TIDMGFS
13 April 2017
G4S plc
(the "Company")
Integrated Report and Accounts and Notice of Annual General Meeting
Further to the preliminary announcement of its results for the year
ended 31 December 2016 which it made on 8 March 2017, G4S plc, the
global, integrated security solutions provider, announces that it has
published its 2016 Integrated Report and Accounts for the same period.
The full Integrated Report and Accounts has been posted to shareholders
who have elected to receive printed copies, together with the Notice of
the Company's Annual General Meeting which will be held on Thursday, 25
May 2017 at 2.00 pm in The Orchard Suite at the Holiday Inn, Gibson Road,
Sutton, Surrey, SM1 2RF, UK. A proxy form for the Company's Annual
General Meeting will be sent to shareholders other than those who have
elected to receive shareholder information via electronic communication.
The 2016 Integrated Report and Accounts and the Notice of Meeting with
the explanatory notes accompanying it have been submitted to, and will
be available from, the National Storage Mechanism.
A condensed set of the Company's financial statements and extracts of
the management report were included in the Company's preliminary final
results announcement.
That information, together with the Appendix to this announcement, which
contains additional information extracted from the 2016 Integrated
Report and Accounts for the year ended 31 December 2016, constitutes the
material required for the purposes of compliance with the Transparency
Rules and should be read together with the preliminary final results
announcement, which is available at www.g4s.com/en/Investors.
This announcement should be read in conjunction with, and is not a
substitute for, reading the full 2016 Integrated Report and Accounts.
Together these constitute the information required by DTR 6.3.5, which
must be communicated in unedited full text, through a Regulatory
Information Service.
References in this announcement to the Company's website are intended to
refer only to the specific documents mentioned herein and not to other
information available on that website.
Page and note references in the text below refer to page numbers and
notes in the 2016 Integrated Report and Accounts.
APPIX
The group's principal risks and uncertainties:
A description of the principal risks and uncertainties that the Company
faces is extracted from pages 52 to 55 of the 2016 Integrated Report and
Accounts.
HEALTH AND SAFETY (H&S)
Risk description
The provision of security services to protect valuable assets, often in
hostile or dangerous circumstances, presents health and safety
challenges. The business operates a large vehicle fleet in a number of
countries with poor road infrastructures, increasing the risk of road
traffic incidents. In 2016, 47 (2015: 46) employees lost their lives in
work-related incidents.
Risk mitigation
The protection of our staff, people in our care or custody, and third
parties including the public, is of utmost importance. We believe that
accidents are preventable and that 'zero fatalities' is an appropriate
goal. The Group has mandatory H&S controls which all companies are
required to comply with. These controls cover the core requirements for
businesses' management systems and are supplemented by on-line training
for managers and business leaders. Formal processes, which are
continuously reinforced, are in place to report, investigate, close out
and share the lessons learned from serious incidents. A road safety
policy applies to all businesses, a number of which also run local
programmes on topics such as speed management, GPS tracking and
motorcycle safety. A series of 'Golden Rules' which reflect some of the
most common H&S risks are widely publicised, included in mandatory
training, and failure to adhere to them is linked to our disciplinary
procedures. As part of embedding best practice H&S standards and
behaviour we have completed assessments of H&S practices in high-risk
countries and provided further guidance to mitigate H&S risks. Good
practice and progress in delivering H&S improvements are recognised and
rewarded, while poor practice and insufficient progress lead to close
executive scrutiny, formal performance management processes and
reductions in performance related pay for business leaders as
appropriate.
Mitigation priorities for 2017
We will continue to monitor compliance with the H&S controls through the
annual self-assessment process and through on site reviews from local,
regional and Group teams to check compliance with these controls. We
will enhance the process for reporting H&S performance and introduce the
tracking of high potential incidents with the aim of proactive
prevention of incidents leading to injuries and fatalities.
Having recently developed a number of training programmes aimed at
managers and business leaders, we will focus our attention on the
content of H&S training given to front line employees and make changes
as appropriate to ensure the messages about the importance of health and
safety and responsibilities are consistent at all levels. We will
refresh the 'Golden Rules' to ensure they remain aligned to the key H&S
risks and awareness of them is reinforced. We will continue to provide
guidance and intervene to support selected businesses in delivering
improved health and safety performance.
CULTURE AND VALUES
Risk description
G4S provides security for people, premises and valuable assets.
The Care and Justice services businesses provide services to detainees,
victims of crime, people needing state assistance, and other members of
the public. We operate in many different countries around the world with
a diversity of local and national cultures. Having a strong set of
corporate values that unite the organisation deeply embedded in our
culture, is very important.
If we fail to behave in accordance with the high standards that we set
ourselves there is a risk that we will not deliver on our commitment to
our colleagues, customers and other stakeholders and may fail to comply
with legislation and international standards.
Risk mitigation
The Group has a strong set of corporate values which are embedded in a
range of employment practices including recruitment, induction training,
Group policies and performance contracts. They are communicated to
employees through posters, intranet, values events, training programmes
and other methods across our different markets. Our corporate values are
detailed on page 3. In everything we do, no matter how challenging the
circumstances, we require our people to live these values and to be
prepared to Speak Out if others disregard them. Ethics steering
committees at a Group level and in each region oversee the
whistleblowing investigation process and provide guidance to countries
on ethical matters. In the UK & Ireland we focused on building awareness
of the importance of our corporate values and whistleblowing,
particularly in prisons and other secure care environments. Members of
our Group Executive Committee have undertaken a programme of visits to
these locations to help ensure this is embedded successfully.
Mitigation priorities for 2017
To ensure widespread understanding and awareness of our revised
corporate values, we have recently launched a new communications toolkit
and identified a global network of values ambassadors who are
responsible for communicating the values across all businesses. In
addition, we are embedding the values in our processes for selecting,
hiring, on-boarding, training and development of colleagues around the
world. We are launching a scheme to recognise colleagues who are living
the values and will share best practice case studies across the Group.
This includes a new video for induction training which makes the values
relevant to our day to day activities, a revised competency framework
for managers so that expected behaviours and assessment of their
performance is aligned to the new values, as well as on-line management
training. Every opportunity will be taken to promote Speak Out in these
materials so colleagues can report any concerns with behaviour that
appears contrary to our values.
PEOPLE
Risk description
In a global and diverse security business such as ours, employing over
585,000 people across around 100 countries, there are risks associated
with recruiting, supervising, motivating and training employees on such
a large scale, as well as rewarding appropriately and retaining critical
talent to ensure effective succession in management roles. Screening is
also a particular challenge in some territories which lack supporting
infrastructure from the relevant authorities. While our controls are
robust we still face the risk of a rogue employee not complying with our
values.
Risk mitigation
The Group has mandatory human resources controls which all countries are
required to comply with. These HR core standards were reviewed and
re-launched during the year with appropriate training and support and
are assessed through a control self-assessment process within our GRC
tool. This provides visibility of compliance and monitoring of action
plans to mitigate any non-compliance. In those territories where local
circumstances make it impossible to comply fully with the screening and
vetting elements, we identify alternative measures, approved by Group
human resources, to mitigate the risk as much as possible.
We review in detail the performance and potential of approximately 3,000
managers across the Group to help identify development needs and build
succession plans. We also run a regional leadership programme to nurture
talented individuals early in their careers and develop them into more
senior roles as they move through the organisation.
We monitor staff turnover monthly to ensure that our employee engagement
initiatives are achieving desired results of improved employee loyalty
and retention. During the year voluntary staff turnover reduced by 7.1%,
for more details see page 15.
Mitigation priorities for 2017
We will undertake our fifth global employee engagement survey. The
questions will be aligned to the revised corporate values to help
businesses identify whether our employees believe the company is living
up to them. The results will guide further enhancements to policies and
incentive mechanisms to improve productivity, customer satisfaction,
personal development and engagement. Self-assessments against the HR
core standards are completed annually so progress in closing any gaps
identified in the 2016 assessments and any new ones will be followed up.
MAJOR CONTRACTS
Risk description
The Group has a number of long-term, complex, high-value contracts with
multinational, government or other strategic customers. For such
contracts there are risks to 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 both
detailed legal review and senior management oversight. These are
embedded into our SalesForce opportunity management tool. For our most
significant contracts in the UK, we perform 360deg reviews of all
aspects of contract management and performance. We also perform a
quarterly financial review of the top 25 and low margin contracts in
each region. For our large multinational customers we have account
managers who oversee performance of these contracts across relevant
countries and have regular updates with these customers to ensure we
deliver to contract terms. We believe the improvements made to controls
in this area over the last three years have significantly reduced the
risk of entering into new contracts which will become materially
onerous.
Mitigation priorities for 2017
We will continue to enhance the review and approval process to mitigate
further the risk of poor contracts and ensure lessons learned from
underperforming contracts and those we have turned around lead to better
performance and the identified issues are part of future approvals for
all contracts.
LAWS AND REGULATIONS
Risk description
G4S operates in many jurisdictions globally, with complex and diverse
regulatory frameworks. An additional complexity arises from the
extraterritorial reach of some of the legislation to which the Group is
subject.
Risks include increasing litigation and class actions; bribery and
corruption; obtaining operating licences; complying with local tax
regulations; changes to employment legislation; complying with human
rights legislation; and new or changed restrictions on foreign
ownership. Risk also arises from new or changing regulations which
require modification of our processes and staff training. These can lead
to higher costs from claims and litigation; inability to operate in
certain jurisdictions, either through direct ownership or joint
ventures; loss of management control; damage to our reputation; and loss
of customer confidence.
Risk mitigation
Our policies and procedures clearly set out the requirement for all
local management to comply with local laws and regulations. Group and
regional leadership together with our Ethics Committees at Group and
regional level provide oversight and support compliance with these
policies and procedures to mitigate the risks. Group legal and regional
leadership closely monitor changes in foreign ownership laws and make
appropriate plans to respond. G4S continues to liaise with relevant
governments and authorities to influence positively the regulatory
environments in which we work.
Mitigation priorities for 2017
We will continue through Group and regional leadership to monitor for
changes in laws and regulations and ensure that compliance with them is
maintained in all countries. In addition we will continue to liaise
constructively with governments and relevant authorities.
GEOPOLITICAL
Risk description
We operate in many countries across the world, with wide-ranging
government and political systems, different cultures and varying degrees
of rule of law and compliance with human rights within conflict and
post-conflict zones. The risk factors include political volatility,
revolution, terrorism, military intervention and insurgency. The
geopolitical risks we face impact us in many ways: the health and safety
of our staff and customers; the continued operation of our businesses;
and the ability to secure our assets and recover our profits.
Risk mitigation
We have developed a global process for assessing geopolitical risks of
different countries which determines the types of customers we will
serve and the types of service we will provide. We also have a great
deal of experience of operating in a wide range of difficult
territories. We collaborate with our local partners; conduct early risk
assessments before and during security assignments; have robust
operating procedures; and work closely with our local and global
customers in managing the risks of operating in such environments
including compliance with human rights. Our G4S Risk Management business
has particular expertise in providing secure solutions in very high risk,
low infrastructure environments.
Mitigation priorities for 2017
We will continue to assess and monitor geopolitical risks, including
exposure to potential human rights abuses, across the high risk
countries in which we operate.
INFORMATION SECURITY
Risk description
The customers, staff, suppliers and partners of G4S which entrust their
sensitive and confidential business information into our care rightly
expect that we will take all reasonable steps to protect it. We are at
risk of cyber and physical attack by criminal organisations and
individual hackers which 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 from
system failures, incomplete backup routines, inadequate business
continuity plans and disaster recovery.
Risk mitigation
We have "defence-in-depth" technologies (i.e. multiple layers of
defence) in key systems to protect business information entrusted to us.
We have mandatory policies and best practice guidance for application by
operating businesses across the Group. Our Minimum Information Security
Controls are continually refined and updated in line with our assessment
of threats. Compliance with the controls is measured through
self-assessment and independently audited by group internal audit.
In 2016, G4S migrated successfully all its businesses to one unified
office productivity suite, Google Cloud, covering around 65,000
employees. This further improves our control and security of email and
corporate documents.
Mitigation priorities for 2017
Group IT will refine policies into standards and will continue to
provide direct technical and hardware solutions to improve performance
of IT systems, backup routines and resilience across the world. We will
deploy appropriate IT security controls to ensure that we have the right
levels of monitoring, reporting and protection of our business
information.
CASH LOSSES
Risk description
There are risks in our cash business from external attacks, internal
theft and poor cash reconciliation as we transport and safeguard high
value cash and valuables including international shipments.
We provide a wide range of cash management services including cash
processing, sorting of notes for ATMs, holding funds on behalf of
customers, secure storage, and a range of ATM services. Loss of cash or
valuables could lead to loss of profit, increased cost of insurance and
health and safety considerations for our staff and the public.
Risk mitigation
We have clearly defined standards for reconciliation and operational
cash controls and have developed an e-learning 'academy' for cash
reconciliation and controls to facilitate quick deployment and continued
effective operation of these controls across our cash businesses. Group
and regional teams monitor compliance with the reconciliation and
control standards and support our cash businesses to improve them.
We also have clearly defined standards for physical cash security for
our employees, vehicles and processing centres. The Group cash security
function is responsible for monitoring compliance with these; for
monitoring attacks and other cash losses; and for communicating lessons
learned. Innovative security defence products are in use, cash box
tracking, vehicle protection foam and protective boxes.
Mitigation priorities for 2017
We will continue to drive improvement in cash reconciliation and
physical cash security across our cash businesses through both Group and
regional teams.
GROWTH STRATEGY
Risk description
Our growth strategy is to leverage our expertise to drive innovation in
our core service lines to improve service for our customers and so
increase the value of long-term customer relationships.
There are risks that we will 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 government legislation
changes could impact on our growth potential or force exit from markets
and territories.
Risk mitigation
We have best practice service delivery guidelines for both secure
solutions and cash service lines and are developing a global information
system supporting the end to end order to cash process in our secure
solutions service lines, including finance, human resources and
operational delivery.
Our development of new service offerings, particularly in electronic
security and cash solutions, is focused on those centres of excellence
where we have the strongest capability.
We leverage our global network to offer integrated solutions
internationally. In particular, our global accounts programme supports
and promotes our multinational accounts and focuses selling our more
specialist services such as investigations and secure logistics.
Our 'outbound' programme works with Chinese and North American
multinational customers to provide services to them on a global scale.
We are able to mitigate local reduction in growth opportunities through
the diversity of industries and markets we serve and by leveraging our
portfolio of products to offer alternative cost efficient solutions.
We also have a consistent approach across all countries to assess
customer satisfaction and ensure we deliver our service commitments, key
performance indicators and thus improve retention of customers.
Mitigation priorities for 2017
We will continue to invest in our business development capabilities in
both people and systems. The results of understanding our customers'
levels of satisfaction in how we deliver our services will be used to
improve further customer satisfaction and guide how we deliver
integrated solutions to existing and potential customers across all
businesses.
The global information system is planned to be piloted in our UK &
Ireland businesses, and then rolled out globally over a number of years.
Further enhancements will be made to our business resilience mechanisms
to enhance business continuity and thus mitigate the risk of
interruption of service to customers.
Related party transactions (note 40 to the consolidated financial
statements)
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 GBP49m
(2015: GBP48m). Amounts due from related parties include GBP8m (2015:
GBP5m) from joint ventures. There are no amounts due to joint ventures
(2015: GBPnil).
No expense (2015: GBPnil) has been recognised in the year for bad and
doubtful debts 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:
2016 2015
Services/ Services/
sales to sales to
GBPm GBPm
White Horse Education Partnership Limited 3 2
Integrated Accommodation Services plc 54 49
Fazakerley Prison Services Limited 34 34
Onley Prison Services Limited 16 15
ECD Cookham Wood Limited - 3
ECD Onley Limited - 11
UK Court Services (Manchester) Limited 2 2
East London Lift Company Limited 1 1
Total 110 117
The Group had outstanding balances of GBP12m due from these entities as
at 31 December 2016 (2015: GBP10m).
Transactions with post-employment benefit schemes
Details of transactions with the Group's post-employment benefit schemes
are provided in note 32. Unpaid contributions owed to schemes amounted
to GBP0.5m at 31 December 2016 (2015: GBP0.4m).
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 78 to 98.
2016 2015
GBP GBP
Short-term employee benefits 11,463,651 11,637,540
Post-employment benefits 74,390 134,201
Other long-term benefits 28,728 63,938
Termination benefits 305,159 -
Share-based payment 6,417,657 4,922,935
Total 18,289,585 16,758,614
Statement of directors' responsibilities:
The following responsibility statement is repeated here solely for the
purpose of complying with Disclosure and Transparency Rule 6.3.5. This
statement relates to and is extracted from page 102 of the Company's
2016 Integrated Report and Accounts. Responsibility is for the full
2016 Integrated Report and Accounts, not the extracted information
presented in this announcement and the preliminary final results
announcement.
"The directors are responsible for preparing the annual report and the
Group and parent company financial statements in accordance with
applicable law and regulations.
Company law requires the directors to prepare group and parent company
financial statements for each financial year. Under that law they are
required to prepare the group financial statements in accordance with
IFRSs as adopted by the EU and applicable law and have elected to
prepare the parent company financial statements in accordance with UK
Accounting Standards.
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;
-- for the parent company financial statements, state whether applicable UK
Accounting Standards have been followed, subject to any material
departures disclosed and explained in the parent company financial
statements; and
-- prepare the financial statements on the going concern basis unless it is
inappropriate to presume that the Group and the parent company will
continue in business.
The directors are responsible for keeping adequate accounting records
that are sufficient to show and explain the parent company's
transactions and disclose with reasonable accuracy at any time the
financial position of the parent company and enable them to ensure that
its financial statements comply with the Companies Act 2006. They have
general responsibility for taking such steps as are reasonably open to
them to safeguard the assets of the Group and to prevent and detect
fraud and other irregularities.
Under applicable law and regulations, the directors are also responsible
for preparing a strategic report, Directors' report, Directors'
remuneration report and Corporate governance statement that comply with
that law and those regulations. The directors are responsible for the
maintenance and integrity of the corporate and 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 58 and 59
of this annual report, confirm that, to the best of his or her
knowledge:
-- the financial statements in this annual report 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
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 55 includes
information on the Group structure, the performance of the business and
the principal risks and uncertainties it faces. The financial statements
on pages 110 to 185 include information on the Group and the Company's
financial results, financial outlook, cash flow and net debt and balance
sheet positions. Notes 22, 26, 27, 30 and 31 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 110 to 176 contain information on the performance of the Group,
its financial position, cash flows, net debt position and borrowing
facilities. Further information, including financial risk management
policies, exposures to market and credit risk and hedging activities, is
given in note 31 to the 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 55 of the annual report
and accounts.
The directors consider that the annual report and accounts, taken as a
whole, is fair, balanced and understandable and provides the information
necessary for shareholders to assess the Company's performance, 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
28 March 2017 and signed on its behalf by Tim Weller, chief financial
officer."
Celine Barroche
Company Secretary
G4S plc
LEI 549300L3KWKK8X35QR12
Notes to Editors:
G4S is the leading global, integrated security company, specialising in
the provision of security services and solutions to customers. Our
mission is to create material, sustainable value for our customers and
shareholders by being the supply partner of choice in all of our
markets.
G4S is quoted on the London Stock Exchange and has a secondary stock
exchange listing in Copenhagen. G4S is active in around 95 countries
and has over 585,000 employees. For more information on G4S, visit
www.g4s.com.
This announcement is distributed by Nasdaq Corporate Solutions on behalf
of Nasdaq Corporate Solutions clients.
The issuer of this announcement warrants that they are solely
responsible for the content, accuracy and originality of the information
contained therein.
Source: G4S plc UK DK via Globenewswire
http://www.g4s.com/
(END) Dow Jones Newswires
April 13, 2017 04:01 ET (08:01 GMT)
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