
Macau
Macau
100
100
100
100
100
Madagascar
100
Malawi
99.72
Malawi
100
Malaysia
Malaysia
60
48.8
Malaysia
48.8
Malaysia
Malaysia
Malaysia
Malaysia
Malaysia
Malaysia
Malaysia
Malaysia
48.8
48.8
48.8
48.8
48.8
43.9
43.9
43.9
Malaysia
100
Malaysia
100
Company Name
Level 15B, Main Office Tower, Financial
Park, Jalan Merdeka, 87000 Labuan, Malaysia
RISK CONSULTING (L) LTD
Unit No 9-7, The Boulevard, Mid Valley
City, Lingkaran Syed Putra, 59200 Kuala
Lumpur, Malaysia
HILL RISK CONSULTING (MALAYSIA) SDN
BHD
Level 21, Suite 21.10, The Gardens South
Tower, Mid Valley City, Lingkaran Syed
Putra, 59200 Kuala Lumpur, Malaysia
VIVA POWERTECH SDN. BHD
Suite 1005, 10th Floor, Wisma Hamzah-
Kwong Hing No 1 Leboh Ampang, 50100
Kuala Lumpur, Malaysia
INDO BRITISH GARMENTS MALAYSIA
SDN BHD
Hamdallaye ACI 2000, street 405 – gate
558, Bamako, Mali
G4S (MALI) SARL
Ent A, Level 1, Capital Business Centre, Triq
ta-Zwejt, SGN 3000 San Gwann, Malta
G4S SECURITY SERVICES (MALTA) LTD
G4S SECURITY SERVICES LTD
G4S HOLDINGS (MALTA) LTD
G4S COMMUNITY SERVICES LIMITED
BP 4201, Nouakchott, Tevragh Zeina Ilot C,
No. 261, Nouakchott, Mauritania
G4S SECURITY SERVICES
(MAURITANIA) SA
c/o Multiconsult Ltd, Les Cascades Building,
Edith Cavell Street, Port Louis, Mauritius
G4S HOLDINGS CHINA LTD
HILL RISK MANAGEMENT LTD
HILL & ASSOCIATES (MAURITIUS) LTD
HILL RISK CONSULTING
(MAURITIUS) LTD
210 St James Court, Rue St Denis, Port
Louis, Mauritius
CROSSKEYS (MAURITIUS) HOLDINGS LTD
c/o Intercontinental Trust LTD, Level 3,
Alexander House, 35 Cybercity, Ebene,
Mauritius
S GRAY MANAGEMENT SERVICES LTD
Barranca del Muerto #380, CP 01020
Mexico, D.F., Mexico
G4S HOLDINGS MÉXICO, SA DE CV
G4S SECURITY SYSTEMS S.A. DE C.V.
G4S PRIVATE SECURITY SERVICES, SA DE
CV
Cvijetna Street no.25, Podgorica,
Montenegro
G4S SECURITY SERVICES CRNA GORA
DOO PODGORICA
24 Lotissement la Colline, Sidi Maarouf,
20150 Casablanca, Morocco
MAROC PROTECTION SURVEILLANCE SA
G4S (MAROC) SA
FIRST SELECT MOROCCO SA
G4S INTERGRATED SERVICES
MOROCCO SA
Country of
Incorporation
% owned
by group
% owned
by plc
Malaysia
100
Malaysia
100
Malaysia
100
Malaysia
100
Mali
100
Malta
Malta
Malta
Malta
50.1
50.1
100
50.1
Mauritania
70
Mauritius
Mauritius
Mauritius
Mauritius
100
100
100
100
Mauritius
100
Mauritius
100
Mexico
Mexico
Mexico
100
100
100
Montenegro
85
Morocco
Morocco
Morocco
Morocco
100
100
99.9
100
Integrated Report and Accounts 2018 G4S plc 209
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUED
42. Details of Related Undertakings of G4S plc continued
Subsidiaries continued
Company Name
Rua Mariano Machado nr. 99/186, Maputo,
Mozambique
WACKENHUT MOZAMBIQUE LIMITADA
Av da Organizacao da Unidade Africana,
121, Maputo, Mozambique
G4S SECURE SOLUTIONS MOCAMBIQUE
LIMITADA
No 2085, Avenida Ahmed Sekoe Toure,
Maputo, Mozambique
G4S ORDNANCE MANAGEMENT
(MOCAMBIQUE), LIMITADA
33 General Murtala Ramat Muhammed
Street, Eros, Windhoek, Namibia
G FOUR S MANNED SECURITY (NAMIBIA)
(PTY) LTD
G FOUR S AVIATION SECURITY
(NAMIBIA) (PTY) LTD
G FOUR S SECURE SOLUTIONS
(NAMIBIA) (PTY) LTD
G FOUR S CASH SOLUTIONS (NAMIBIA)
(PTY) LTD
Ichhunadi Marg, Baluwatar, Ward No. 4,
Kathmandu Metropolitan City, Kathmandu,
Nepal
G4S SECURITY SERVICES NEPAL (P) LTD
SECURITAS PRODUCT NEPAL P. LTD
G4S FACILITY & EMPLOYMENT SERVICES
NEPAL PVT. LTD
P.O. Box 20423, House # 75/45, Lazimpat,
Kailash Chaur, Kathmandu, Nepal
FIRST SELECT NEPAL (P) LTD
Hogehilweg 12, 1101CD Amsterdam
Zuidoost, Netherlands
G4S INTERNATIONAL (NL) BV
G4S HOLDING (B) BV
G4S INDIA HOLDINGS (NL) BV
G4S SECURE MONITORING BV
G4S INTERNATIONAL HOLDINGS 101
(NL) BV
G4S SECURITY SERVICES BV
G4S HOLDINGS 102 (NL) B.V.
G4S HOLDINGS 103 (NL) BV
G4S GROUP HOLDING (ASIA) BV
G4S BEHEER BV
G4S SERVICES BV
G4S PUBLIC SECURITY BV
IBG EUROPE BV
G4S OVERSEAS HOLDINGS BV
Evert van de Beekstraat 1 rumimtenummer
66, Luchthaven Schiphol, 1118 CL
Netherlands
G4S AVIATION SECURITY BV
Ptolemaeuslaan 61, 3528 BR Utrecht,
Netherlands
G4S CASH SOLUTIONS BV
G4S CASH MANAGEMENT BV
Galvanistraat 89, 6716 AE Ede, Netherlands
G4S TRAINING & SAFETY BV
G4S DIRECT BV
ROTUS BV
Country of
Incorporation
% owned
by group
% owned
by plc
Mozambique
90
Mozambique
87.5
Mozambique
90
Namibia
Namibia
Namibia
Namibia
Nepal
Nepal
Nepal
100
100
100
100
99
100
100
Nepal
100
Netherlands
Netherlands
Netherlands
Netherlands
Netherlands
Netherlands
Netherlands
Netherlands
Netherlands
Netherlands
Netherlands
Netherlands
Netherlands
Netherlands
100
100
100
100
100
100
100
100
100
100
100
100
100
100
Netherlands
100
Netherlands
Netherlands
Netherlands
Netherlands
Netherlands
100
100
100
100
100
Company Name
Amperestraat 25, 6716 BN Ede,
Netherlands
G4S PERSONNEL BV
Donk 1D, 2991 LE Barendrecht,
Netherlands
G4S FIRE & SAFETY BV
Tolnasingel 1, 2411PV Bodegraven,
Netherlands
INZETBAAR BV
Level 3, 2 Kalmia Street, Ellerslie, 1051,
New Zealand
G4S NEW ZEALAND LTD
Reparta Belmonte, Dr. Hospital Velez Paiz,
1 Cuadra Holis Arriba, Nicaragua
G4S SECURE SOLUTIONS NICARAGUA,
SOCIEDAD ANÓNIMA
27, Oba Akinjobi Street, GIRA, Ikeja, Lagos,
Nigeria
OUTSOURCING SERVICES LTD
G4S SECURE SOLUTIONS NIGERIA LTD
ARMORGROUP (NIGERIA) LTD
13A, A.J. Marinho Drive, Victoria Island,
Lagos, Nigeria
SCHC LTD
AIB Plaza, Off Akin Adesola Street, Victoria
Island, Lagos, Nigeria
G4S TRACKING SOLUTIONS LTD
1 Murtala Mohammed Drive (Formerly Bank
Road), Ikoyi, Lagos, Nigeria
ASSETGUARD SERVICES LTD
Plot 7a Acme Road, Block C, Ogba Inustrial
Scheme, Ikeja, Lagos, Nigeria
G4S/GLOBAL RISKS NIGERIA LTD
Country of
Incorporation
% owned
by group
% owned
by plc
Netherlands
100
Netherlands
100
Netherlands
100
New Zealand
100
Nicaragua
51
Nigeria
Nigeria
Nigeria
99.9
100
100
Nigeria
99.9
Nigeria
60
Nigeria
100
Nigeria
100
PMB 384 PPP Box 1000, 96950 Saipan,
Northern Mariana Islands
G4S SECURE SOLUTIONS (CNMI) INC.
Northern
Mariana Islands
P.O. Box 1625, 112, Ruwi Muscat, Oman
G4S SECURITY SOLUTIONS LLC
G4S SERVICES LLC
Oman
Oman
100
49
49
B-61, KDA Scheme 01, 7550 Karachi,
Pakistan
HILL & ASSOCIATES PAKISTAN (PVT.) LTD
Calle 41, 2-40 Bella Vista, Panama
INVERSIONES SETESCA
SEGURIDAD TECNICA SA
TELEMETRIA Y ALARMA SA
DETECTA SA
LIMPIE SA
METERS CORP.
Marbella, Ave. Aquilino de la Guardia
Ocean Business Plaza, Piso 17-1704,
Panama City, Panama
G4S S.A.
Pakistan
100
Panama
Panama
Panama
Panama
Panama
Panama
100
44
17.6
44
44
100
Panama
100
210 G4S plc Integrated Report and Accounts 2018
Country of
Incorporation
% owned
by group
% owned
by plc
Company Name
Bulevar Peka Dapcevica 32 Belgrade, Serbia
G4S SECURE SOLUTIONS D.O.O.
Country of
Incorporation
% owned
by group
% owned
by plc
Serbia
85
Company Name
Section 61, Allotment 13, Morata Street,
Gordons, National Capital District,
Papua New Guinea
G4S SECURE SOLUTIONS (PNG) LTD
c/o Sinton Spence Chartered Accountants
2nd Floor Brian Bell Plaza Turmu St.
Boroko, Boroko, Papua New Guinea
MONT BLANC LTD
PO Box 5392 Boroko NCD, Papua New
Guinea
G4S PNG LTD
Nery Quevedo 315 Esq. Hipolito Garron,
Asuncion, Paraguay
WACKENHUT PARAGUAY SA
Av. El Sol 916, Urbanización La Campiña.,
Chorrillos, Lima, Peru
G4S PERU S.A.C.
G4S SECURE MONITORING AND
RESPONSE PERU S.A.C.
100 E. Rodriquez Avenue, Ugong Norte,
1552 Quezon City, Philippines
G4S CASH SOLUTIONS PHILLIPINES INC.
Carretera #1 Plaza Bairoa, Suite 211,
Caguas, Puerto Rico
G4S SECURE SOLUTIONS (PUERTO
RICO) INC.
15 Charles de Gaulle Square, 12th floor,
District 1, Bucharest, Romania
G4S SECURE SOLUTIONS SRL
G4S CASH SOLUTIONS SRL
G4S FIRE & SAFETY S.R.L.
36 Dzerzhinskogo,
693000 Yuzhno Sakhalinsk, Russia
LLC PSE G4S SECURITY SERVICES –
SAKHALIN
62A Amurskaya Str, Office 103, 693000
Yuzhno-Sakhalinsk, Russia
LLC G4S TECNICAL SOLUTIONS –
SAKHALIN
Building 1, 4 Ukhtomsky Pereulok, 111020
Moscow, Russia
G4S EURASIA LLC
107023, Moscow, M. Semenovskaya str., 9,
bld I Russia
GROUP 4 SECURICOR LLC
5698 Nyarutarama, P.O. Box 7230, Kigali,
Rwanda
G4S RWANDA LTD
P.O. Box CP 6098 Conway Post Office,
Castries, Saint Lucia
G4S SECURE SOLUTIONS (ST.LUCIA) LTD
Papua New
Guinea
Papua New
Guinea
Papua New
Guinea
100
100
100
Paraguay
80
Peru
Peru
99
99
Philippines
51
Puerto Rico
100
Romania
Romania
Romania
100
100
100
Russia
100
Russia
100
Russia
100
Russia
99
Rwanda
99
Saint Lucia
51
P.O. Box 31049, 21497 Jeddah, Saudi Arabia
AL MAJAL GROUP 4S FOR SECURITY AND
SAFETY LIMITED LIABILITY COMPANY
Saudi Arabia
Post Code 6930, 21452 Jeddah, Saudi Arabia
AL MAJAL SERVICE MASTER LLC
Saudi Arabia
49
49
6 Spur Road, P.O Box, Freetown,
Sierra Leone
G4S SECURE SOLUTIONS (SL) LTD
8 Commonwealth Lane, #04-04 (Annex),
149555 Singapore
GROUP 4 SECURICOR (S) PTE. LTD
G4S SECURITY SYSTEMS (S) PTE. LTD
G4S SECURE SOLUTIONS (SINGAPORE)
PTE. LTD
158 Cecil Street, 069 545 #11-01 Singapore
G4S INTERNATIONAL LOGISTICS
(SINGAPORE) PTE LTD
51 Cuppage Road, #10-18, 229469,
Singapore
HILL & ASSOCIATES RISK CONSULTING
(SINGAPORE) PTE LTD
Visnova 16, 831 01 Bratislava, Slovak
Republic
G4S SECURITY SYSTEMS (SK) S.R.O.
G4S SECURE SOLUTIONS (SK), A.S.
G4S FIRE SERVICES (SK), S.R.O
G4S TECHNOLOGY SOLUTIONS (SK),
S.R.O
Stegne 21, 1000 Ljubljana, Slovenia
G4S DRUZBA ZA VAROVANJE D.O.O.
(G4S D.O.O.)
Byls Bridge Office Park, Building 11, 13
Candela Street, Highveld Ext 73, 0157
Centurion, South Africa
GROUP 4 FALCK (PTY) LTD
G4S SECURITY SERVICES (AFRICA)
(PROPRIETARY) LTD
G4S SECURE SOLUTIONS (SA) (PTY)
LTD(iii)
G4S AVIATION SECURITY (SA) (PTY) LTD
G4S INTEGRITY ASSESSMENT (PTY) LTD
GRAY SECURITY SERVICES (SA)
(PROPRIETARY) LTD
G4S CASH SOLUTIONS (SA) (PTY) LTD(iii)
G4S INSURANCE (SA) LTD
ELWIERDA (GAUTENG) (PTY) LTD
CMS MICRO FINANCE (PTY) LTD
G4S EMPOWERMENT VENTURES (SA)
(PTY) LTD
G4S CARE AND JUSTICE SERVICES
(SOUTH AFRICA) (PTY) LTD
G4S CORRECTION SERVICES
(BLOEMFONTEIN) (PTY) LTD
GSL REBOUND (PTY) LTD
SKYCOM (PTY) LTD
ACCESS AND BEYOND (PTY) LTD
INTEGRATED SKY FORCE SOLUTIONS
(PTY) LTD
INVESTMENT SURVEYS (PTY) LTD
G4S DEPOSITA (RF) (PTY) LTD
G4S ATM ENGINEERING (SA) (PTY) LTD
INTEGRA (PTY) LTD
THETHA TECHNOLOGIES (PTY) LTD
G4S AFRICA (PROPRIETARY) LTD
Sierra Leone
100
Singapore
Singapore
Singapore
100
100
100
25.3
Singapore
100
Singapore
100
Slovak Republic
Slovak Republic
Slovak Republic
Slovak Republic
100
100
100
100
Slovenia
49
South Africa
South Africa
South Africa
South Africa
South Africa
South Africa
South Africa
South Africa
South Africa
South Africa
South Africa
South Africa
South Africa
South Africa
South Africa
South Africa
South Africa
South Africa
South Africa
South Africa
South Africa
South Africa
South Africa
100
100
79.1
79.1
79.1
79.1
74.9
74.9
74.9
74.9
79.1
100
81
100
79.1
79.1
79.1
100
74.9
74.9
100
74.9
100
Integrated Report and Accounts 2018 G4S plc 211
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUED
42. Details of Related Undertakings of G4S plc continued
Subsidiaries continued
Company Name
G4S VALUABLE LOGISTICS (SA)
(PTY) LTD
CMS MANCO (PROPRIETARY) LTD
Country of
Incorporation
% owned
by group
% owned
by plc
South Africa
South Africa
100
74.89
Unit 31, First Floor Waterford Office Park,
Corner Witkoppen & Waterford Road,
Fourways 1610, South Africa
G4S INTERNATIONAL LOGISTICS
(SOUTH AFRICA) PTY.
Sorento Suite, 5 de Haviland Crescent,
Ill Villaggio Persequor Pretoria, Gauteng,
South Africa
INDO BRITISH GARMENTS PVT. LTD,
EXTERNAL PROFIT
South Africa
100
South Africa
100
21 Vauxhall Street, 2 Colombo, Sri Lanka
G4S SECURITY SERVICES (PRIVATE) LTD.
Sri Lanka
60
8 Mek Nimer Street, P.O. Box 47,
Khartoum, Sudan
ARMORGROUP SUDANESE CO LTD
c/o Eversheds Sutherland AG ,
Stadelhoferstrasse, 22 8001, Zurich,
Switzerland
G4S INTERNATIONAL LOGISTICS
(SWITZERLAND) AG
Al-Aasar Building, near the Central Post
office, Sinjikdar, Damascus, Syria
GROUP 4 SYRIA LIMITED LIABILITY
COMPANY
20F-1, No. 266, Sec 1, Wenhua 2nd Road,
Linkou Dist, 24448 New Taipei City, Taiwan
G4S SECURE SOLUTIONS (TAIWAN) LTD
G4S ATM SOLUTIONS (TAIWAN) LTD
G4S PROPERTY MANAGEMENT LTD
G4S SECUREWELL SECURE SOLUTIONS
(TAIWAN) LTD
HILL & ASSOCIATES (TAIWAN) LTD
20F-2, No. 266, sec 1, wun hua 2nd road,
Linko Distt, 24448 Taipei City, Taiwan
G4S WEI FUNG SECURE SOLUTIONS
(TAIWAN) LTD
6F., No.320, Sec. 1, Neihu Rd., Neihu Dist.,
Taipei City 11493, Taiwan (R.O.C), 22101
Taipei, Taiwan
G4S SYSTEM ENGINEERING
CORPORATION
16th Floor, Suite 1, No. 266, Sec. 1,
Wen-Hwa 2nd Road, Linko Hsiang, Taipei,
Taiwan, 22101 Taipei, Taiwan
G4S SECURITY SYSTEMS CO. LTD
Plot No. 37, Ali Hassan Mwinyi Road,
Kinondoni Municipality, P O Box 5555, Dar
Es Salaam, Tanzania
G4S SECURE SOLUTIONS (TZ) LTD
Sudan
100
Switzerland
100
Syria
29.4
Taiwan
Taiwan
Taiwan
Taiwan
Taiwan
100
100
100
100
100
Taiwan
100
Taiwan
85
Taiwan
85
Company Name
2922/205-206 Charn Issara Tower II, 11th
Floor, New Petchburi Road, Bangkapi,
Huaykwang, 10310 Bangkok, Thailand
G4S (THAILAND) LTD
G4S SECURITY SERVICES
(THAILAND) LTD
G4S HOLDINGS (THAILAND) LTD
INTER-ASIAN ENTERPRISES (IAE)
COMPANY LTD
ASIAN HOLDING INTERNATIONAL
COMPANY LTD
HILL RISK CONSULTING (THAILAND)
CO., LTD(iii)
G4S HOLDINGS 4 (THAILAND) LTD
G4S HOLDINGS 3 (THAILAND) LTD
G4S HOLDINGS 2 (THAILAND) LTD
G4S HOLDINGS 1 (THAILAND) LTD
45/1 Silom 19 Building, 2nd Floor, Soi Silom
19, Silom Road, Silom, 10500 Bangrak,
Bangkok, Thailand
G4S INTERNATIONAL LOGISTICS
HOLDING (THAILAND) LTD
G4S INTERNATIONAL LOGISTICS
(THAILAND) LTD
61-63 Edward Street, Port of Spain, Trinidad
& Tobago
G4S HOLDINGS (TRINIDAD) LTD
G4S SECURE SOLUTIONS
(TRINIDAD) LTD
Ayazaga Mah. Ataturk Cad Mezarlik Sok No
1 Ayazaga, Sariyer, Istanbul, Turkey
G4S GÜVENLIK HIZMETLERI ANONIM
ŞIRKETI
G4S ELEKTRONIK SISTEMLERI ANONIM
ŞIRKETI
Plot 6, Nakasero Road, Nakasero, Kampala,
Uganda
G4S SECURE SOLUTIONS (UGANDA) LTD
Plot 53 Lumumba Avenue, Nakasero,
Kampala, Uganda
ALARM PROTECTION SERVICES LTD
US DEFENSE SYSTEMS LLC (UGANDA)
21A Moskovskij ave, 02073 Kiev, Ukraine
GROUP 4 SECURITAS LLC
G4S SECURE SOLUTIONS (UKRAINE) LTD
G4S SECURITY SOLUTIONS
(UKRAINE) LTD
Chain Tower (Oriental Travel Building),
First Floor, Muroor Street,
P.O. Box 31859 Abu Dhabi,
United Arab Emirates
G4S SECURE SOLUTIONS LLC
Tanzania
100
P.O. Box 32634, Dubai,
United Arab Emirates
TDFL, 3rd Floor (Opposite Sheraton Hotel),
Dar-es-Salaam, Tanzania
ARMORGROUP TANZANIA LTD
Tanzania
100
212 G4S plc Integrated Report and Accounts 2018
GROUP 4 FALCK SERVICES LLC
GROUP 4 SECURICOR INFORMATION
TECHNOLOGY UAE LLC (G4S)
GROUP 4 SECURICOR FACILITY SERVICES
LLC (G4S)
SHAMS AGRICULTURAL SERVICES
L.L.C (G4S)
FIRST SELECT UAE LLC
Country of
Incorporation
% owned
by group
% owned
by plc
Thailand
Thailand
Thailand
Thailand
Thailand
Thailand
Thailand
Thailand
Thailand
Thailand
Thailand
Thailand
Trinidad &
Tobago
Trinidad &
Tobago
Turkey
Turkey
73.5
73.7
73.4
73.5
73
49
48.9
48.9
48.9
48.9
100
100
51
51
100
100
Uganda
100
Uganda
Uganda
Ukraine
Ukraine
Ukraine
100
100
99.4
100
100
United Arab
Emirates
49
United Arab
Emirates
United Arab
Emirates
United Arab
Emirates
United Arab
Emirates
United Arab
Emirates
49
48.5
48.5
48.5
48.5
Country of
Incorporation
% owned
by group
% owned
by plc
Country of
Incorporation
% owned
by group
% owned
by plc
Company Name
P.O. Box 31859, Abu Dhabi,
United Arab Emirates
G4S ALARM MONITORING SERVICES LLC
Unit 1-05, Street W B 4, Airport Free Zone,
54907, United Arab Emirates
G4S INTERNATIONAL LOGISTICS
(MIDDLE EAST) FZE
Dubai, 215634, United Arab Emirates
G4S EVENTS SERVICES UAE LLC
Unit No. Al Mas 2 – D14, Al Mas Tower,
Plot No. LT2, Jumeirah Lake Tower Dubai,
United Arab Emirates
G4S INTERNATIONAL LOGISTICS
(MIDDLE EAST) DMCC
Unit no. 2403, JBC 5, Plot no. JLT-PH
2- W1A, Jumeirah Lake Towers, Dubai,
United Arab Emirates
G4S REGIONAL MANAGEMENT
CONSULTANCY ME DMCC
United Arab
Emirates
United Arab
Emirates
United Arab
Emirates
49
100
48
United Arab
Emirates
100
United Arab
Emirates
100
Level 14 – Tower 2, Al Fattan Currency
House, Dubai International Financial Centre,
Dubai, Uinited Arab Emirates
G4S CASH 360 INTERNATIONAL FZCO
Level 14 203 Al Shamal Building Plot # 113-
242, Al Daghya Deira, United Arab Emirates
G4S INTERNATIONAL LOGISTICS MIDDLE
EAST LLC
United Arab
Emirates
United Arab
Emirates
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
Southside, 105 Victoria Street, London,
SW1E 6QT, United Kingdom
G4S UK HOLDINGS LTD(iii)
G4S 084 (UK) LTD
G4S CARE AND JUSTICE SERVICES
(UK) LTD
G4S GOVERNMENT SERVICES LTD
G4S 308 (UK) LTD
G4S 309 (UK) LTD
G4S 182 (UK) LTD
G4S REGIONAL MANAGEMENT
(UK&I) LTD(iii)
G4S FACILITIES MANAGEMENT
(UK) LTD(iii)
G4S OVERSEAS HOLDINGS LTD
G4S GOVERNMENT AND
OUTSOURCING SERVICES (UK) LTD
STRATUS INTEGRATED SERVICES LTD
G4S HEALTH SERVICES (UK) LTD
G4S INVESTIGATION SOLUTIONS
United Kingdom
(UK) LTD
G4S FINANCE (SOUTH AFRICA) LTD
United Kingdom
G4S MONITORING TECHNOLOGIES LTD United Kingdom
G4S INTEGRATED SERVICES
HOLDINGS LTD
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
100
49
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
Company Name
Challenge House, International Drive,
Tewkesbury, Gloucestershire, GL20 8UQ,
United Kingdom
G4S TECHNOLOGY LTD
AMAG TECHNOLOGY LTD
Sutton Park House, 15 Carshalton Road,
Sutton, Surrey, SM1 4LD, United Kingdom
G4S SECURITY SERVICES (UK) LTD
G4S AVIATION SERVICES (UK) LTD
G4S SECURE SOLUTIONS (UK) LTD
G4S CASH SOLUTIONS (UK) LTD
G4S CASH CENTRES (UK) LTD
G4S TRUSTEES LTD*
G4S CASH SOLUTIONS EMPLOYEES'
CRIMINAL ATTACK FUND LTD (v)
G4S BULLION SOLUTIONS (UK) LTD
G4S GURKHA SERVICES (UK) LTD
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
5th Floor, Southside, 105 Victoria Street,
SW1E 6QT London, United Kingdom
United Kingdom
GROUP 4 LTD
United Kingdom
G4S GLOBAL HOLDINGS LTD
United Kingdom
SECURICOR LTD
United Kingdom
G4S INTERNATIONAL 105 (UK) LTD
United Kingdom
G4S AMERICAS (UK) LTD
United Kingdom
G4S AVIATION (FRANCE) LTD
United Kingdom
G4S HOLDINGS UK (AG) LTD
United Kingdom
G4S MP (UK) LTD
United Kingdom
G4S NOMINEES LTD
G4S INTERNATIONAL HOLDINGS LTD
United Kingdom
G4S FINANCE MANAGEMENT (AG) LTD United Kingdom
United Kingdom
G4S FINANCE LTD
United Kingdom
FIRST SELECT HOLDINGS LTD
United Kingdom
G4S US HOLDINGS LTD
United Kingdom
G4S WORLDWIDE HOLDINGS LTD
United Kingdom
G4S DEFENCE SYSTEMS EURASIA LTD
G4S DSL HOLDINGS LTD
United Kingdom
G4S HOLDINGS INTERNATIONAL
(AG) LTD
G4S US INVESTMENTS LTD
IBG HOLDINGS (UK) LTD
G4S INTERNATIONAL FINANCE PLC
G4S CORPORATE SERVICES LTD
G4S FINANCE (BRAZIL) LTD
G4S INVESTMENT LONDON LTD
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
99.8
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
Unit 6, Central Park Estate, Staines Road,
Hounslow, England, TW4 5DJ
G4S INTERNATIONAL LOGISTICS
(UK) LTD
United Kingdom
100
46 Gillingham Street, London, SW1V 1HU,
United Kingdom
G4S RISK MANAGEMENT LTD
G4S SECURE SOLUTIONS (IRAQ) LTD
G4S RISK CONSULTING LTD
G4S ORDNANCE MANAGEMENT LTD
100
United Kingdom
United Kingdom
United Kingdom
United Kingdom
100
100
100
100
Site 16 Sydenham Buisness Park
Airport Road West, Belfast, BT3 9LN,
United Kingdom
G4S FIRE AND SECURITY SYSTEMS LTD
20701 Manhattan Place, CA 90501-1829
Torrance, United States
AMAG TECHNOLOGY INC(iii)
* Pension trust not part of the consolidation.
United Kingdom
100
United States
100
Integrated Report and Accounts 2018 G4S plc 213
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUED
42. Details of Related Undertakings of G4S plc continued
Subsidiaries continued
Company Name
Cufre 2320, Montevideo, Uruguay
G4S SECURE SOLUTIONS
(URUGUAY) S.A.
Los Ruices Sur, Calle Milan 1013,
Caracas, Venezuela
SETECSA DE VENEZUELA CA
P.O. Box 32914, 10 H Kabulonga Road,
Lusaka, Zambia
G4S SECURE SOLUTIONS ZAMBIA LTD
Plot 3144, Mukwa Road, Lusaka, Zambia
SAFETECH (COPPERBELT) LTD
Plot 7305, Kambala Road, Lusaka, Zambia
SAFETECH ZAMBIA LTD
Country of
Incorporation
% owned
by group
% owned
by plc
Uruguay
80
Venezuela
30
Zambia
100
Zambia
100
Zambia
100
Company Name
2711 Centerville rd, 19808 Wilmington, DE,
United States
G4S HOLDING ONE INC.
WACKENHUT U.S. PROPERTIES INC.
WACKENHUT FOREIGN PROPERTIES INC.
US DEFENSE SYSTEMS LLC(iv)
G4S RETAIL SOLUTIONS (USA) INC.
900 Market Street, Suite 200, DA 19801
Wilmington, Delaware, United States
TUHNECKCAW INC.
4200 Wackenhut Drive, Suite 100, FL 33410
Palm Beach Gardens, FL, United States
AMERICAN GUARD & ALERT INC.
TWC/FL/01 INC.
WACKENHUT HOMELAND
SECURITY, INC.
G4S US INC.
PROLOGIS Cargo Center 75, JFK
International Airport, North Hangar
Road, Suite 210 Jamaica 11430 New York,
United States
G4S INTERNATIONAL LOGISTICS
(USA), INC.
1395 University Blvd, 33458 Jupiter, FL,
United States
VEBA TRUST
G4S GUATEMALA HOLDING, LLC(iv)
G4S ELECTRONICA HOLDING, LLC(iv)
G4S GUATEMALA FACILITY
SERVICES, LLC(iv)
G4S SECURE SOLUTIONS (USA) INC.
G4S SECURE SOLUTIONS
INTERNATIONAL INC.
910 Paverstone Drive, 27615 Raleigh, NC,
United States
G4S COMPLIANCE &
INVESTIGATIONS, INC.
21 North Avenue, MA 01803 Burlington,
United States
G4S TECHNOLOGY HOLDINGS
(USA) INC.
G4S TECHNOLOGY SOFTWARE
SOLUTIONS LLC(iv)
Country of
Incorporation
% owned
by group
% owned
by plc
United States
United States
United States
United States
United States
100
100
100
100
100
United States
100
United States
United States
United States
United States
100
100
100
100
United States
100
United States
United States
United States
United States
United States
United States
100
100
100
100
100
100
United States
100
United States
United States
100
100
1209 Orange Street, DE 19801 Wilmington,
Delaware, United States
RONCO CONSULTING CORPORATION
United States
100
1200 Landmark Center, Ste 1300, 68102
Omaha, NE, United States
G4S SECURE INTEGRATION LLC(iv)
ADESTA LLC
United States
United States
100
100
601 Abbot Rd., 48823 Lansing, United States
RENAISSANCE CENTER
MANAGEMENT COMPANY(iii)
United States
90.9
156 College Street, 3rd Floor,
05401 VT, IS, United States
TITANIA INSURANCE CO OF AMERICA
United States
100
701 Brazos Suite 1050, 78701 Austin, Texas,
United States
SERVICE AND SUPPLY INTERNATIONAL, INC.
United States
100
214 G4S plc Integrated Report and Accounts 2018
Holdings in other undertakings
The Group has a legal interest in the entities listed below which are
joint ventures, where the economic interest has been divested and
are therefore not included in the consolidation.
Company Name
3rd Floor, Broad Quay House,
Prince Street, Bristol BS1 4DJ,
United Kingdom
G4S INVESTMENTS LTD
G4S JOINT VENTURES LTD
G4S JOINT VENTURES
(FAZAKERLEY) LTD
FAZAKERLEY PRISON SERVICES LTD
G4S JOINT VENTURES
(ONLEY) LTD
ONLEY PRISON SERVICES LTD
OCHRE SOLUTIONS
(HOLDINGS) LTD
OCHRE SOLUTIONS LTD
NORTH WILTSHIRE SCHOOLS LTD
UK COURT SERVICES
(MANCHESTER) HOLDINGS LTD
UK COURT SERVICES
(MANCHESTER) LTD
WHITE HORSE EDUCATION
PARTNERSHIP LTD
HULL MATERNITY
DEVEOPMENT LTD
HEALTHCARE PROVIDERS LTD
ALBION HEALTHCARE (OXFORD)
HOLDINGS LTD
ALBION HEALTHCARE
(OXFORD) LTD
Country of
Incorporation
% owned by
group
% owned
by plc
United
Kingdom
United
Kingdom
United
Kingdom
United
Kingdom
United
Kingdom
United
Kingdom
United
Kingdom
United
Kingdom
United
Kingdom
United
Kingdom
United
Kingdom
United
Kingdom
United
Kingdom
United
Kingdom
United
Kingdom
United
Kingdom
16.78
16.78
16.78
16.78
16.78
16.78
3.36
3.36
16.78
16.78
16.78
16.78
16.78
16.78
4.19
4.19
Company Name
Challenge House, International Drive,
Tewkesbury, GL20 8UQ,
United Kingdom
ACCOMMODATION SERVICES
(HOLDINGS) LTD
INTEGRATED ACCOMODATION
SERVICES PLC
EAST LONDON LIFT
ACCOMMODATION 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
LIFT HEALTHCARE
INVESTMENTS LTD
BEXLEY BROMLEY & GREENWICH
LIFT COMPANY LTD
BBG HOLDCO LTD
BBG LIFT ACCOMMODATION
SERVICES LTD
BBG LIFT HOLDCO (NO 2) LTD
BBG LIFT ACCOMMODATION
SERVICES (NO 2) LTD
BHH LIFT COMPANY LTD
BHH HOLDCO LTD
BHH LIFT ACCOMMODATION
SERVICES LTD
HEALTHCARE IMPROVEMENT
PARTNERSHIP (WOLVERHAMPTON
CITY AND WALSALL) LTD
WOLVERHAMPTON CITY AND
WALSALL HOLDCO LTD
WOLVERHAMPTON CITY AND
WALSALL LIFT ACCOMMODATION
SERVICES LTD
WALSALL HOLDCO LTD
WALSALL LIFT ACCOMMODATION
SERVICES LTD
LONDON LIFTCO PS LTD
Country of
Incorporation
% owned by
group
% owned
by plc
United
Kingdom
United
Kingdom
United
Kingdom
United
Kingdom
United
Kingdom
United
Kingdom
United
Kingdom
United
Kingdom
United
Kingdom
United
Kingdom
United
Kingdom
United
Kingdom
United
Kingdom
United
Kingdom
United
Kingdom
United
Kingdom
United
Kingdom
United
Kingdom
United
Kingdom
United
Kingdom
United
Kingdom
United
Kingdom
United
Kingdom
United
Kingdom
United
Kingdom
United
Kingdom
8.39
8.39
5.03
5.03
8.39
5.03
5.03
5.03
5.03
5.03
5.03
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
Integrated Report and Accounts 2018 G4S plc 215
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUED
Other Significant Holdings
Company Name
G4S-SJC LLC
G4S PARSONS
PACIFIC LLC
POLICITY - OPERATOR LIMITED
Joint Ventures
Company Name
PARKSEC LIMITED
PACIFIC BUILDING SERVICES
MANAGEMENT LIMITED (JV)
BRIDGEND CUSTODIAL
SERVICES LIMITED(ii)
BLOEMFONTEIN CORRECTIONAL
CONTRACTS (PTY) LIMITED
FORBES G4S SOLUTIONS PVT LTD
G4S QATAR S.P.C
BUSINESS CASH CENTER S.A.
T.I.S. TOTAL INTEGRATED
SERVICES LTD
% owned by group
20
20
25
Profit or loss
not material
not material
not material
Registered address
1395 University Blvd., 33458 Jupiter,
United States
7121 Fairway Drive, Suite 301, 33418
Palm Beach Gardens, FL, United States
Virginia I, Beit Shemesh, Israel
Registered address
Ent A, Level 1, Capital Business Centre, Triq ta-Zwejt, SGN
3000 San Gwann, Malta
Level 6, Era Rumana Building Champions Parade, Port Moresby,
Papua New Guinea
Challenge House, International Drive, Tewkesbury,
GL20 8UQ, United Kingdom
Byls Bridge Office Park, Building 11, 13 Candela Street, Highveld
Ext 73, 0157 Centurion, South Africa
C-16, Community Centre, Janakpuri, Behind Janak Cinema,
110058 New Delhi, India
Villa no. 321, Corner of Abduallah Bin Rawaha Street, C Ring
Road, P.O. Box 18592 Doha, Qatar
Parc Industriel de la CFCIM, lot No63, Bouskoura,
Casablanca, Morocco
Diianiras 17, 2045 Strovolos Nicosia, P.O. Box 23989 1687,
Nicosia, Cyprus
% owned by group
undertakings
Factors on which joint
management is based
Date of last financial
year if not 31/12
50.1 Joint venture agreement
1 director appointed to
the board
50
58.68 Joint venture agreement
30 September
20 Joint venture agreement
30 September
50 Joint venture agreement
0 Joint venture agreement
45.7 Joint venture agreement
Joint Venture
Agreement
50
CLASSIFICATIONS KEY
(i) Ordinary shares
(ii) Deferred shares
(iii) Preference including cumulative, non-cumulative and redeemable shares
(iv) Units
(v) Limited by guarantee
216 G4S plc Integrated Report and Accounts 2018
PARENT COMPANY STATEMENT OF CHANGES IN EQUITY
For the year ended 31 December 2018
At 1 January 2018
Comprehensive expense:
Loss for the year
Other comprehensive income/(expense):
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 expense
Transactions with owners:
Dividends paid
Own shares purchased
Own shares awarded
Share-based payments
At 31 December 2018
At 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 purchased
Own shares awarded
Share-based payments
At 31 December 2017
Share
capital
£m
388
Share
premium
£m
258
Retained
earnings
£m
918
Hedging
reserve
£m
–
Reserve for
own shares
£m
(12)
Total
equity
£m
1,552
(76)
–
–
–
–
–
–
–
–
–
–
–
–
388
–
–
–
–
–
–
–
–
–
–
–
258
–
–
38
(7)
(45)
(150)
–
(9)
8
(151)
722
1
(1)
–
–
–
–
–
–
–
–
–
–
388
258
945
–
–
–
–
–
–
–
–
–
–
–
388
–
–
–
–
–
–
–
–
–
–
–
258
87
–
–
–
40
(7)
120
(145)
–
(11)
9
(147)
918
(4)
4
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
(11)
9
–
(2)
(14)
(76)
1
(1)
38
(7)
(45)
(150)
(11)
–
8
(153)
1,354
(13)
1,578
–
–
–
–
–
–
–
(10)
11
–
1
(12)
87
(4)
4
40
(7)
120
(145)
(10)
–
9
(146)
1,552
214 G4S plc Integrated Report and Accounts 2018
Integrated Report and Accounts 2018 G4S plc 217
PARENT COMPANY STATEMENT OF FINANCIAL POSITION
At 31 December 2018
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
Bank overdraft
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
Note
2018
£m
2017
£m
(e)
(f)
(g)
(k)
(l)
(g)
(h)
(i)
(h)
(k)
(m)
(n)
(o)
3
3,101
7
75
96
3,282
956
1
957
4,239
(1)
(464)
(2)
(1,982)
(2,449)
(148)
(288)
(436)
(2,885)
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)
1,354
1,552
388
258
722
(14)
1,354
388
258
918
(12)
1,552
1. The loss for the financial year was £76m (2017: profit of £87m).
The parent company financial statements on pages 217 to 226 were approved by the board of directors and authorised for issue on 12
March 2019.
They were signed on its behalf by:
ASHLEY ALMANZA
Director
TIM WELLER
Director
218 G4S plc Integrated Report and Accounts 2018
Integrated Report and Accounts 2018 G4S plc 215
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 228. 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 including the new standards adopted, 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 144 to 182 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 30 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(i) 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.
216 G4S plc Integrated Report and Accounts 2018
Integrated Report and Accounts 2018 G4S plc 219
NOTES TO THE PARENT COMPANY FINANCIAL STATEMENTS CONTINUED
(c) Significant accounting policies continued
Share-based payments
The company issues equity-settled share-based payments to certain employees. The fair value of equity settled share-based payments is determined
at the date of grant and is either expensed in income statement if it relates to employees of the company or capitalised as an investment in the
relevant subsidiary if it relates to the employees of a subsidiary company, with a corresponding increase in equity, and amortised on a straight-line
basis over the vesting period, based on the company’s estimate of the shares that will eventually vest. The amount expensed or capitalised is
adjusted over the vesting period for changes in the estimate of the number of shares that will eventually vest, save for changes resulting from any
market-related performance conditions.
The company also issues cash-settled share-based payments to certain employees, which are recognised as a liability at fair value at the date of
grant. The value of the liability is re-measured at each reporting date and at the date on which the liability is settled. The fair value of cash settled
share-based payments is expensed in the income statement if it relates to employees of the company and capitalised as an investment in the
relevant subsidiary if it relates to employees of a subsidiary company.
Financial guarantees
The company enters into financial guarantee contracts to guarantee the indebtedness of other companies within the Group. The company
considers these to be insurance arrangements and accounts for them as such. The company therefore treats such contracts as a contingent liability
unless and until such time as it becomes probable that the company will be required to make a payment under the guarantee. The contingent
liabilities are disclosed in note (t).
(d) Adoption of new and revised accounting standards and interpretations
The company has applied IFRS 15 – Revenue from Contracts with Customers and IFRS 9 – Financial Instruments for the first time in the year ended
31 December 2018.
IFRS 15 – Revenue from Contracts with Customers
The company has adopted IFRS 15 – Revenue from Contracts with Customers with effect from 1 January 2018 and has prepared its financial
statements in accordance with the requirements of this new standard. The company has chosen to apply the standard fully retrospectively and has
restated comparatives where appropriate.
The company derives its revenue principally from its group companies as license or royalty fees by providing them intellectual property rights. The
license or royalty fees is determined based on pre-defined terms as per the terms of the contract.
The impact of adopting IFRS 15 on the company’s financial position as at 31 December 2017 and as at 1 January 2017 was £nil.
IFRS 9 – Financial Instruments
The company has adopted IFRS 9 – Financial Instruments with effect from 1 January 2018, and has prepared its financial statements in accordance
with the requirements of this new standard.
The new standard is applicable to the classification, measurement, impairment and re-categorisation of financial assets and liabilities. It also
introduces a new hedge accounting model.
There has been no material change to the company's statement of other comprehensive income, statement of changes in equity or statement of
financial position on adoption. The company has no financial liabilities held at fair value other than derivatives. The introduction of an expected-loss
impairment model has had no material effect given the general quality and short-term nature of the company's trade receivables. There has been
no re-categorisation of assets on adoption of the new standard and the company's existing hedging relationships have been assessed as compliant
with the new requirements following a review of the existing hedging arrangements.
Hedge accounting
The company has adopted the new general hedge accounting model in IFRS 9. This requires the company to ensure that hedge accounting
relationships are aligned with its risk management objectives and strategy, and to apply a more qualitative and forward-looking approach to
assessing hedge effectiveness. Following a review of the company’s hedging arrangements, the company has determined that its existing hedges are
compliant with the new requirements. In accordance with the accounting policy, the company has elected to present separately the cost of hedging
reserve in equity.
Transition
Changes in accounting policies resulting from the adoption of IFRS 9 have been applied retrospectively. Other than described above, the company
has not made any voluntary elections on adoption.
220 G4S plc Integrated Report and Accounts 2018
Integrated Report and Accounts 2018 G4S plc 217
(e) Intangible assets
Cost
At 1 January 2018
At 31 December 2018
Accumulated amortisation
At 1 January 2018
Amortisation charge
At 31 December 2018
Carrying amount
At 31 December 2017
At 31 December 2018
(f) Investments in subsidiaries
Subsidiary undertakings
Shares at net book value:
At 1 January
Additions
Contribution through share-based payments
Disposal
At 31 December
2018
£m
3,098
1,479
3
(1,479)
3,101
As part of an internal reorganisation, the company has transferred its 100% investment in one of its wholly owned subsidiaries to another
subsidiary in exchange for new shares issued at cost with no profit and loss arising as a result of the transaction.
Full details of all investments held by the parent company are disclosed in note 42 to the consolidated financial statements. There were no
impairment charges recorded in respect of the company’s investments in subsidiaries during the current or prior years.
(g) Trade and other receivables
Within current assets
Amounts owed by Group undertakings
Other receivables
Derivative financial instruments at fair value (note (j))
Total trade and other receivables within current assets
Within non-current assets
Derivative financial instruments at fair value (note (j))
Total trade and other receivables within non-current assets
2018
£m
950
5
1
956
7
7
Amounts owed by Group undertakings are unsecured, interest-free or interest-bearing based on market rates, and repayable on demand.
Software
£m
12
12
(8)
(1)
(9)
4
3
2017
£m
3,045
46
7
–
3,098
2017
£m
1,341
3
14
1,358
11
11
218 G4S plc Integrated Report and Accounts 2018
Integrated Report and Accounts 2018 G4S plc 221
NOTES TO THE PARENT COMPANY FINANCIAL STATEMENTS CONTINUED
(h) Loan notes (unsecured)
The loan notes are repayable as follows:
Within one year
In the second year
In the third to fifth years inclusive
Total loan notes
2018
£m
464
59
89
612
2017
£m
210
461
142
813
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, US$145m of these notes
matured and were repaid on 1 March 2019, and the remaining notes mature in 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, US$224m and £44m matured and were repaid on 15 July 2018. The remaining notes mature in July 2020 (US$75m).
The company issued its inaugural public note of £350m using its European Medium Term Note Programme on 13 May 2009. The note matures in
May 2019.
All loan notes are stated at amortised cost. The loan notes issued in March 2007 are designated in a fair value hedge relationship and their carrying
value includes a fair value adjustment in relation to the hedged interest rate risk. Derivatives relating to the loan notes, described in note (j), have a
fair value loss in the year of £5m (2017: £11m). The management of currency risk and interest rate risk is also described in note (j).
Together with G4S International Finance plc, the company amended the available revolving credit facility in August 2018, reducing it from £1bn to
£750m while extending the maturity for a further one and a half years to August 2023. As at 31 December 2018 there were no drawings from this
facility. In addition, a £300m bridge facility has also been arranged in January 2019 for 1 year by the company and G4S International Finance plc.
(i) Trade and other payables
Within current liabilities:
Amounts owed to Group undertakings
Other taxation and social security costs
Accruals
Other payables
Total trade and other payables
2018
£m
1,953
2
23
4
1,982
2017
£m
1,927
2
30
5
1,964
Amounts owed to Group undertakings are unsecured, interest-free or interest-bearing based on market rates, and repayable on demand.
222 G4S plc Integrated Report and Accounts 2018
Integrated Report and Accounts 2018 G4S plc 219
(j) Derivative financial instruments
The carrying values of derivative financial instruments at the reporting date are presented below:
Cross currency swaps designated as cash flow hedges
Interest rate swaps designated as fair value hedges
Total
Less: maturity within 12 months:
Cross currency swaps designated as cash flow hedges
Interest rate swaps designated as fair value hedges
Included within current assets
Maturing after 12 months
2018
Assets
£m
–
8
8
–
1
1
7
2017
Assets
£m
12
13
25
12
2
14
11
The mark-to-market valuation of the derivatives has decreased by £17m (2017: decreased by £15m), partly due to derivatives maturing during the
year. The gain/(loss) recognised in respect of movements in the fair value of the derivatives is analysed below:
Cross currency swaps designated as cash flow hedges
Interest rate swaps designated as fair value hedges
2018
Income
statement
£m
1
(5)
(4)
2017
Income
statement
£m
–
(11)
(11)
2018
Other
Comprehensive
Income
£m
–
–
–
2017
Other
Comprehensive
Income
£m
(4)
–
(4)
Derivative financial instruments are stated at fair value, measured using techniques consistent with Level 2 of the valuation hierarchy as explained in
note 3(g) to the consolidated financial statements. The fair values are calculated using discounted cash flow models. The relevant currency yield
curve is used to forecast the floating rate cash flows anticipated under the instrument, which are discounted back to the balance sheet date.
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 overseas net assets by holding loans in foreign currencies. On consolidation, translation adjustments arising on the translation of foreign
currency loans are recognised in equity to match translation adjustments on foreign currency equity investments as they qualify as net investment
hedges. However, 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.
The company uses cross currency interest rate swaps to manage part of the foreign currency risk associated with non functional currency debt. The
effective portion of changes in the fair value of derivatives that are designated and qualify as cash flow hedges is recognised in the cash flow hedge
reserve within equity. The ineffective portion of movements in the fair value of hedging instruments is recognised immediately in the consolidated
income statement.
There were no cross-currency interest rate swaps outstanding as at 31 December 2018 (2017: £12m).
Cost of Hedging
Currency basis is considered an unavoidable ‘cost’ of the derivatives that the company uses in cash flow hedges. Currency basis spread is an
element that is only present in the hedging instrument, but not in a hedged item that is a single currency exposure. As such, when designating the
foreign currency transactions, the Group has excluded the currency basis spread. The change in fair market value which relates to currency basis
spread is recognised in OCI in a separate component of equity; ‘cost of hedging reserve’.
The balance held in this reserve was nil (2017: nil).
220 G4S plc Integrated Report and Accounts 2018
Integrated Report and Accounts 2018 G4S plc 223
NOTES TO THE PARENT COMPANY FINANCIAL STATEMENTS CONTINUED
(j) Derivative financial instruments continued
Interest rate risk and interest rate swaps
Borrowings issued at fixed rates expose the company to fair value interest rate risk, which the company manages within policy limits approved by
the directors. When fixed/floating interest rate debt in the preferred mix is unavailable directly from investors, interest rate swaps are utilised to
create the desired blend in accordance with Group Treasury policy which is to maintain a fixed percentage of debt within the range of 25% to 75%.
The quantity of interest rate swaps outstanding in the company is expected to continue to decline as treasury activity is increasingly conducted by
G4S International Finance plc.
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.
(k) 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 31 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:
2018
At 1 January 2018
Amounts recognised in income
Current service cost (in cost of sales)
Past service cost – equalisation of benefits (in specific items)
Interest on obligations and assets (in finance costs)
Administration costs paid from plan assets (in administration expenses)
Total amounts recognised in income
Re-measurements
Actuarial gain – change in financial assumptions
Actuarial gain – change in demographic assumptions
Actuarial loss – experience
Return on assets
Re-measurement effects recognised in other comprehensive income
Cash
Employer contributions
Benefits paid from plan assets
Net cash
At 31 December 20181
1. Retirement benefit surplus £75m and retirement benefit obligation £288m.
Obligation
£m
(2,595)
Assets
£m
2,345
Deficit
£m
(250)
(4)
(35)
(65)
(1)
(105)
130
56
(26)
–
160
–
108
108
–
–
60
–
60
–
–
–
(122)
(122)
44
(108)
(64)
(4)
(35)
(5)
(1)
(45)
130
56
(26)
(122)
38
44
–
44
(2,432)
2,219
(213)
224 G4S plc Integrated Report and Accounts 2018
Integrated Report and Accounts 2018 G4S plc 221
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 expenses)
Total amounts recognised in income
Re-measurements
Actuarial gain – change in financial assumptions
Actuarial loss – change in demographic assumptions
Actuarial gain – experience
Return on assets
Re-measurement effects recognised in other comprehensive income
Cash
Employer contributions
Benefits paid from plan assets
Net cash
At 31 December 20171
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)
1. Retirement benefit surplus £80m and retirement benefit obligation £330m.
Contributions in 2018 included £41m (2017: £40m) of additional contributions in respect of the deficit in the UK scheme.
(l) Deferred tax assets
The reconciliation of deferred tax assets is as follows:
At 1 January 2018
Credit/(charge) to the income statement
Charge to equity
At 31 December 2018
At 1 January 2017
Credit/(charge) to the income statement
(Charge)/credit to equity
Charge to equity – change in tax rate
At 31 December 2017
Intangible
assets
£m
1
–
–
1
Retirement
benefit
obligation
£m
44
–
(7)
37
Share-based
payments
£m
2
–
–
2
Other
temporary
differences
£m
3
8
–
11
Tax losses
£m
49
(4)
–
45
1
–
–
–
1
57
(6)
(8)
1
44
2
–
–
–
2
58
(9)
–
–
49
–
2
1
–
3
Total
£m
99
4
(7)
96
118
(13)
(7)
1
99
At 31 December 2018, the company had unutilised tax losses of approximately £250m (2017: £271m) potentially available for offset against future
profits. A deferred tax asset of £43m (2017: £49m) has been recognised in respect of these unutilised tax losses based on expected/forecast
profitability from approved budgets and business plans. The recognition of deferred tax assets on tax losses is predicated on the projected
generation of income in the company which should result in the utilisation of the available tax losses within a foreseeable period. This income
stream is driven by the current and future global results of the Group in line with business plans.
In addition, the company has estimated capital losses of approximately £2.7bn (2017: £2.6bn) of which £139m (2017: £15m) have been agreed
with HMRC. In 2018 the company has recognised a deferred tax asset of £2m (2017: £nil) in relation to capital losses on the basis of future
planned transactions which would result in a capital gain.
222 G4S plc Integrated Report and Accounts 2018
Integrated Report and Accounts 2018 G4S plc 225
NOTES TO THE PARENT COMPANY FINANCIAL STATEMENTS CONTINUED
(m) Share capital
Disclosures about the share capital of the company have been included in note 34 to the consolidated financial statements.
(n) Retained earnings
Included in the company’s retained earnings are £684m (2017: £885m) of distributable profits.
(o) Reserve for own shares
Disclosures about the reserve for own shares of the company have been included in note 35 to the consolidated financial statements.
(p) Auditor’s remuneration
Fees payable to PricewaterhouseCoopers LLP for the audit of the company’s annual financial statements have been disclosed in note 10 to the
consolidated financial statements.
(q) Staff costs and employees
The average monthly number of employees, including executive directors was:
Average number of employees (corporate)
The aggregate remuneration of employees, including executive directors, employed by the Company comprised:
Wages and salaries
Social security costs
Employee benefits
Total staff costs
2018
Number
16
2017
Number
19
2018
£m
6
1
5
12
2017
£m
7
1
6
14
Information about the directors’ remuneration, long-term incentive plans, pension contributions and entitlements is set out in the Directors’
Remuneration Report on pages 105 to 127.
(r) Share-based payments
The company has both equity-settled and cash-settled share-based payment schemes in place, being the conditional allocations of G4S plc shares.
An Employee Benefit Trust established by the Group holds shares to satisfy the vesting of conditional allocation awards. Share-based payments
disclosures relevant to the company are presented within note 38 to the consolidated financial statements.
(s) Related-party transactions
Certain disclosures relevant to the company are presented within note 39 to the consolidated financial statements. Company transactions with
Group undertakings primarily consist of royalty charges, central service charges and loan transactions.
(t) Contingent liabilities
To help secure cost-effective finance facilities for its subsidiaries, the company issues guarantees to some of the Group’s finance providers. At
31 December 2018 guarantees totalling £540m (2017: £466m) were in place in support of such facilities.
The company also guarantees the debt obligations of certain subsidiaries. At 31 December 2018 contingent liabilities of £1,393m (2017: £1,333m)
were outstanding in support of such debt obligations.
(u) Dividends
Amounts recognised as distributions to equity holders of the company in the year have been disclosed in note 14 to the consolidated financial
statements.
226 G4S plc Integrated Report and Accounts 2018
Integrated Report and Accounts 2018 G4S plc 223
GROUP FINANCIAL RECORD
GROUP FINANCIAL
RECORD
Revenue* (£bn)
Adjusted PBITA* (£m)
Operating cash flow* (£m)
8
7
6
5
4
3
2
1
0
7.2
7.3
7.0
6.4
6.6
500
400
300
200
100
0
474
474
444
395
376
611
516
453
445
357
700
600
500
400
300
200
100
0
14
15
16
17
18
14
15
16
17
18
14
15
16
17
18
£7.3 billion
Revenue in 2018
£474 million
Adjusted PBITA defined as profit before
interest, tax and amortisation and
excluding specific and other separately
disclosed items, in 2018
£453 million
Operating cash flow in 2018
Dividend (pence per share)
Employees (‘000)
10
8
6
4
2
0
9.24
9.41
9.41
9.70
9.70
623
610
585
570
546
700
600
500
400
300
200
100
0
14
15
16
17
18
14
15
16
17
18
9.70p
Total dividend per share for 2018
546,000
(including joint ventures and businesses
held for sale or closure)
* Underlying revenue, Adjusted PBITA and operating cash flow are Alternative Performance Measures (APMs) as described on pages 41 and 42 and exclude results from disposed
businesses, onerous contracts and specific and other separately disclosed items. A reconciliation between underlying results and statutory results is provided on page 50.
Integrated Report and Accounts 2018 G4S plc 227
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 – 12 October 2018
Final payable – 14 June 2019
Annual General Meeting
16 May 2019
Corporate addresses
Registered office
5th Floor
Southside
105 Victoria Street
London
SW1E 6QT
Telephone +44 (0)207 963 3100
Registered number
4992207
Legal Entity Identifier code
549300L3KWKK8X35QR12
Auditor
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
G4S website
g4s.com
228 G4S plc Integrated Report and Accounts 2018
GENERAL SHAREHOLDER INFORMATION
Registrars and transfer office
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)
Email: enquiries@linkgroup.co.uk
Secure shareholder portal: signalshares.com
Please note that beneficial 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.
Buy and sell shares
Link Asset Services provide a service to buy
and sell shares, there is no need to pre-register
and there are no complicated application
forms to fill in.
For further information on this service,
or to buy and sell shares visit linksharedeal.com
or call 0371 664 0445.
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