G4S Annual Report and Accounts 2011

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Overview Strategic review Performance Performance Divisional review continued Cash solutions Case study Driving outsourcing in the UK cash market Understanding and managing cash cycles is one of the group’s core skills. Central banks, commercial banks and retailers outsource their cash management to G4S as the group has the capability and experience to drive substantial efficiencies in the system whilst achieving maximum return for our customers over the longer term. In 15 years, through the expertise and innovation demonstrated by G4S, the UK cash outsourcing market has moved from a purely cash transportation business to a more complex business outsourcing market covering ATM forecasting, replenishment and maintenance and cash centre management. As a result of this more extensive outsourcing, the market is estimated to be double the size of a traditional cash solutions market. Case study G4Si Market growth drivers Retail Cash has existed for five millennia, and remains king in the 21st century. Globally it is the preferred method of payment among consumers. For example, according to the UK Payments Council, cash accounts for the majority of payments in the UK payment markets, with 20.4 billion cash payments last year compared to 16.0 billion made by non-cash methods such as debit cards and direct debit. Almost everybody makes at least some of their day-to-day purchases by cash, and last year, on average, each person in the UK made seven cash payments per week to a total value of around £100. We estimate the average retailer can spend up to 1.7% of turnover managing cash. In the fiercely competitive retail sector where margins are becoming ever tighter and every penny counts, our retail customers continue to look for ways to minimise those costs. Financial institutions With origins in cash handling going back many decades, our UK cash solutions expertise has allowed us to develop long-standing relationships with central and retail banks in more than 70 countries in which we operate our cash management services. Our banking customers want to maximise the efficiency of all their operations, from how hard their cash works for them, to how their buildings and employees are protected. Our banking customers want partners which can operate their cash cycle at maximum efficiency, high productivity, and optimum security, so their money is kept moving around the economy, always available to consumers and not sat in bank deposits incurring central bank interest charges. Other A portion of our cash solutions work is separate from the traditional work that is carried out for financial institutions and retailers. This specialist work will vary from country to country, covering areas such as toll collections, creating wage packets, through to specialist sporting and cultural events. One business that provides a specialised solution is G4S International (G4Si), which meets the global demand for safe, reliable transport of valuable and vulnerable cargo. G4S International (G4Si) is one of the world’s leading transporters of valuable and vulnerable cargo. G4Si ensures safe and reliable transportation across a range of sectors including mining, diamonds and jewellery, finance, pharmaceuticals and government and performed strongly in 2011 with double‐digit organic growth. 36 G4S plc Annual Report and Accounts 2011
Governance Financial statements Shareholder information Total 2011 Turnover £m 2010* 2011 PBITA £m 2010* 2011 Margins % 2010* Organic growth % 2011 Europe 817 835 87 103 10.6% 12.3% –1% North America 106 108 2 4 1.9% 3.7% –1% Developing markets 378 346 48 44 12.7% 12.7% 9% Total cash solutions 1,301 1,289 137 151 10.5% 11.7% 2% Exchange differences – 1 – 1 At actual exchange rates 1,301 1,290 137 152 *At constant exchange rates. Performance The cash solutions business continued to face a sustained period of low interest rates which has continued to result in some service reductions. Overall organic growth was 2%, but margins have declined due to service reductions and lost contracts in the UK. Europe Organic growth in Europe was a decline of 1%, with additional work in Belgium being offset by a decline in the UK. In the UK & Ireland, as a result of the loss of two ATM contracts, the cash solutions business saw revenues decline by 7%. This impacted the second half of 2011 and will continue to impact the first half of 2012. Organic growth and margins should improve in the second half with the start-up of new contracts for financial institutions, Northern Rail, Accor and the M6 Toll, together with a good pipeline of other opportunities. In Ireland, the business benefited from the provision of cash outsourcing for An Post (post office) pension payments in 2011. North America In North America, the business in Canada was impacted negatively by the partial loss of the Bank of Montreal contract. Developing markets Organic growth in Developing markets was good at 9%, but margins were affected by one-off costs relating to the floods in Thailand which reduced our ability to deliver services in the region and a King’s decree in Saudi Arabia awarding an extra month’s salary to employees. A further negative impact was the increased competition and attack losses in South Africa. Excellent growth and strong margins were achieved in Kuwait, Indonesia and Malaysia. CASH360 is now a proven retail cash management solution, with almost 1,000 in-store solutions within retailers in nine countries across Europe, Africa and North America. Major customers which have implemented CASH360 in the last twelve months include TGI Friday’s, Center Parcs, Bofrost and Hema. In Sweden, the cash solutions business was put up for sale and classified as a discontinued business and was sold in February 2012. In Romania, following the termination of the work for the state post office, the cost base has been actively reduced. G4Si, the international valuables transportation business, achieved another strong performance, with double-digit organic growth supported by higher commodity prices. Elsewhere in Continental Europe, organic growth was affected by a reduction in cash transportation and ATM services, but strong growth was achieved in Belgium, where a number of bank contracts have been won, and in Greece helped by increased cash in circulation as consumers hold on to their cash due to economic uncertainty. G4S plc Annual Report and Accounts 2011 37
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G4S Annual Report and Accounts 2011

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