G4S Annual Report and Accounts 2011

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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. 102 G4S plc Annual Report and Accounts 2011
Governance Financial statements Shareholder information 26 Construction contracts Contracts in place at the balance sheet date are as follows: Amounts due from contract customers included in trade and other receivables (see note 25) 28 32 Amounts due to contract customers included in trade and other payables (see note 31) (5) (7) Net balances relating to construction contracts 23 25 2011 £m 2010 £m Contract costs incurred plus recognised profits less recognised losses to date 320 212 Less: Progress billings (297) (187) Net balances relating to construction contracts 23 25 At 31 December 2011, advances received from customers for contract work amounted to £5m (2010: £9m). There were no retentions held by customers for contract work at either balance sheet date. All trade and other receivables arising from construction contracts are due for settlement within one year. The directors believe the fair value of amounts due from and to contract customers, being the present value of future cash flows, approximates to their book value. 27 Disposal groups classified as held for sale At 31 December 2011, disposal groups classified as held for sale primarily comprised the assets and liabilities associated with the cash solutions business in Sweden, which was disposed of on 27 February 2012 and the UK Risk Assessment Services business in Afghanistan. At 31 December 2010 there were no disposal groups classified as held for sale. The major classes of assets and liabilities comprising the operations classified as held for sale are as follows: ASSETS Goodwill and acquisition-related intangible assets 6 – Property, plant and equipment and intangible assets other than acquisition-related 10 – Trade and other receivables 17 – Cash and cash equivalents 2 – Total assets classified as held for sale 35 – 2011 £m 2010 £m LIABILITIES Bank overdrafts (12) – Trade and other payables (19) – Current tax liabilities 2 – Total liabilities associated with assets classified as held for sale (29) – Net assets of disposal group 6 – G4S plc Annual Report and Accounts 2011 103
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G4S Annual Report and Accounts 2011

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