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.
APPENDIX
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 360° 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 £49m (2015: £48m). Amounts due from related parties
include £8m (2015: £5m) from joint ventures. There are no amounts
due to joint ventures (2015: £nil).
No expense (2015: £nil) 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
Services/
sales to
£m |
2015
Services/
sales to
£m |
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 £12m due
from these entities as at 31 December 2016 (2015: £10m).
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 £0.5m at 31 December 2016 (2015: £0.4m).
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
£ |
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
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