Further to the preliminary announcement of its results for the year ended 31 December 2011 which it made on 13 March 2012, G4S plc, the international security solutions provider, announces that it has published its Annual Report and Accounts for the same period.

The full Annual Report and Accounts will be posted to shareholders in due course. The document includes the notice of the company’s Annual General Meeting which will be held on Thursday 7 June 2012 at The London Stock Exchange, 10 Paternoster Square, London EC4M 7LS at 2.00 pm. A proxy form for the company’s Annual General Meeting will accompany annual reports posted to shareholders.

The Annual report and Accounts, including the notice of meeting and explanatory notes accompanying it, has been submitted to, and will be available from, the National Storage Mechanism.

The Annual Report and Accounts and the Notice of Annual General Meeting are now available to view or download in a pdf format from the company’s website: www.g4s.com

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 which has been extracted from the Annual Report and Accounts for the year ended 31 December 2011, 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 can be downloaded from the company’s website.

This announcement should be read in conjunction with and is not a substitute for reading the full Annual Report and Accounts. Together these constitute the information required by DTR 6.3.5, which is required to 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.

APPENDIX

The group’s principal risks and uncertainties:

A description of the principal risks and uncertainties that the company faces is extracted from pages 42 and 43 of the 2011 Annual Report and Accounts.

Group principal risks

Our risk assessment and management process

The group operates around 160 businesses spread over more than 125 countries and across a range of product areas. Most of the risks identified below are market specific and so the diversity of the group’s operations means any particular issue should have a limited impact.

The group operates a management structure that is appropriate to the scale and breadth of its activities, and the internal audit department operates under a wide remit to ensure strict adherence to group authorisation procedures and control standards as outlined here.

Price competition

Risk

The security industry comprises a number of very competitive markets. In particular, manned security markets can be fragmented with relatively low economic barriers to entry and the group competes with a wide variety of operators of varying sizes.

KPI potentially impacted

Actions taken by the group’s competitors may place pressure upon its pricing, margins and profitability.

Mitigation

• Group management continually monitors competitor activity to ensure that the group can react quickly to any competitor actions which would directly affect the group’s results
• All business plans and strategic planning includes competitor and SWOT analysis and the pricing strategy for contracts is managed through business unit and regional price approval levels - significant price reductions require group capex committee approval

Case study – Customer relationship management
During 2011 the group implemented a new customer relationship management system across the organisation. Combined with the group’s sales leadership programme and account management, this should help the group win larger contracts more often and keep and develop existing customers.

Major changes in market dynamics

Risk

Such changes in dynamics could include new technologies, government legislation, political or economic volatility or customer consolidation and could, particularly if rapid or unpredictable, impact the group’s revenues and profitability. Security can be a high profile industry. There is a wide and ever-changing variety of regulations applicable to the group’s businesses across the world, with a recent development being an increase of restriction of foreign ownership in some countries.

KPI potentially impacted

Failure, or an inability, to comply with such regulations may adversely affect the group’s revenues and profitability.

Mitigation 

• The group performs strategic and business planning at group, division, region and business unit level to ensure that specific local regulation requirements are met
• Monthly business unit trading reviews ensure that market changes are identified quickly and actions taken to maintain performance and ensure that business objectives continue to be achieved
• The group also monitors local markets and engages with governments around the world to ensure adherence to regulatory requirements, to identify any restrictions that could adversely impact the group’s activities and take appropriate actions

Case study – Reputation management

During 2011, the group undertook a number of initiatives to protect its reputation as the world’s leading security group:

It formed a business ethics steering group to develop a strategy to ensure compliance with the requirements of the UK Bribery Act and similar legislation.

Actively participated in the development of the International Code of Conduct for Private Security Providers of which it is a founder signatory and which sets out principles for security operations in so-called “complex environments” – areas experiencing or recovering from disaster or unrest and where governments or the rule of law are weak.

This code covers recruitment, vetting and training of staff, use of firearms, health and safety reporting and complaints handling. During 2011, G4S worked with companies, governments and NGOs to develop an oversight mechanism for the code and how appropriate action will be taken against a company if it is not compliant.

Cash losses

Risk

The group is responsible for the cash held on behalf of its customers. Increases in the value of cash lost through criminal attack may increase the costs of the group’s insurance.

KPI potentially impacted

Were there to be failures in the control and reconciliation processes surrounding customer cash these could also adversely affect the group’s profitability.

Mitigation

• The group has formal systems and policies in place documenting physical security procedures and directives and adheres to a security framework to help reduce the risk of cash losses 
• The group also operates a captive insurance business unit to mitigate against the financial risk of losses and attacks
• All transactions are subject to strict authorisation limits and regular reconciliations of cash balances are performed for both cash in ATMs and cash held on customers’ behalf
• In addition there is regular reporting of any cash losses/attacks and audits of security are performed in branches
• The group has in place regional cash reconciliation managers to increase the focus on cash reconciliations globally

Case study - G4S UK cash solutions
Through investment in technology and ongoing development of operational procedures, the number of attacks in the UK have roughly halved over the last two years. All changes have been made with the support and backing of the GMB Union.

Onerous contractual obligations

Risk

The group could commit to sales contracts specifying disadvantageous pricing mechanisms, unachievable service levels or excessive liability,

KPI potentially impacted

It could impact its margins and profitability.

Mitigation

• Any new contracts entered into are subject to a defined approval process
• Standard contracts are used where practicable
• Non-standard contracts which expose the group to material risk (e.g. unlimited liability) are subject to risk assessment and depending on the level of risk exposure are referred for regional or group legal department review

Poor operational service delivery and crisis management

Risk

Failure to meet the operational requirements of its customers and/or fail to respond to a crisis.

KPI potentially impacted

It could significantly impact the group’s reputation, contract retention and growth.

Mitigation

• Group-wide operational procedures and standards for crisis management and communication are in place and adherence to them is tested in all business units
• There is also a robust supervision structure which allows management to monitor the progress and delivery of the group’s contracts and customer relationships
• The Group crisis communications process is reviewed regularly and an updated process was introduced in 2011

Financing

Risk

If, due to adverse financial market conditions, insufficient or only very costly financial funding were available, the group might not be in a position to implement its strategy or invest in acquisitions or capital expenditure. This includes possible bank bankruptcy, loss of headroom particularly from movement of exchange rates, unavailability of bank, bond or other sources of financing and downgrading of the G4S credit rating.

KPI potentially impacted

These could adversely impact G4S revenue growth and profitability.

Mitigation

• The group treasury department monitors and follows policies to mitigate against liquidity, refinancing and currency/exchange rate risks - Refer to note 33 to the group accounts for more details
• The group’s historical main source of funding has been a revolving bank facility of £1.1bn which was renewed in March 2011 until 2016.
• The group has sought to diversify its sources of finance by issuing a number of private placement bonds in the US and more recently a public bond in the UK
• These have spread out the refinancing requirements over the next ten years to ensure the group has access to sufficient funds to meet its business and strategic plans

IT

Risk

Cyber attacks and incidents on G4S and client systems and services, especially around critical national infrastructure

KPI potentially impacted

Could result in financial loss, breach of contract, legal action and reputational damage.

Mitigation

• The group employs IT specialists at all levels and has in place mandatory minimum security controls (relating to 35 specific controls)
• In addition penetration testing of networks and systems is performed regularly to ensure that key systems are robust

Defined benefit pension scheme

A prolonged period of poor asset returns and/or unexpected increases in longevity could require increases in the level of additional cash contributions to defined pension schemes.

KPI potentially impacted

This could constrain the group's ability to invest in acquisitions or capital expenditure adversely affecting its growth and profitability.

Mitigation

• The performance of the group's pension schemes and deficit funding plans are reviewed regularly by both the group and the trustees of the schemes taking actuarial and investment advice as necessary

Case study – Defined benefit pension scheme management

The UK scheme was closed to future accrual from 5 July 2011 and this should help to reduce future volatility in the deficit.

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 71 of the 2011 Annual Report and Accounts. Responsibility is for the full 2011 Annual 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 and applicable law (UK Generally Accepted Accounting Practice).

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 judgements 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;
• Or 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 Directors' Report, Directors' Remuneration Report and Corporate Governance Statement that complies 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.

Each of the directors, the names of whom are set out on pages 49 to 51 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 profit of the company and the group taken as a whole. 

The directors’ report, including the Business Review on pages 8 to 43, 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 statement of directors’ responsibilities was approved by a duly authorised committee of the board of directors on 12 March 2012 and signed on its behalf by Trevor Dighton, Chief financial officer.”

Peter David
Company Secretary