G4S Annual Report and Accounts 2011

Overview Strategic review Performance
Notes to the consolidated financial statements continued
25 Trade and other receivables
Within current assets
Trade debtors 1,287 1,228
Allowance for doubtful debts (67) (73)
Amounts owed by associated undertakings 2 2
Other debtors (including tax receivable) 180 155
Prepayments and accrued income 103 105
Amounts due from construction contract customers (see note 26) 28 32
Derivative financial instruments at fair value (see note 32) 14 11
Total trade and other receivables included within current assets 1,547 1,460
2011
£m
2010
£m
Within non-current assets
Derivative financial instruments at fair value (see note 32) 106 85
Other debtors 37 17
Amounts receivable under service concession arrangements 19 36
Total trade and other receivables included within non-current assets 162 138
Credit risk on trade receivables
There is limited concentration of credit risk with respect to trade receivables, as the group’s customers are both large in number and dispersed
geographically in over 120 countries. 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.
There is no group-wide rate of provision, and provision is made for debts that are past due according to local conditions and past default experience.
The movement in the allowance for doubtful debts is as follows:
At 1 January (73) (66)
Amounts written off during the year 13 5
Increase in allowance (7) (12)
At 31 December (67) (73)
2011
£m
2010
£m
Included within trade receivables are trade debtors with a carrying amount of £372m (2010: £393m) which are past due at the reporting date for which
no provision has been made as there has not been a significant change in credit quality and the group believes that the amounts are still recoverable. The
group does not hold any collateral over these balances. The proportion of trade debtors at 31 December 2011 that were overdue for payment was 34%
(2010: 37%). The group-wide average age of all trade debtors at year end was 59 days (2010: 57 days).
The group’s monthly management accounts use the last three months sales of the year to calculate management trade debtor days. Using this calculation
the group-wide average age of trade debtors is 51 days (2010: 49 days at constant exchange rates).
The directors believe the fair value of trade and other receivables, being the present value of future cash flows, approximates to their book value.
Amounts receivable under service concession arrangements
Amounts receivable under service concession arrangements comprise the group’s proportion of amounts receivable in respect of the Private Finance
Initiative (PFI) projects undertaken by the group’s joint ventures. The group’s interests under PFI contracts primarily consist of the design, construction,
financing and management of HM Prison and Young Offenders Institution Parc in Bridgend, South Wales, and Bloemfontein Correctional Contracts (Pty)
for the Government of South Africa. The Bridgend contract commenced in January 1996 and expires in December 2022. The Bloemfontein contract
commenced in July 2001 and ends in June 2026. Both contracts can be terminated by the customer either in the event of a severe failure to comply with
the contract or voluntarily with six months notice (ninety days for the Bloemfontein contract) and the payment of appropriate compensation. The specified
assets remain the property of the customers. The group’s joint ventures have the right to receive payment for the infrastructure and to provide services
using the specified assets during the life of the contracts. There is currently no obligation to acquire or build further assets and any such obligation would
be agreed with the customers as variations to the contracts. The pricing basis is inflation-indexed.
Amounts receivable under service concession arrangements are pledged as security against borrowings of the group.
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G4S plc
Annual Report and Accounts 2011