Cass Business School 1

CFA Institute Research Challenge

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United Kingdom Cass Business School

Upcoming disposals in 2017-2018

US Youth JusticeE> £400m

G4S engineeringunit to IBME£20-30m

G4S Israel to a PEFeb-Mar’17

A£88m

UK children’sservices

n/d

Source: MergerMarket 2017

Corporate performance (FY 2015)

ROAA 0.6%

ROAE 3.5%

Current ratio 1.46

Net debt/EBITDA 3.46x

Leverage 4.97

Source: G4S Q2 2016 Earnings call, Financial Times 2016

‹ INVESTMENT RECOMMENDATION: We issue a hold recommendationfor G4S with a target price of 243.00p. Our target price is based onthe DCF analysis with a particular focus on the future capitalstructure; taking in consideration debt covenants and target leverage.

‹ Our DDM valuation indicates a target price of 251.64p. However, weconsider DDM market assumptions not appropriate to evaluate G4S.In particular, the company’s steady increase in dividends does notreflect the fundamental cash flows and riskiness of the company.

‹ ORGANIC GROWTH & DISPOSALS: G4S’ organisational strategychanges involving the disposal of non-core businesses and theplanned improvement of core activities should be observed diligentlyby analysts over the coming years. After years of considerable M&Aactivity and with a questionable ability to fully integrate the acquiredcompanies, G4S has changed its strategy; focussing on organicgrowth, with no acquisition deals recorded in the past 12 months asof August 2016. The company has liquidated 26 underperformingbusinesses (out of 63 planned), generating a profit of > £14m. Noneof the businesses were unprofitable. We expect the liquidations tohave a negative impact on the company’s revenue in 2017. On theother hand, we believe G4S’ reduction of presence in the UK isbeneficial in the long term. A recent sale of UK Utility Services for£52m (NOPAT £5.3m) and a planned sale of UK Children's Serviceswill generate the cash required to focus on emerging markets andNorth America: growth areas for the business. Cash proceeds will alsohelp speed up the repayment of its current portion of debt; highleverage being one of our key concerns.

‹ RESTRUCTURING: In 2014 and 2015, G4S invested £73m in businessrestructuring, cost reduction, operational improvement, and in theautomation of business processes. This raised their EBIT margin from4.8% to 5.0% and revenue by 3.2% (YoY) in H1 2016 to £3.5b – apromising figure, however still lagging behind competitors such asSecuritas AB (7% YoY). We expect G4S to achieve the its long termrevenue growth target of 4-6%.

HOLD G4S PLC (LON: GFS) INVESTMENT SUMMARY G4S snapshot (as of H1 2016)

- Expected organic revenue growth of 5% with a 10% growth in emerging markets

- 25 underperforming businesses disposed of

- EUR500m new debt issue in 2016 and £514m (20%) repayment due in 2017

- ND/EBITDA increased from FY14 3.17x to FY15 3.46x; covenants on debt limit ND/EBITDA to3.5x, management targets 2.5x in FY17

- EBIT margin increased from FY14 3.8% to FY15 5.0%

- New contracts (2016): (1) Australia £450m & £1bn for 20 yrs; (2) US £149m

- New management’s clean-up strategy: restructuring, productivity improvement, avoidance ofloss-making contracts

FY 2014A 2015A 2016E 2017E 2018E 2019E 2020E

EPS (£) 0.050 0.086 0.141 0.160 0.180 0.194 0.215

DPS final + interim (£) 0.0896 0.0941 0.0941 0.103 0.108 0.114 0.119

Dividend yield, % 3.68%

P/E trailing 17.25

P/E leading 15.20

Revenue (£m) 6 889 6 863 6 892 7 428 7 750 8 080 8 435Gross profit (£m) 1 350 1 271 1 307 1 428 1 511 1 576 1 670 EBIT (£m) 331 341 425 477 519 558 6307 Net income (£m) 82 28 291 248 279 301 334

Source: LSE 2017, Blomberg as of 07.02.2017, Company data

2

7 Feb 2017

150170190210230250270

pen

ce

1 year – price performance

Market information

Closing price 255.50p

Date of price 06/02/2017

Target price 243.00p

Ticker GFS

Exchange London Stock Exchange

Currency GBX

Market cap. £3964.32m

Shares O/S 1551.594m

52w range 145.00p - 262.40p

Liquidity (daily avg. 30 days)

4 628 928

Float 99.982%

Valuation results

Implied beta 0.78

Adjusted beta 0.85

Intrinsic value (DDM) (over – biased market)

251.4p

Intrinsic value (FCF) 243p

Intrinsic value (multiples) (under – big portion of debt)

230p

‹ G4S IN 2016: The largest security company with a 6% market share,G4S operates in two business segments, secure solutions (85% ofrevenue in FY15) and cash solutions (15%), with plans to outsourcesub-segments of the latter. Its main service, Security and FacilityManagement contributed 58% of the revenue in 2015. We expect itto continue to be the key driver of the business, as G4S has a globalpresence with over 900 subsidiaries worldwide. According to the2016 H1 figures, 82% of revenue was generated outside the UK &Ireland with considerable emerging markets exposure. (appendix 8)The client base of the company is diversified across industriesranging from government institutions (24% revenue), to majorcorporates and industrials (32%). Every customer accounts for lessthan 1.9% of the revenue in FY15 and the total revenue generatedby the top 10 customers accounts for 12.3% of the company'srevenue in FY15. These diversification benefits reduce G4Scounterparty risk exposure. The contract pipeline is looking healthy,with an annual value of £6.3bn (H1 2016). Moreover, contract winvalue was up in 2015 compared with the previous year (£1.3bn vs£1.1bn), which is encouraging.

‹ EMERGING MARKETS GROWTH, EXIT FROM ISRAEL: G4S’ competitiveadvantage is its well-diversified structure both by the location andthe business line with no dependence on one single customer. G4Sactively widens its geographical outreach in developing andemerging countries: in Africa its revenue grew by 7.4% in H1 2016.G4S’ business in Africa is backed by the European External ActionService (EEAS). As a result , they were able to secure 3 contracts,with the latest announced in January 2017. Latin Americanoperations have recorded a revenue growth of 9.4% in H1 2016. G4Ssaw a 10% increase in revenue in developing markets in 2016, astrong growth rate that outweighed the lower growth in Europe. Onthe other hand, G4S is decreasing its presence in the Middle East.G4S has fully disposed of its Israeli business for £88m, above theasset estimated value of £56m. The exit was foreseeable: thebusiness may have had the potential to hinder the rebuilding of theirreputation following a number of scandals.

‹ ONGOING REPUTATIONAL PROBLEMS IN THE UK: The onegeographical segment that has underperformed in H1 2016 is the UK& Ireland. Growth was down by 1.9% in H1 2016 as two of the fourlarge governmental contracts expired in 2015. In addition, the G4Scontract for managing HMP Birmingham has recently been the targetof much scrutiny following a prison riot. Another warning sign in theregion is G4S’ continuing losses with the UK government’s asylumseeker holding contract. The contract will make an expected loss of£31m and was due to expire in August 2017. It will now finish in2019 as the government has chosen to extend it, resulting in afurther expected loss of £57m. On the positive side, G4S is disposingunprofitable businesses in the region, the two largest beingChildren’s Services UK and Utility Services UK. One of the keystrengths of G4S is its size and ability to take on large scale, nationalor international contracts, it is for this reason that we believe theywill continue to win and service UK government needs.

‹ PRODUCT MIX: A notable change for G4S in 2016 is its predominantoffering of personalised solutions. G4S’ new version of RISK360, thatwas developed in collaboration with potential customers and retailsolutions services, is well tailored to customers’ specific needs. Weexpect the strategy to pay off; the company already sees a contractretention rate of 90%. We like that G4S invests heavily in innovativesolutions: it has most recently launched a new product ‘SymmetryBlue’, the first door opening app for a mobile phone.

3

BUSINESS DESCRIPTION

18.00%

25.00%23.00%

18%

9.00%

7.00%

UK & Ireland North America

Asia & Middle East Europe

Latin America Africa

14%

58%

8%

9%

11%

Revenue FY2015 by service line

Cash solutionsSecurity & FM servicesSecurity systems & techCash & justice servicesSpecialist outsourcing services

7.40%

3.40%

9.40%

3.50%

-1.90%

2.40%

-4.00%

-2.00%

0.00%

2.00%

4.00%

6.00%

8.00%

10.00%

Selected new contracts 2016-2017

Location Target Value (£)

Yrs

Australia Port Philip prison

1bn 20

U.S.A. Walmart 148.8m 5

Australia n/d 450m n/d

Source: Q2 2016 Earnings Call, G4S

Revenue H12016 by location

Regional revenue growth %, H1 2016

-3%

-2%

-1%

0%

1%

2%

3%

4%

5%

Source: Company data

Source: Company data

Source: FT.com as of May 2016

Key employees

CEO – Ashley Almanza (since 2013)Ex-BG Group CFO

CFO – Tim Weller (s. 2016)Ex-KPMG partner & Petrofac, Innogy,Thames Water CFO

Chairman – John Connolly (s. 2012)Ex-Deloitte Global Chairman

CEO, Europe – Graham Levinson (s. 2013)Ex-Securicor

CEO, North America – John Kenning (s. 2014)Ex-ADT/Tyco Security Services president

‹ LEADERSHIP: G4S is headed by Ashley Almanza who has been with thecompany since 2013. Mr Almanza has endorsed a businesstransformation policy, reducing expenditure, and targeting organicrevenue growth, with the aim of creating sustainable long termcompany value.

‹ In October 2016, Tim Weller substituted Himanshu Raja as ChiefFinancial Officer. Mr Weller has previously served as a non-executivedirector at G4S. He is therefore familiar with company operations and islikely to act in the shareholder’s best interests.

‹ The G4S board consists of 10 members, eight of which are independentand seven have been with the company less than six years. We believethis is indicative of good governance practice.

‹ G4S has most recently attracted a new non-executive director, IanSpringett, starting in January 2017. He is currently holding the positionof CFO at Tullow Oil, a market leading leading African oil company. Webelieve Mr Springett is a good addition for G4S’ strategic targeting ofAfrica’s commodities sector.

‹ The current share ownership of executive directors is lower than wewould like, with Mr Almanza owning 466,777 shares (0.03% holding).We feel that an increase would provide further incentives tomanagement which would in turn increase our optimism for futuregovernance decisions.

‹ Regarding remuneration, 48% of executive director pay wasperformance related in 2015. The variable pay was based on bothfinancial targets and non financial targets, providing a good mix ofincentives. We agree with the G4S remuneration committee's use ofabsolute EPS growth, total shareholder return and operating cash flowas metrics for long term company performance.

‹ SHAREHOLDERS: In total, 0.07% of G4S’ shares are owned by insiders.This is low when compared with two of its major competitors, Securitas(4.60%) and Prosegur (50.56%). We believe G4S’ returns are consideredto be more volatile than that of its competitors as only a minorpercentage of shares are owned by the pension funds that targetcompanies with stable growth prospects. In addition, some of the topinstitutional holders may have a negative outlook on G4S’ share price asthey have decreased their ownership in 2017.

CSR - EMPLOYEES SAFETY: Health and Safety is of significant importanceto G4S, given previous events of negative publicity. During 2015, thecompany extended mandatory health and safety training to the widermanagement population, with more than 1,000 managers completingthe training programme. The company also implemented themedsafety programs that target common risk areas such as road safety. Forexample, during 2015, G4S India ran a safety programme for employeesusing motorcycles, called ‘’safety on the go’’. We believe this willcontribute towards to the restoration of G4S’ reputation.

COMMUNITY: G4S have invested approximately £1.6m in charitablecommunity and welfare programs for employees. They have supportedmore than 1,113 community projects across 65 countries.

‹ ENVIRONMENT: G4S continues to invest in telematics technology tomonitor driver behaviour, leading to reductions in fuel usage andmaintenance costs, as well as improving driver and road safety. At theend of 2015, approximately 4,700 of cash solutions vehicles were fittedwith telematics devices. During 2015, G4S increased the use of videoconferencing and virtual meeting technology, helping reduce theircarbon footprint by 6% since 2014.

4

Ownership summary

Shareholder Ownership

Invesco 14.74% ↓

Harris Associates 7.81% →

Mondrian Investment Partners

6.90% →

BlackRock 5.87% ↓

Woodford Asset Management

5.53% ↑

Tweedy Browne 4.74% →

Source: Bloomberg as of 3 Feb 2017

Insider holding, cross-section data

Company Ownership

G4S 0.07%

Securitas AB 4.60%

Prosegur 50.56%

Pension funds holdings

G4S 1.57%

Securitas AB 6.95%

Prosegur 0.86%

Government holdings

G4S 0.67%

Securitas AB 2.26%

Prosegur n/d

Source: Bloomberg as of 3 Feb 2017

MANAGEMENT AND GOVERNANCE‘SAFETY ON THE GO’ in India

Source: G4S Corporate Responsibility 2015

15.00%

29.70%19%

18.50%

17.80%

U.S. client segmentation

Retail and leisure Corporation

Financial institutions Government clients

‹ The global security services industry is expected to grow by 5.5 to 6%annually for the next two years. The industry growth will be stimulated bythe general economic improvement; the increasing number of businessesand their increased profits levels following the recession; the expectedincrease in global buildings and infrastructures (especially in developedcountries); and the increasing trend of governments to outsource securityservices. While a decline in a number of males aged between 15 and 24years in developed countries is expected to lower crime rates, this trend ismore than offset by the former demand drivers.

‹ Emerging markets will be the main driver of the industry’s growth. Thestrongest market gains will be experienced by regions where securityservices are relatively underdeveloped such as Africa, Eastern Europe, andthe Middle East. Industry growth rates for countries such as China, India,and South Africa are expected to be in double digits in 2017 and 2018. Inthese countries, factors such as rapid economic growth, foreign investmentactivity, rising urbanization, and concerns about the public safety haveprovided and will still provide a fertile environment for security services.

‹ In developed countries, growth is less pronounced but still consistent. TheUSA is expected to be the largest market in the industry with an expectedannual growth of 4.8% and accounting for 24% of the global demand.Western European growth will be slightly lower, forecasted at an annualrate of 3.2% and mainly driven by Industrial and Government clients thataccount together for more than 90% of the total demand.

‹ The original forecasts of 6.8% (The Freedonia Group, Inc. November 2014)have been reduced taking into consideration the macroeconomic concernsof 2016. In fact, the decline in commodities prices, and that of oil inparticular, has reduced the growth prospects of countries such as Brazil,Middle East and Africa.

‹ INDUSTRIAL LIFECYCLE: The global secure logistics market is currentlygrowing, with an expected CAGR of 9% during the 2016-20 period. One ofthe primary growth drivers is the rise in cash circulation. During 2015, cashdemand increased by 5% in Europe and by more than 11% in the BRICScountries. The market is expected to grow at a steady pace in establishedmarkets such as Europe and the US. The markets in APAC, MEA, and LatinAmerica are expected to grow at a rapid pace owing to the expansion ofbanking and financial institutions and also because of security threats inthese regions. Long term however, cash circulation is expected to decreasewhich may hurt G4S’ cash solutions business.

‹ The growing affinity toward outsourcing is also expected to fuel thedemand for secure logistics between 2016 and 2020. The major factorcontributing to the total outsourcing of cash management and security isthe rise in the number of ATMs across the world, which is expected toincrease by 42% by the end of 2019. Moreover, economic instabilityincreases outsourcing, benefiting G4S.

‹ According to World Bank statistics, in 2014, 62% of the world’s adultpopulation had a bank account compared to 51% in 2011. The increasingtrend toward introducing cash recycling ATMs is likely to accelerate theATM market. Economic size and population density have had a positiveimpact on the financial sector. The densely populated countries have ahigher ATM penetration.

World Security Services Demand by Region

USD million 2008 2013 2018*CAGR 2013-2018

World SecurityService Demand

149 885 190 700 255 100

6,0%

North America 54 595 59 200 74 700 4,8%

Western Europe

37 410 40 400 47 400 3,2%

Asia/Pacific 24 020 37 820 52 000 6,6%

Other Regions 33 860 53 280 81 000 8,7%

*Estimate

55.00%22.70%

8.50%

2.20%

11.60%

Guard Services Alarm MonitoringArmored Transport Prison ManagementOther Services

5

INDUSTRY OVERVIEW AND COMPETETIVEPOSITIONING

14.30%

7.80%

6%

71.90%

U.S. market share

Securitas AB

G4S

Allied Barton Security Services

Source: IBIS World 2016

Source: Freedonia Group 2014

Source: Freedonia Group 2014

Largest market: U.S. market outlook

Revenue $31.7b

Profit $1.3b

Companies 11 133

Annual growth 2011-2016 3.1%

Annual growth 2016-2021 2.5%Source: IBIS World 2016

Corporate profit Competition Crime rate Economic

growth

Infrastructuredevelopment

World security services industry

‹ COMPETETIVE LANDSCAPE: The security services industry has amarket capitalization of £58.99B as of December 2016 with the totalrevenue of £31.70B (down 1.33% YoY). Conversely, in the UnitedStates, G4S’ largest market segment, security services revenue hasrecorded a growth of 3.1% between 2011 and 2016 with predictedgrowth of 2.5% between 2016-2021. The industry is highlycompetitive with high barriers of entry and the established marketplayers. Globally, Secom Co, headquartered in Japan, has the highestmarket capitalization of £13.49B, followed by Swedish Securitas AB(£4.32B) and G4S (£3.65B). In the United States, Securitas AB has amarket share of 14.3% with G4S’ share of 7.8% and Allied UniversalSecurity Services’ of 6%.

‹ While more than 100,000 firms are involved in the security serviceindustry, the majority are small privately held companies withservices on a local or regional basis within a single country. Theleading global providers of security services are: G4S Plc, SecuritasAB, and Tyco International accounting collectively for 13% of theglobal demand. G4S is the leading player and share its cash solutionmarket with Brink’s Co. in emerging markets and Loomis AB in theEU. In the global secure solutions market, G4S’ main competitor isSecuritas AB. However, it mainly focusses on Europe and the USwithout a significant presence in emerging markets currently.

‹ G4S IN PORTER’S FIVE FORCES FRAMEWORK

‹ Industry competition is high and it is mainly based on price andquality of service. However, G4S tends to focus on special customerssuch as banks, airports or oil and gas plants that need trained andlicenced people. The sophisticated training required decreasescompetition in this sub-segment. Moreover, G4S serves internationalclients that prefer suppliers able to provide a national or eveninternational footprint and G4S is one of very few companies thathave this capability.

‹ Bargaining power of customers: As for industry competition,bargaining power of suppliers is high because of the highlycompetitive market. However, G4S serves clients with special needsthat are willing to pay a premium for the higher quality of services,therefore giving G4S greater pricing power.

‹ Bargaining power of suppliers: The workforce is the principal supplierof the industry. Their bargaining power is low as salaries have notimproved and have been constant over the last 10 years at around60-65% of revenues in developed countries. In developing countries,workforce pricing power is lower.

‹ Barriers to entry: Referring to regional security companies who are incompetition with G4S, barriers to entry are low. The industry islabour intensive and there are minimal capital investments requiredto launch a new business. However, they are high for a securitycompany with large scale national or global contract capabilities. Thecash solutions business is slightly more capital intensive as armouredvehicles and more specialised equipment is required.

‹ Threat of subsidies: An increasing demand for more automated, low-cost alternatives such as CCTV and electronic alarms makes thethreat of subsidies for the industry moderate-high.

6

1. The original forecasts of 6.8% (The Freedonia Group, Inc. November 2014) have beenreduced taking into consideration the quite serious macroeconomics concerns of the secondhalf of last year. In fact, the decline in commodities prices, and that of oil in particular, hasreduced growth prospective in countries such as Brazil, Middle East and Africa.

2. Low intensity of security service use measured against economic indicators such as GDP3. The Freedonia Group, Inc. November 2014

INDUSTRY OVERVIEW AND COMPETETIVEPOSITIONING (CONT.)

All data in GBPFY G4S Secom Securitas

NI m2015 26 475 1952014 162 424 1722013 -357 408 175

Assets m2015 4718 9666 32512014 4909 7936 34022013 5321 7760 3520

Equity m2015 691 11628 20042014 922 10208 18712013 882 9702 1774

Debt m2015 2278 3852 22492014 2161 2832 24672013 2210 2908 2633

ROAA 2015 0.6% 4.91% 6.01%2014 1.6% 5.34% 5.04%2013 N/A 5.26% 4.98%

ROAE 2015 3.5% 4,08% 9,75%2014 9.4% 4.15% 9.17%2013 N/A 4.21% 9.89%

Leverage 2015 330% 39.85% 69.18%2014 234% 35.68% 72.50%2013 267% 37.48% 74.81%

012345

IndustryCompetition

BargainingPower of

Customers

BarganingPowers ofSuppliers

Barriers toEntry

Threat ofSubsidies

1 year price performanceG4S vs major competitors

0

5

10

15

0

2

4

6

8

GB

P

G4S Prosegur Securitas AB

Porter’s 5 forces

Summary: SWOT analysis

Strengths: (1) Diversification by the location and the product line; (2) Established market position; (3) High barriers to entry for global security (4) 90% contract retention rate;

Weaknesses: (1) High outstanding debt; (2) Revenue reduction due to disposals;

Opportunities: (1) High demand for securities services in the emerging markets; (2) Positive outlook for the securities services industry –geopolitical instability.

Threats: (1) Threatened reputation in the UK; (2)Other global security companies stealing market share

INVESTMENT RISKS‹ Market Risk

‹ [M1] Currency risk (low impact, high probability) In 2015,G4S generated approximately 70% of its revenues in countries otherthan the UK. Therefore, it is exposed to significant currency risk dueto fluctuations in exchange rates. G4S manages this risk by holdingforeign currency denominated loans. The group's Euro and US dollarnet asset were nearly 90% and 83% hedged by foreign currencyloans at 31 December 20151. They do not hedge using foreignexchange contracts to avoid the risks associated with restricted cashflow.

‹ [M2] Interest rate risk (high impact, high probability) The company'sborrowings are dominated in US dollars, Euros and Pound Sterling.Although the company's interest rates are largely hedged by usingfixed rate loans and interest rate swaps, interest rate risks stillremain. A 1% increase in interest rates across the yield curve in eachof these currencies with the 31 December 2015 position will lead toan expected additional charge of £12m in FY16, if the debt position iskept the same1.

‹ Counterparty Risk

‹ [C1] Accounts receivable (low impact, low probability) G4S is in thelow risk category regarding accounts receivable. A Large proportionof sales are based on contracts with well established,repeat customers. This ensures the safe collection of payment.According to the Group Finance Manual guidelines, new customerswill be selected carefully, and G4S will make sure they have thecapacity to service the customer’s needs. The diversified customerbase in different geographic locations ensures that default by a singlecustomer will not cause significant overall loss. This is confirmed bytheir bad debt loss, which on average accounts for 1% of debtsreceivable over the past three financial years.

‹ [C2] Rating (high impact, high probability) Acquisitions over the past 3years have increased the ND/EBITDA ratio of G4S making itconsiderably higher than it’s competitors. Although the companyaims to decrease the leverage to 2.5X in 20171. In 2016, Standard &Poor’s re-affirmed the G4S plc credit rating at 'BBB-' long-term and'A-3' short-term with a 'Negative Outlook‘2, just above junk grade. Itis expected that the low credit rating will increase the cost of capital,and make it harder to access the capital markets in the future.

‹ Operational Risk

‹ [O1] Major contracts (high impact, low probability) G4S has a numberof long term, complex, high value contracts. Failure to deliver thecontractual requirements may impact the group's liability, customersatisfaction, cash flow, growth and profitability.

‹ [O2] Cash losses (low impact, mid probability) G4S’ cash solutionsbusiness operates around the world and is responsible for cash heldon behalf of customers. Therefore, the group's cash managementservices are highly exposed to security and safety risks, especially incountries with high crime rates.

‹ Political risk

‹ [P1] Geopolitical Risk (high impact, high probability) With anincreasing presence in potentially unstable developing markets (9.7%revenue growth in revenue according to 2016 H1 results), politicalrisk is becoming an increasingly important factor for G4S. Risk factorssuch as political volatility, currency fluctuation, low commodityprices, terrorism, military intervention and insurgency could affectthe operations of G4S and consequently affect the share price of thecompany. On the contrary, this may facilitate an increase in demandfor private security services. 7

G4SSecuritas

ABProsegur

Short Term

BBB- BBB BBB

Long Term

A-3 A-2 A-2

Outlook Negative Stable Stable

Source: Bloomberg

Impact (high)

Probability (high)

M1

M2

C1

O2

O1

C2

Source: G4S annual repots (FY13-15)

Source: companies’ annual reports (FY13-15)

1122

943 970

20 4 70

200

400

600

800

1000

1200

2013 2014 2015

account receivable bad debt loss

Account receivable and bad debt loss(in Millions of GBP)

33.2

3.5

2.3 2.42.0

3.3

2.0

1.3

FY13 FY14 FY15

G4S Securitas AB Prosegur

ND/EBITDA

1. G4S annual report 20152. G4S debt investors http://www.g4s.com/en/Investors/Debt%20Investors/

P1

Financial Analysis

FY 2013 FY 2014 FY 2015

Activity Ratios FY 2013 FY 2014 FY 2015 Inventory Turnover 48.16 50.35 53.00 Days of Inventory onHand (DOH)

7.6 7.2 6.9

Receivables Turnover 4.90 5.02 5.12 Days of Sales Outstanding(DSO)

74.54 72.69 71.32

Payables turnover 4.86 4.80 5.17 Nr of Days of Payables 75.2 76.0 70.6 Working Capital Turnover 18.83 20.94 18.75 Total Asset Turnover 1.29 1.35 1.43 Cash ConversionCycle 7 4 8 Liquidity Ratios FY 2013 FY 2014 FY 2015

Current Ratio1.35 1.32 1.46

Quick Ratio1.61 1.29 1.25

Cash Ratio0.34 0.32 0.36

Solvency Ratios FY 2013 FY 2014 FY 2015 Debt-to-assets ratio 0.42 0.44 0.48 Debt-to-capital ratio 0.73 0.70 0.77 Debt-to-equity ratio 2.67 2.34 3.30 Net Debt/EBITDA 2.97 3.17 3.46 FinancialLeverage Ratio 5.31 5.84 5.97 Interest Coverage 4.55 4.41 4.49 ProfitabilityRatios

FY 2013 FY 2014 FY 2015

Gross Profit Margin

18.2% 19.6% 18.5%

Operating Profit Margin

7.8% 7.8% 7.5%

Net profit Margin

-3.4% 1.2% 0.4%

Operating ROA 6.2% 6.5% 7.1%ROAA -4.4% 1.6% 0.6%ROAE -23.6% 9.4% 3.5%Growth Ratios FY 2013 FY 2014 FY 2015 Revenue Growth -2.31% -2.44% -0.38%EBITDA Growth -9.67% -3.09% -3.37%Net Income Growth

-305.93%-

133.74%-65.85%

Du Pont Analysis FY 2013 FY 2014 FY 2015 ROAE -0.24 0.09 0.03Net Profit Margin x

-0.03 0.01 0.00

Total Asset Turnover x

1.29 1.35 1.43

Asset / Equity 5.31 5.84 5.97

‹ Revenues decreased from £7,827m in 2013 to £6,683 (-14.61%) in2015 mainly due to the sale and/or closure of businesses in line withthe restructuring plan undertaken in 2013.

‹ EBIT margin, has increased from 4.8% (£331m) in 2014 to 5.0%(£341m) in 2015, which reflects positive outcomes of therestructuring plan. Nevertheless, its Net Income as of FY15 suffereda 84% decrease due to extraordinary restructuring costs andGoodwill impairments.

‹ As of FY15, G4S’ Total Assets are comprised mainly of Goodwill(accounting for 38.7% of total assets), A/R’s 27.8%, Cash 10.4% andPP&E 9.05%. As for its liquidity position, G4S holds an adequate cashposition of £492m and a current ratio of 1.46x. Also, the companyhas available committed undrawn facilities of £683m which addsliquidity to its operations. Given the intensive M&A activity of thepast years, G4S’ Goodwill has been a major component of its Assets.

‹ From its operations, G4S generated £81m of FCF in 2015, which is ahuge increase compared to the £14m of 2014 but it is lower than theFCF of 2013 (£86m). Due to its high leverage, interest expensesamount to around 53% of its Cash Flow. Therefore its financialflexibility is strongly limited by the highly levered capital structure.

‹ Debt has increased dramatically over the last 10 years, totalling£2,278m (Including leases) at FY15. Despite G4S stating thatdeleveraging to 2.5x is one of their priorities, the ratio has increasedfrom 3.17x to 3.46x during 2015. We expect it to decrease slightly to3.4x in 2016 and to 3.2x in 2017 to respect its covenant restrictions(Net-Debt-to-EBITDA less than 3.5x) and maintain its investment-grade credit rating.

‹ Upcoming debt maturities are £605m; £469m of which are due inMay 2017. However, we expect the company to refinance itsliabilities because its operating cash flows cannot sustain a healthylevel of long-term investment and the growing dividends it has beenpaying. In fact, the company has a track record of increasing itsdividends paid regardless of the economic results. As shown in thegraph below. Over the last 10 years, debt issues has been almostcompletely employed to pay interest expenses and dividend. Theyears where no debt was issued its cash outflows were covered bycapital increases (i.e. in 2013, a £343m capital increase was almostcompletely used to pay dividends of £130m and to pay back £197mof debt).

8

FINANCIAL ANALYSIS

-300

-200

-100

0

100

200

300

400

Interest Expenses and Dividend Paid Net debt Issued

‹ REVENUE GROWTH: Historically, G4S’ revenue has broadly followednominal GDP growth with a 1 year time lag; weighted based ongeographical location and magnitude of revenue streams. Wedecided that this would be the optimal proxy for organic revenuegrowth. In addition to this, effects of disposals, namely G4S Israel, aswell as earnings tailwinds caused by the pound sterling devaluationfollowing Brexit, were factored in.

‹ Nominal GDP forecast data (obtained from the IMF world economicoutlook database) was used and an aggregate revenue growth ratefor G4S, constructed. It is worth noting that proportions of revenuegenerated by geographical location are not held constantthroughout the forecast. Historical trends in country revenues as apercentage of total group revenue were used to better predictfuture revenue proportions for respective countries. The changes inrevenues by geography are displayed in the figure on the left handside. The sale of G4S Israel results in a fall in Middle East Presencefrom 7.1% in 2015 to 5.8% in 2016. From the years 2012 to 2015,G4S’ sales growth had a volatility coefficient of 0.84 compared withthe weighted nominal GDP data. This coefficient was incorporatedinto the revenue projections.

‹ FOREIGN EXCHANGE EFFECTS ON REVENUE: As previouslymentioned, the effects of Brexit have resulted in a considerabledevaluation of the Pound Stirling. In 2015, approximately 78% ofG4S’s turnover was generated in countries outside of the UK. Thisallowed for considerable currency tailwinds; boosting GBPdenominated earnings.

‹ Since nominal GDP growth denominated in USD was used as a proxyfor organic revenue growth, it was estimated that revenue growthwould be boosted by 8% in 2016 and 16% in 2017; the figures takeinto account that Brexit occurred mid-way through 2016.

‹ DISPOSALS: On the 12th December 2016, G4S announced the sale ofits Israel subsidiary to a local private equity firm for approximately£88m. Prior to the sale, the business generated £121m revenue. Bypiecing together information from the 2015 annual report and 2016earnings call, it was estimated that an additional £90m revenueworth of business was disposed of in 2016, a total of £202m. Theremainder of businesses have been estimated to generate a revenueof £488m. We assume that all remaining businesses are sold in 2017.

9

-10.0%

0.0%

10.0%

20.0%

30.0%

2006 2008 2010 2012 2014 2016

G4S Revenue Growth vs Weighted Nominal GDP Growth 1y Lag

Weighted Nominal GDP Growth 1y Time Lag (%)

Revenue Growth (%)

0%

5%

10%

15%

20%

25%

30%

35%

40%

2006 2008 2010 2012 2014

Revenue By Region as % of Group Revenue

UK and Ireland

Continental Europe

North America

Middle East and Gulf States

Latin America and Carribean

Africa

APAC

-20%

0%

20%

40%

60%

2006 2008 2010 2012 2014 2016

Revenue Growth Euro

-10%

0%

10%

20%

30%

40%

50%

60%

2006 2008 2010 2012 2014 2016

Revenue Growth South Africa Rand

VALUATION 1. DISCOUNTED CASH FLOW MODEL

DCF2016 E 2017 E 2018 E 2019 E 2020 E 2021 E 2022 E 2023 E 2024 E 2025 E

Revenue 6892 7428 7750 8080 8435 8764 9088 9425 9754 10096Revenue Growth % 3.5% 16.0% 4.3% 4.3% 4.4% 3.9% 3.7% 3.7% 3.5% 3.5%EBIT 509 611 682 711 742 771 800 829 848 888EBIT Margin % 8.0% 8.2% 8.8% 8.8% 8.8% 8.8% 8.8% 8.8% 8.8% 8.8%Capex -143 -154 -161 -168 -175 -182 -189 -186 -203 -210%Sales 2.1% 2.1% 2.1% 2,1% 2,1% 2,1% 2,1% 2,1% 2,1% 2,1%Tax -92 -104 -114 -123 -137 -145 -151 -157 -163 -169%EBT 29.5% 29.5% 29% 29% 29% 29% 29% 29% 29% 29%Change in WC 3 23 1 17 19 17 17 18 17 18 Depreciation -124 -134 -140 -145 -152 -158 -164 -170 -176 -182

FCFF 367.87 409.83 462.70 482.37 503.58 523.22 542.58 562.66 582.35 602.73

Discount factor @WACC

0.91 0.83 0.76 0.70 0.64 0.58 0.53 0.48 0.44 0.40

WACC 9.5% 9.5% 9.5% 9.5% 9.5% 9.5% 9.5% 9.5% 9.5% 9.5%

PV (FCFF) 336 342 352 336 320 304 287 272 257 243

Terminal Value 7 446Stable Growth

1.30%

Sum of FCF 3 049 MV of Equity 3 916PV of TV 3 005 MV of Debt 2 723EV 6 054 Implied TV/EV 50% FCF Yield 9.30%Cash 443 Dividend Yield 0.87%Nr of shares 1 552 Equity Value 3 774 Total Capital 6 639Implied Price 2.43 WACC 9.5%Upside -5% PV(WC) 215

Share Price 2.55

10

-500

0

500

1000 Cash Flows vs Income

Net profit (loss) FCFF FCFE FCFE (post acquisitions)

‹ KEY ASSUMPTIONS: Forecasting the gross profit margin, we have assumed a steady decrease throughthe years 2016 to 2020, stabilising at 19.80%. This assumption is based on the fact that G4S are in theprocess of selling off low margin businesses as part of their portfolio management program. As a result ofless acquisition activity, we have forecasted the EBIT margin to steadily increase from 6.2% in 2016,stabilising at 7.2% in 2020.

‹ G4S have mentioned that they intend to deleverage, reducing their net debt/EBITDA to 2.5x. We do notthink that this is feasible over two years, as they have suggested. Our rationale behind this statement isfurther explained in the financial analysis. In our DCF, we have reduced the leverage over a 5 yeartimespan to 2.8x where it remains constant. We have used 5% as the interest rate on debt goingforward; based on a weighted average of interest rates on existing loans/bonds. We have used a stablegrowth rate of 1.3%.

‹ WACC: Using CAPM with an adjusted beta of 0.837 yielded a required rate of return on equity of 6.11%.With a cost of debt of 1%, we calculated the WACC to be approximately 4%.

‹ G4S is highly leveraged with a D/E ratio of 3.3x. Taking into account this and the tax shield of debt, webelieve the WACC calculated statistically is too low. As they are planning to deleverage over the comingyears, we believe the WACC will increase. In addition to this, there has been considerable cash flowvolatility, which adds to the risk. Regarding the required return on equity, a large proportion of G4S’soperations are in emerging markets; contributing to increased country risk. To factor in the higher risk,we computed a weighted average of country specific risk, resulting in a required return on equity of 15%.The adjusted WACC used in the valuation is 9.5%, we believe this figure to be more representative of thecompany.

‹ VALUATION SUMMARY: To derive our target price, we have used the DCF as we believe it bestaccommodates the high correlation between revenues and weighted nominal GDP growth. We have seta target price of £2.43, a 5% downside. If G4S addresses its debt issues as quickly as they suggest andsuccessfully sells its outstanding businesses, our outlook for the business will improve. We remainconcerned about the potential damage to their reputation if contracts go wrong such as the London2012 Olympics contract, however we believe they are taking the necessary steps to improve this.

11

VALUATION 2. DIVIDEND DISCOUNT MODEL

‹ It has been noted earlier that the management projects stablegrowth of 4-6% p.a. by liquidating underperforming and non-corebusinesses and investing the proceeds into the promising regions ofthe emerging markets and North America. The underlyingassumption of the constant growth enables us to employ theGordon-Shapiro growth model to project the intrinsic value of thestock that employs the use of cash flows from dividends with agiven growth rate.

‹ RATE OF RETURN: For accuracy, the required rate of return isobtained using two models, CAPM and SIM. In the CAPM, the beta-coefficient is derived from the regression of FTSE100 index logreturns and G4S log returns from 20/07/2004 to 31/01/2017. Thedata is adjusted for the five breakpoints, 10/08/2016, 07/05/2013,16/07/2012, 17-18/10/2011 to normalise the log distribution. Theadjusted beta is used to calculate the required rate of returnreflecting the mean reversion tendency: as G4S becomes morediversified and globalised its beta moves towards the market beta.

‹ VOLATILITY: The volatility of returns is attributed mostly to theidiosyncratic risk of the company, thus making the returns sensitiveto the corporate performance. Conversely, the low correlation withthe market makes the stock a good addition to a portfolio as theunsystematic risk is easily diversifiable.

Capital Asset Pricing Model

Variable Value

Implied beta 0.756

Adjusted beta (2/3*beta+1*1/3) 0.837

Alpha (excess return) 0.0002

FTSE100 median return 2008-2016 p.a. 7.15%

UK 1 month T-Bill index median return p.a. 0.78%

Required rate of return using CAPM 6.11%

y = 0.7558x + 0.0002

-0.15

-0.1

-0.05

0

0.05

0.1

0.15

-0.15 -0.1 -0.05 0 0.05 0.1 0.15

FTSE100 & G4S

-0.15

-0.1

-0.05

0

0.05

0.1

0.15

0.2

Volatility of returns, 5Y σ = 2%

Restructuring

Brexit

Single Index Model (SIM)

Variable Value

σFTSE100 (21/07/04-31/07/17), daily 0.0117

σG4S (21/07/04-31/07/17), daily 0.0154

COVAR (FTSE100&G4S) 0.0001

Correlation coefficient 0.577

Implied beta (SIM), COVAR/σFTSE100 ̂ 2 0.75557

Adjusted beta (SIM) 0.837

G4S unsystematic risk (σG4S-ß^2*σFTSE250^2) 0.000157

G4S systematic risk (ß^2*σFTSE250^2) 0.000079

Required rate of return using SIM 6.002%

Dividend as reported (final)

FY Dividend £ Growth (ln)

2010 0,0416 12%

2011 0,0437 5%

2012 0,0511 16%

2013 0,0554 8%

2014 0,0554 0%

2015 0,0582 5%

2016 0,0582 0%

Median 4.93%

Management projection 4.00-6.00%

Dividend as reported (interim)

FY Dividend £ Growth (ln)

2010 0,0317 5%

2011 0,0342 8%

2012 0,0342 0%

2013 0,0342 0%

2014 0,0342 0%

2015 0,0359 5%

2016 0,0359 0%

Median 0%

Average 2.07%

Total risk

Gordon-Shapiro growth model

Variable Value

DPS annual (final+ interim) 9.41p

Growth (avg. median interim DPS & final DPS) 2.23%

Required rate of return (avg. CAMP & SIM) 6.056%

Intrinsic value 251.64p

Source: company data

210

220

230

240

250

260

270

p

1 Month price performance

DPS final EPS adj. Payout ratio

2012 0,0511 0,13 39%

2013 0,0554 0,05 111%

2014 0,0554 0,09 62%

2015 0,0582 0,1 58%

Avg. excl. 2013 53%

Source: Bloomberg as of 25 Jan 2017

‹ G4S has two type of claimholders, bond holders and equity holders.Considering the properties of the debt instrument, one may agreethat bond holders, in fact, own the companies’ assets, but they havegiven an option to the equity holders to buy them back. In this case,we may view the equity as a call option with the strike price of debtand the spot price of the firm’s assets. Consequently, it is reasonableto check the value of the firm’s equity using the Black-Scholes optionpricing model to assess the impact of the outstanding debt on theshare price.

‹ In the present case, the strike price is the total value of outstandingdebt of the company as of 2017. The duration or the time until theoption will be exercised is the weighted-average duration of theoutstanding debt. We assume the current portion of debt to berefinanced soon, and that its duration reverts towards 0. Theprobabilities of the debt to be repaid is calculated assuming thenormal distribution of returns (i.e. the volatility of the underlyingasset).

Source: Bloomberg

‹ The valuation result using the Black Scholes model implies a shareprice 230p, which is significantly lower that those implied by theDiscounted Cash Flow model and the Divided Discount model. Weattribute this difference to the significant portion of outstandingdebt.

Maturity Currency £m Debt type Weight Duration

2017 1 EUR 514* Bond

2018 2 EUR 429* Bond 0.231 0.362

2019 3 GBP 350 Bond 0.188 0.443

2021 5 GBP 650 Revolver 0.350 1.370

2023 7 EUR 429* Bond 0.231 1.266

Total long-term debt (as of 2017)

1858Total

duration4.392

*GBP/EUR exch. rate as of 31/01/2017

12

VALUATION 3. EQUITY AS A CALL OPTION

Black-Scholes

Variable Value

Spot (total assets as of 2017) £5001.114m

Strike (long-term debt) £1858m

Duration of debt (years) 3.657

Volatility of the underlying asset (σ of returns) p.a.** 0.293

D1 2.326

N(D1) 0.990

D2 1.711

N(D2) 0.956

Total equity value £3569.298m

Shares O/S 1551.594m

Value per share 230.041p

**assuming 365 day count convention

Bond Maturity Coupon

GFSLN 2 7/8 2017 2.875

GFSLN 2 5/8 2018 2.625

GFSLN 7 3/4 2019 7.750

GFSLN 1 1/2 2023 1.500

Source: Bloomberg

Distribution of returns

Extreme values

Face valueof debt

(principal +couponsdiscounted at

a current yield)

Value of the firm

Payoffon equity

Equity as a call option

13

APPENDIX 1. INCOME STATEMENT REFORMULATED

FY 2013 FY 2014 FY 2015 2016 E 2017 E 2018 E 2019 E 2020 E 2021 E 2022 E 2023 E 2024 E 2025 E

Net Sales 7 061 6 889 6, 863 6 892 7 428 7 750 8 080 8 435 8 764 9 088 9 425 9 754 10 096

Revenue Growth % -2.30% -2.40% -0.40% 3.50% 16.00% 4.30% 4.30% 4.40% 3.90% 3.70% 3.70% 3.50% 3.50%

COGS -5 779 -5 539 -5 592 -5 585 -6 001 -6 239 -6 504 -6 765 -7 029 -7 289 -7 559 -7 823 -8 097

Gross Profit 1 282 1 350 1 271 1 307 1 428 1 511 1 576 1 670 1 735 1 799 1 866 1 931 1 999

Gross Profit Margin % 18.20% 19.60% 18.50% 18.97% 19.22% 19.50% 19.50% 19.80% 19.80% 19.80% 19.80% 19.80% 19.80%

Operating Costs -731 -816 -755 -758 -817 -853 -873 -911 -947 -982 -1 018 -1 053 -1 090

Operating Costs % Sales

10.40% 11.80% 11.00% 11.00% 11.00% 11.00% 10.80% 10.80% 10.80% 10.80% 10.80% 10.80% 10.80%

EBITDA 551 534 516 549 611 659 703 759 789 818 848 878 909

EBITDA Margin % 7.80% 7.80% 7.50% 8.00% 8.20% 8.80% 8.80% 8.80% 8.80% 8.80% 8.80% 8.80% 8.80%

D&A -214 -203 -175 -124.05 -133.71 -139.5 -145.44 -151.83 -157.75 -163.59 -169.64 -175.58 -181.73

Goodwill Impairments -46 - -66

Depreciation % Sales 3.03% 2.95% 2.55% 1.80% 1.80% 1.80% 1.80% 1.80% 1.80% 1.80% 1.80% 1.80% 1.80%

EBIT 337 331 341 425 477 519 558 607 631 654 679 702 727

EBIT Margin % 4.80% 4.80% 5.00% 6.20% 6.40% 6.70% 6.90% 7.20% 7.20% 7.20% 7.20% 7.20% 7.20%

Net Interest Expense -108 -109 -102 -115 -125 -127 -134 -136 -131 -134 -137 -140 -143

EBT -190 128 78 310 352 392 424 471 500 520 541 562 584

Income Taxes -53 -46 -50 91.52 103.91 113.77 122.89 136.56 144.95 150.84 156.96 163 169.28

ETR % 28% 36% 64% 30% 30% 29% 29% 29% 29% 29% 29% 29% 29%

Net income -243 82 28 219 248 279 301 334 355 369 384 399 414

Income (Loss) Disc. Operations

-114 80 -2 - - - - - - - - - -

Net Income Incl MI -357 162 26 219 248 279 301 334 355 369 384 399 414

Net Income Growth -675.80% -145.40% -84.00% 4.00% 13.50% 12.20% 8.00% 11.10% 6.10% 4.10% 4.10% 3.80% 3.90%

NI % Sales -2.30% 1.20% 0.40% 3.20% 3.30% 3.60% 3.70% 4.00% 4.00% 4.10% 4.10% 4.10% 4.10%

Avg. Number of Shares

1452 1545 1545 1545 1545 1545 1545 1545 1545 1545 1545 1545 1545

Basic and Diluted EPS -0.251 0.094 0.005 0.142 0.161 0.181 0.195 0.216 0.23 0.239 0.249 0.258 0.268

Dividends per Share 0.09 0.089 0.094 0.098 0.103 0.108 0.114 0.119 0.125 0.131 0.138 0.145 0.152

Payout Ratio N/A 0.95 18.77 0.691 0.642 0.598 0.585 0.55 0.544 0.548 0.555 0.561 0.567

FY 2007 FY 2008 FY 2009 FY 2010 FY 2011 FY 2012 FY 2013 FY 2014 FY 2015

Inventories 58 85 78 84 123 128 112 108 103

Short term investments 73 93 84 82 70 56 39 44 49

Trade and other recievables 887 1 375 1 351 1 460 1 546 1 506 1 378 1 366 1 316

Cash and cash equivalents 382 562 309 351 433 469 532 422 443

Assets classified as held for sale 131 71 29 - 35 229 220 6 58

Total Current Assets 1 532 2 186 1 851 1 977 2 207 2 388 2 281 1 946 1 969

Goodwill 1 331 2 080 2 049 2 159 2 205 2 108 1 940 1 924 1 828

Other aq related intangibles 225 403 359 285 269 204 141 84 47

Other intangibles 31 61 69 71 87 87 77 82 82

PP&E 403 529 546 576 531 512 517 468 427

Investment in joint ventures - - - - - - 34 41 18

Investment in associates 10 7 7 10 9 - - - -

Trade and other recievables 69 198 111 138 162 132 104 97 84

Retirement benefit surplus - - - - - - 31 75 76

Deferred tax assets 85 155 178 161 157 179 196 192 187

Total non-current assets 2 154 3 433 3 319 3 400 3 420 3 222 3 040 2 963 2 749

Total Assets 3 686 5 619 5 170 5 377 5 627 5 610 5 321 4 909 4 718

Bank overdrafts 111 195 38 45 53 22 11 20 41

Bank loans 80,6 87,9 146 113 47 13 27 60 75

Loan notes 40 61 96 25

Obligations under finance leases 16 22 23 21 16 18 31 25 19

Trade and other payables 852 1217 1106 1210 1251 1193 1181 1 125 1 036

Current tax liabilities 18 29 54 58 48 41 48 55 36

Retirement benefit obligations 47 49 55

Provisions 24 34 30 33 30 29 195 90 90

Liabilities classified as held for sale 78 74 31 29 52 133 4 30

Total current liabilities 1 227 1 708 1 483 1 480 1 474 1 408 1 687 1 475 1 352

Bank loans 729 878 516 574 885 327 140 105 324

Loan notes 290 902 1 117 1 153 1 180 1 999 1 921 1 803 1 749

Obligations under finance leases 46 64 63 49 48 43 70 52 45

Trade and other payables 39 64 43 48 19 22 33 35 41

Retirement benefit obligations 120 279 313 306 344 471 535 394 355

Provisions 38 117 73 46 41 45 62 104 152

Deferred tax liabilities 76 138 122 98 92 64 44 19 9

Total non-current liabilities 1 338 2 440 2 247 2 274 2 609 2 971 2 805 2 512 2 675

Total Liabilities 2 566 4 148 3 730 3 754 4 083 4 379 4 492 3 987 4 027

Net Assets 1 120 1 471 1 440 1 623 1 544 1 231 829 922 691

Shareholders' Equity attributable to the Group

1 087 1 427 1 407 1 577 1 494 1 176 809 900 673

Minority interests 32,9 43,9 33 46 50 55 20 22 18

Reserves 254 27

Profit for the period attributable to the Group

Total Shareholders ' Equity 1 120 1 471 1 440 1 623 1 544 1 231 829 922 691

Total liabilities and equity 3 686 5 619 5 170 5 377 5 627 5 610 5 321 4 909 4 718

14

APPENDIX 2. BALANCE SHEET REFORMULATED

FY 2013 FY 2014 FY 2015 2016 E 2017 E 2018 E 2019 E 2020 E 2021 E 2022 E 2023 E 2024 E 2025 E

Inventories 112 108 103 99 109 113 114 120 126 131 137 143 149

Short term investments 39 44 49 41 47 50 49 52 54 57 59 62 65

Trade and other recievables 1378 1366 1316 1350 2971 1431 1446 1516 1591 1664 1740 1814 1890

Cash and cash equivalents 532 422 443 427 557 529 405 343 277 195 107 6 -104

Assets classified as held for

sale

220 6 58

84 53 71 75 71 79 82 84 89 92

Total Current Assets 2281 1946 1969 2001 3737 2193 2089 2102 2127 2129 2128 2115 2092

Goodwill 1940 1924 1828 1747 1850 1816 1842 1925 1964 2055 2169 2248 2344

Other aq related intangibles 141 84 47 82 75 74 83 82 87 92 95 99 104

Other intangibles 77 82 82 74 84 87 87 92 96 101 105 110 114

PP&E 517 468 427 432 467 481 492 513 538 564 589 614 640

Investment in joint ventures 34 41 18 28 31 28 31 32 33 35 36 38 40

Investment in associates 0 0 0 0 0 0 0 0 0 0 0 0 0

Trade and other recievables 104 97 84 87 94 96 99 103 108 113 118 123 129

Retirement benefit surplus 31 75 76 57 73 75 73 78 82 85 89 93 97

Deferred tax assets 196 192 187 176 196 203 205 215 225 236 246 257 268

Total non-current assets 3040 2963 2749 2683 2870 2860 2912 3041 3134 3280 3449 3582 3735

Total Assets 5321 4909 4718 4580 5001 5188 5264 5501 5778 6044 6317 6589 6864

Bank overdrafts 11 20 41 9 21 43 25 30 34 31 33 34 34

Bank loans 27 60 75 23 63 79 55 67 69 67 71 72 73

Loan notes 61 96 25 52 100 26 61 64 52 62 62 61 65

Obligations under finance

leases

31 25 19

26 26 20 25 24 24 25 26 26 27

Trade and other payables 1181 1125 1036 1005 1172 1089 1117 1145 1157 1195 1222 1245 1273

Current tax liabilities 48 55 36 41 57 38 47 48 46 49 50 50 52

Retirement benefit obligations 0 0 0 0 0 0 0 0 0 0

Provisions 195 90 90 166 94 95 123 106 112 119 117 121 124

Liabilities classified as held for

sale

133 4 30

113 4 32 53 30 40 43 39 42 43

Total current liabilities 1687 1475 1352 1436 1537 1421 1505 1513 1533 1591 1620 1652 1691

Bank loans 140 105 324 176 212 250 217 230 241 240 248 254 258

Loan notes 1921 1803 1749 1617 1719 1779 1763 1783 1839 1882 1923 1966 2006

Obligations under finance

leases

70 52 45

51 52 52 53 53 55 56 57 59 60

Trade and other payables 33 35 41 34 38 40 38 39 41 41 42 43 44

Retirement benefit obligations 535 394 355 426 400 404 409 411 423 434 443 453 463

Provisions 62 104 152 99 124 132 121 128 131 133 137 140 142

Deferred tax liabilities 44 19 9 21 17 17 19 18 19 20 20 20 21

Total non-current liabilities 2805 2512 2675 2423 2563 2674 2621 2663 2749 2807 2871 2934 2994

Total Liabilities 4492 3987 4027 3823 4155 4231 4177 4258 4374 4475 4579 4676 4774

Net Assets 829 922 691 3823 4155 4231 4177 4258 4374 4475 4579 4676 4774

Shareholders' Equity

attributable to the Group

809 900 673

36 4100 4095 4126 4177 4282 4397 4491 4586 4684

Minority interests 20 22 18 3859 -55 -136 -50 -82 -92 -78 -88 -90 -89

Reserves 254 27

36

-

55

-

136

-

50

-

82

-

92

-

78

-

88

-

90

-

89

Profit for the period attributable to the

Group

Total Shareholders ' Equity 829 922 691 757 846 957 1087 1243 1403 1568 1738 1913 2091

TOTAL LIABILITIES AND EQUITY 5321 4909 4718 4580 5001 5188 5264 5501 5778 6044 6317 6589 6864

15

APPENDIX 3. BALANCE SHEET FORECAST

FY 2007 FY 2008 FY 2009 FY 2010 FY 2011 FY 2012 FY 2013 FY 2014 FY 2015OPERATING ACTIVITIESNet profit (loss) 147 151 202 223 181 40 -365 145 8Amortization, depreciation and write-downs: 141 184 219 231 233 223 214 204 175Stock Based Comp - 5 7 7 1 - - 5 7 Other non-cash adjustments -57 -39 33 -22 -60 39 299 -226 45

Changes in Non-cash working capital 5 -8 -25 -77 -106 -161 85 23 -69

(Increase) decrease in inventories -10 -7 2 -1 -20 -14 6 -2 -1

Decrease (increase) in trade receivables - -44 - - - - - - -

Increase (decrease) in trade payables 84 44 - - - - - - -Changes in other receivables and other payables -70 - -27 -76 -86 -47 79 25 -68

Net cash from discontinued operations - - -14 -8 21 35 31 -2 26 Impairment of goodwill - - - - - - - -46 -Cash flow from operating activities before change in working capital

232 301 447 431 376 337 179 126 261

(Increase) decrease in inventories -10 -7 2 -1 -20 -14 6 -2 -1 Decrease (increase) in trade receivables - -44 - - - - - - -Increase (decrease) in trade payables 84 44 - - - - - - -Changes in other receivables and other payables -70 - -27 -76 -86 -147 79 25 -68 Total change in assets and liabilities 5 - 8 - 25 -77 -106 -161 85 23 - 69 Cash flow generated from (absorbed by) operating activities (A)

236 293 422 354 270 176 264 149 192

INVESTING ACTIVITIES:Change in fixed and intangibles capex -109 -161 -170 -139 -142 -137 -167 -119 -104 Disposals of fixed assets and intangibles 26 13 17 40 31 23 11 16 7 Acquisition of fixed assets and intangibles -135 -175 -187 -179 -173 -160 -178 -135 -111 Net change in long term investment - 6 - - - - - - -Cash flow generated from (absorbed by) operating investing activities (B)

-109 -161 -170 -139 -142 -137 -167 -119 -104

Net cash from acquisitions and divestures - - -118 -47 -124 -79 12 144 -6 (Purchase) sale of other investments, business units and securities

-135 -366 -23 2 16 15 3 7 13

Cash flow generated from (absorbed by) acquisition activities (C)

-135 -366 -141 -45 -108 -64 15 151 7

Cash flow generated from (absorbed by) investing activities (B+C)

-244 -527 -311 -184 -250 -201 -152 32 -97

FINANCING ACTIVITIES:Dividends paid -59 -75 -94 -103 -114 -120 -130 -138 -145 Cash from debt repayment 136 160 - -38 222 302 -197 -123 108 Cash from equity repurchase 1 277 3 - -13 -6 343 - -Other financing activities -10 -44 -58 -15 -28 -13 -1 -43 -31 Cash flow generated from (absorbed by) financing activities (D)

68 318 -149 -156 67 163 15 -304 -68

Effect of Foreign Exchange activities - - -32 1 -23 -36 -28 -11 -22 Flows of cash and cash equivalents (A+B+C+D) 61 84 -70 15 64 102 99 -134 5Cash and cash equivalents at beginning of period* 308 382 562 309 351 433 469 532 422Other changes in cash and cash equivalent elements 75 180 -253 42 82 36 63 -110 21Cash and cash equivalents at the end of period 382 562 309 351 433 469 532 422 443Bank overdrafts 111 195 38 45 53 22 11 20 41Cash and cash equivalents at the end of period, net of bank overdrafts

271 367 271 306 380 447 521 402 402

*Including bank overdrafts included within disposal groups classified as held for saleD&A 141 184 219 231 233 223 214 204 175 %Sales 3.1% 3.1% 3.1% 3.2% 3.3% 3.1% 3.0% 2.9% 2.5%Working Capital 93 244 323 334 418 441 309 349 383 % Sales 2,1% 4,1% 4,6% 4,6% 6,0% 6,1% 4,4% 5,1% 5,6%Total CAPEX 135 175 187 179 173 160 178 135 111%Sales 3,0% 2,9% 2,7% 2,5% 2,5% 2,2% 2,5% 2,0% 1,6%Total CAPEX/D&A 0,95 0,95 0,85 0,77 0,74 0,72 0,83 0,66 0,63 Acquisitions CF 135 366 141 45 108 64 -15 -151 -7 % Sales -3,0% -6,2% -2,0% -0,6% -1,6% -0,9% 0,2% 2,2% 0,1%FCF 102 119 235 175 97 16 86 14 81 FCFF 157 196 316 259 187 103 173 92 122 FCFE 263 292 252 177 350 341 - 100 - 93 196 FCFE (post acquisitions) 398 657 393 222 458 405 - 115 - 244 189

Total Debt 1,273 1,865 1,903 1,955 2,229 2,462 2,210 2,161 2,278

Net Debt 818 1,211 1,510 1,522 1,726 1,937 1,639 1,695 1,786

Net Debt/EBITDA 2.08 2.29 2.37 2.36 2.81 3.18 2.97 3.17 3.46

Interest Paid 74 105 109 108 113 117 121 121 115

Effective Interest Rate 5.8% 5.7% 5.7% 5.5% 5.1% 4.8% 5.5% 5.6% 5.0%

Total Debt 1,273 1,865 1,903 1,955 2,229 2,462 2,210 2,161 2,278

16

APPENDIX 4. CASH FLOW STATEMENTREFORMULATED

Formula FY 2008 FY 2009 FY 2010 FY 2011 FY 2012 FY 2013 FY 2014 FY 2015 Activity RatiosInventory Turnover COGS/Avg Inventory 64.47 67.15 70.31 52.31 46.31 48.16 50.35 53.00 Days of Inventory on Hand (DOH)

Nr of days/Inventory Turnover

6 5 5 7 8 8 7 7

Receivables Turnover Revenue/Avg Receivables 5.24 5.14 5.16 4.63 4.74 4.90 5.02 5.12

Days of Sales Outstanding (DSO)Nr of days/Receivables

Turnover69.64 70.99 70.68 78.75 77.06 74.54 72.69 71.32

Payables turnoverPuchases/Avg Trade

Payables4.49 4.71 4.92 4.43 4.76 4.86 4.80 5.17

Nr of Days of Payables Nr of days/Trade Payables 81.3 77.5 74.1 82.4 76.7 75.2 76.0 70.6

Working Capital TurnoverRevenue/Avg Working

Capital35.19 24.74 22.09 18.53 16.83 18.83 20.94 18.75

Total Asset Turnover Revenue/Avg total Assets 1.27 1.30 1.38 1.27 1.29 1.29 1.35 1.43 Cash Conversion Cycle -6 -1 2 3 8 7 4 8 Liquidity Ratios FY 2008 FY 2009 FY 2010 FY 2011 FY 2012 FY 2013 FY 2014 FY 2015 Current Ratio Curr A/Curr L 1.28 1.25 1.34 1.50 1.70 1.35 1.32 1.46 Quick Ratio Curr A-inventories/Curr L 1.20 1.23 1.20 1.28 1.41 1.61 1.29 1.25 Cash Ratio Cash+Mk Sec/Curr L 0.38 0.27 0.29 0.34 0.37 0.34 0.32 0.36 Solvency Ratios FY 2008 FY 2009 FY 2010 FY 2011 FY 2012 FY 2013 FY 2014 FY 2015 Debt-to-assets ratio (total debt/total assets) 0.33 0.37 0.36 0.40 0.44 0.42 0.44 0.48 Debt-to-capital ratio (total debt/debt+equity) 0.56 0.57 0.55 0.59 0.67 0.73 0.70 0.77 Debt-to-equity ratio (total debt/total equity) 1.27 1.32 1.20 1.44 2.00 2.67 2.34 3.30 Net Debt/EBITDA 2.46 2.50 2.49 2.92 3.27 3.05 3.25 3.46

Financial Leverage Ratio(avg.total assets/avg total

eq)3.59 3.71 3.44 3.47 4.05 5.31 5.84 5.97

Interest Coverage (EBIT/Interest Payments) 5.03 5.85 5.97 5.44 5.21 4.55 4.41 4.49Profitability Ratios FY 2008 FY 2009 FY 2010 FY 2011 FY 2012 FY 2013 FY 2014 FY 2015 Gross Profit Margin (Gross Profit/Revenue) 0.22 0.22 0.22 0.22 0.20 0.18 0.20 0.19Operating Profit Margin (EBIT/Revenue) 0.09 0.09 0.09 0.09 0.09 0.08 0.08 0.08

Net profit Margin (Net Income/Revenue) 0.03 0.03 0.04 0.03 0.02 -0.03 0.01 0.00

Operating ROA (Operating Income/Avg

Total Assets)0.07 0.08 0.08 0.07 0.07 0.06 0.06 0.07

ROA(Net Income/Avg Total

Assets)0.04 0.04 0.05 0.04 0.02 -0.04 0.02 0.01

ROENet Income/Avg total

equity0.15 0.16 0.17 0.13 0.09 -0.24 0.09 0.03

Growth Ratios FY 2008 FY 2009 FY 2010 FY 2011 FY 2012 FY 2013 FY 2014 FY 2015 Revenue Growth 32.23% 18.23% 3.55% -4.02% 3.76% -2.31% -2.44% -0.38%EBITDA Growth 34.65% 20.45% 1.10% -4.65% -0.81% -9.67% -3.09% -3.37%Net Income Growth 8.86% 19.45% 15.04% -21.54% -42.16% -305.93% -133.74% -65.85%Du Pont Analysis FY 2008 FY 2009 FY 2010 FY 2011 FY 2012 FY 2013 FY 2014 FY 2015 ROAE 0.15 0.16 0.17 0.13 0.09 -0.24 0.09 0.03Net Profit Margin x 0.03 0.03 0.04 0.03 0.02 -0.03 0.01 0.00Total Asset Turnover x 1.27 1.30 1.38 1.27 1.29 1.29 1.35 1.43Leverage 3.59 3.71 3.44 3.47 4.05 5.31 5.84 5.97

17

APPENDIX 5. RATIO ANALYSIS

-0.05

0.00

0.05

0.10

0.15

0.20

0.25

Gross Profit Margin Operating Profit Margin Net profit Margin

Profit Margins

FY 2008 FY 2009 FY 2010 FY 2011FY 2012 FY 2013 FY 2014 FY 2015

-

1.00

2.00

3.00

4.00

5.00

6.00

7.00

FY 2008 FY 2009 FY 2010 FY 2011 FY 2012 FY 2013 FY 2014 FY 2015

Solvency

Net Debt/EBITDA Financial Leverage Ratio Interest Coverage

45%

48%

45%

40% 41% 41% 41%42%

12%14% 13%

12% 13% 12% 12%13%

36.00%

38.00%

40.00%

42.00%

44.00%

46.00%

48.00%

50.00%

0.00%

5.00%

10.00%

15.00%

20.00%

ROE/ROCE

ROCE (less acquisitions) ROCE (incl acquisitions)

RATIO ANALYSIS 2016 E 2017 E 2018 E 2019 E 2020 E 2021 E 2022 E 2023 E 2024 E 2025 E

Activity Ratios 2016 E 2017 E 2018 E 2019 E 2020 E 2021 E 2022 E 2023 E 2024 E 2025 E

Inventory Turnover 113 58 56 57 58 57 57 56 56 55

Days of Inventory on Hand

(DOH) 3.2 6.3 6.5 6.4 6.3 6.4 6.4 6.5 6.6 6.6

Receivables Turnover 10.21 3.44 3.52 5.62 5.69 5.64 5.58 5.54 5.49 5.45

Days of Sales Outstanding

(DSO) 35.75 106.17 103.66 64.99 64.10 64.71 65.36 65.91 66.50 66.97

Payables turnover 11.31 5.52 5.52 5.90 5.99 6.11 6.20 6.26 6.35 6.44

Nr of Days of Payables 32.3 66.1 66.1 61.9 61.0 59.7 58.8 58.3 57.5 56.7

Working Capital Turnover 35.71 18.70 18.95 19.33 19.34 19.30 19.28 19.28 19.26 19.26

Total Asset Turnover 3.01 1.55 1.52 1.55 1.57 1.55 1.54 1.52 1.51 1.50

Cash Conversion Cycle 7 46 44 9 9 11 13 14 16 17

Liquidity Ratios 2016 E 2017 E 2018 E 2019 E 2020 E 2021 E 2022 E 2023 E 2024 E 2025 E

Current Ratio 1.39 2.43 1.54 1.39 1.39 1.39 1.34 1.31 1.28 1.24

Quick Ratio 1.32 2.36 1.46 1.31 1.31 1.31 1.26 1.23 1.19 1.15

Cash Ratio 0.33 0.39 0.41 0.30 0.26 0.22 0.16 0.10 0.04

-

0.02

Solvency Ratios 2016 E 2017 E 2018 E 2019 E 2020 E 2021 E 2022 E 2023 E 2024 E 2025 E

Debt-to-assets ratio 0.50 0.50 0.49 0.48 0.46 0.45 0.44 0.43 0.43 0.42

Debt-to-capital ratio 0.75 0.75 0.73 0.70 0.67 0.65 0.63 0.61 0.59 0.58

Debt-to-equity ratio 3.03 2.95 2.65 2.30 2.06 1.87 1.71 1.58 1.47 1.37

Net Debt/EBITDA 3.40 3.20 3.00 2.80 2.80 2.80 2.80 2.80 2.80 2.80

Financial Leverage Ratio 6.05 5.98 5.65 5.11 4.62 4.26 3.98 3.74 3.54 3.36

Interest Coverage 4.79 4.90 5.19 5.61 5.94 6.01 6.09 6.17 6.26 6.34

Profitability Ratios 2016 E 2017 E 2018 E 2019 E 2020 E 2021 E 2022 E 2023 E 2024 E 2025 E

Gross Profit Margin 19.0% 19.2% 19.5% 19.5% 19.8% 19.8% 19.8% 19.8% 19.8% 19.8%

Operating Profit Margin 8.0% 8.2% 8.5% 8.7% 9.0% 9.0% 9.0% 9.0% 9.0% 9.0%

Net profit Margin 3.2% 3.3% 3.6% 3.8% 4.0% 4.0% 4.1% 4.1% 4.1% 4.1%

Operating ROA 18.6% 10.0% 10.2% 10.7% 11.3% 11.2% 11.1% 11.0% 10.9% 10.8%

ROAA 9.6% 5.2% 5.5% 5.9% 6.3% 6.3% 6.2% 6.2% 6.2% 6.2%

ROAE 30.2% 31.0% 30.9% 30.0% 29.2% 26.8% 24.9% 23.2% 21.9% 20.7%

Growth Ratios 2016 E 2017 E 2018 E 2019 E 2020 E 2021 E 2022 E 2023 E 2024 E 2025 E

Revenue Growth 0.42% 7.79% 4.33% 4.25% 4.40% 3.90% 3.70% 3.70% 3.50% 3.50%

EBITDA Growth 6.39% 11.23% 7.89% 6.71% 8.00% 3.90% 3.70% 3.70% 3.50% 3.50%

Net Income Growth 681.13% 13.54% 12.17% 10.17% 10.96% 4.21% 4.07% 4.06% 3.85% 3.86%

Du Pont Analysis 2016 E 2017 E 2018 E 2019 E 2020 E 2021 E 2022 E 2023 E 2024 E 2025 E

ROAE 0.30 0.31 0.31 0.30 0.29 0.27 0.25 0.23 0.22 0.21

Net Profit Margin x 0.03 0.03 0.04 0.04 0.04 0.04 0.04 0.04 0.04 0.04

Total Asset Turnover x 3.01 1.55 1.52 1.55 1.57 1.55 1.54 1.52 1.51 1.50

Asset / Equity 6.05 5.98 5.65 5.11 4.62 4.26 3.98 3.74 3.54 3.36

18

APPENDIX 6. RATIOS PROJECTION

G4S FY2012 £m FY2013 £m FY2014 £m FY2015 £m FY2016 £m New Contracts Won Annual Value 1100 1300Total Contract Value Of New Contracts Won

2100 2400

Annual Pipeline Value 3500 6300

Suspects and Prospects 2900 3900 3900 410034% 0% 5%

Bidding 1300 1100 1100 1200-15% 0% 9%

Negotiation 450 800 500 700 1000-38% 40% 43%

Revenue % By SegmentCash Solutions 0,18Secure Solutions Government 0,23Secure Solutions Commercial 0,59

19

APPENDIX 7. REGIONAL REVENUE GROWTHCOMPARISON WITH COMPETITORS

G4S revenue by region (excl. discont. ops.) FY2012 £m FY2013 £m FY2014 £m FY2015 £m

Africa 465 496 484 470

Growth 7% -2% -3%

Asia Middle East 1353 1372 1330 1421

Growth 1% -3% 7%

Latin America 644 693 685 626

Growth 8% -1% -9%

Emerging Markets Total 2462 2561 2499 2517

Growth 4% -2% 1%

Europe 1604 1526 1438 1304

Growth -5% -6% -9%

North America 1338 1359 1365 1523

Growth 2% 0% 12%

UK & Ireland 1620 1615 1587 1519

Growth 0% -2% -4%

Developed Markets Total 4562 4500 4390 4346

Growth -1% -2% -1%

Olympics Revenue 204

Group Total 7228,00 7061,00 6889,00 6863,00

Growth 3,76% -2,31% -2,44% -0,38%

Securitas AB Revenue Breakdown FY2012 £m FY2013 £m FY2014 £m FY2015 £m

Europe 3051,5 3212,4 3102,5 2916,8

5% -3% -6%

North America 2193,8 2242,7 2215,3 2414,9

2% -1% 9%

Developed Markets Total 5245,3 5455,1 5317,8 5331,7

4% -3% 0%

Ibero America 870,6 909,8 818,9 845,1

5% -10% 3%

Emerging Markets Total 870,6 909,8 818,9 845,1

5% -10% 3%

Group Related 78,7 87 89,2 101,7

11% 3% 14%

Group Total 6194,6 6451,9 6225,9 6278,5

4% -4% 1%

Prosegur FY2012 £m FY2013 £m FY2014 £m FY2015 £m

Rest of World (40% emerging markets) 390 384 414 372

-1% 8% -10%

Argentina 363 529 484 646

46% -8% 33%

Brasil 873,4 912 840 649,94% -8% -23%

Total Emerging Markets (approx) 1626 1826 1739 1668

12% -5% -4%

Spain 765 736 690 651

-4% -6% -6%

Rest of World (60% developed markets) 585 576 621 558

Total Developed Markets (approx) 1350 1312 1311 1208

Group Total 2976 3138 3050 2876

-15%

-10%

-5%

0%

5%

10%

15%

FY2013 FY2014 FY2015

Emerging markets growth rate

Prosegur Securitas AB G4S

-10%

-5%

0%

5%

FY2013 FY2014 FY2015

Developed markets growth rate

Prosegur Securitas AB G4S

-10%

-5%

0%

5%

10%

FY2013 FY2014 FY2015

Group total growth rate

Prosegur Securitas AB G4S

0%

5%

10%

15%

20%

25%

30%

35%

40%

2006 2008 2010 2012 2014

Revenue By Region as % of Group Revenue

UK and Ireland

Continental Europe

North America

Middle East and Gulf States

Latin America and Carribean

Africa

APAC

2015 2016E 2017E 2018E 2019E 2020EUK and Ireland 1519as % of total revenue 22% 24,0% 24,0% 24,0% 24,0% 24,0%Revenue Growth -4%Continental Europe 1304as % of total revenue 19% 18,6% 18,3% 18,0% 17,7% 17,3%Revenue Growth -14%North America 1523as % of total revenue 22% 22,1% 22,0% 22,0% 21,9% 21,8%Revenue Growth -7%Middle East and Gulf States 486as % of total revenue 7% 5,8% 5,8% 5,8% 5,8% 5,8%Revenue Growth 7%Latin America and Caribbean 626as % of total revenue 9% 9,2% 9,3% 9,3% 9,4% 9,5%Revenue Growth -9%Africa 470as % of total revenue 7% 6,9% 6,9% 6,9% 6,9% 7,0%Revenue Growth -3%APAC 935as % of total revenue 14% 13,7% 13,9% 14,0% 14,1% 14,2%Revenue Growth 7% 0,4% 0,2% -0,1% -0,3% -0,5%

20

APPENDIX 8. REGIONAL REVENUE GROWTHPROJECTION (ECONOMIC OUTLOOK)

GDP Nominal ($Bn) 2015 2016E 2017E 2018E 2019E 2020E(Source: IMF World Economic Outlook)UK & Ireland 2849 2761 2885 2999 3123 3256Growth -5% -3% 5% 4% 4% 4%Euro Area 11540 11853 12269 12634 13068 13553Growth -14% 3% 4% 3% 3% 4%North America 17947 18558 19285 20145 21016 21874Growth 3% 3% 4% 4% 4% 4%Middle East and Gulf States 2855 2773 2991 3202 3422 3645Growth -11% -3% 8% 7% 7% 7%Latin America And Carribean 5052 4504 4654 4846 5116 5410Growth -15% -11% 3% 4% 6% 6%Sub Saharan Africa 1484 1478 1620 1748 1853 1959Growth -12% 0% 10% 8% 6% 6%APAC 15571 16333 17650 19207 21020 23164Growth 4% 5% 8% 9% 9% 10%

Revenue Weighted Nominal GDP Growth -5,4% 0,0% 5,1% 5,0% 5,2% 5,3%

GDP Growth Real (%) 2015 2016E 2017E 2018E 2019E 2020E(Source: IMF Database)UK & Ireland 2% 2% 2% 2% 2% 2%Euro Area 2% 2% 2% 2% 2% 2%EU 2% 2% 2% 2% 2% 2%North America

Canada 1% 1% 2% 2% 2% 2%US 2% 2% 3% 2% 2% 2%Aggregate 2% 2% 2% 2% 2% 2%

Middle East and Gulf States 2% 3% 3% 3% 4% 4%Latin America And Carribean 0% 0% 2% 2% 3% 3%Sub Saharan Africa 3% 3% 4% 4% 5% 5%APAC 7% 6% 6% 6% 6% 6%

Revenue Weighted Real GDP Growth 2,6% 2,5% 2,9% 2,9% 2,9% 2,9%

2015 2016E 2017E 2018E 2019E 2020ERevenue (£MM) 6 863,00 6 891,63 7 427,86 7 749,84 8 079,40 8 434,68Growth (%) -0,4% 3% 16,0% 4,3% 4,3% 4,4%

Note 1: FX Gain of 11.5% for 2017 and (11.5%/2) for 2016

Note 2: Includes £121MM reduction in revenue from sale of G4S Israel (2016)

Note 3: Estimates include 0.84 scaling factor to take into account volatility of G4S vs weighted nominal GDP growth

All data in £m

Revenue Acq. Disp.Acquisition of Business (CF)

Acquisition CF as

% of Revenue

Divesture of Business (CF)

GoodwillNon

Current Assets

2004 3093,6 93,3 3,0% -0,8 1096,3 1946,4

2005 4045,7 9,57 37,19 69,7 -25% 1,7% 42,1 1176,3 1966,7

2006 4036,8 5,91 0 96,7 39% 2,4% 9,9 1175,6 1996,1

2007 4483,5 380,9 24,86 151,6 57% 3,4% 7,9 1331,3 2223,5

2008 5928,5 59,34 34,98 419,4 177% 7,1% 43,3 2079,5 3432,5

2009 7009 119,56 0 128 -69% 1,8% 10 2049 3319

2010 7258 37,94 0 59 -54% 0,8% 12 2159 3400

2011 6966 9,25 0 165 180% 2,4% 41 2205 3420

2012 7228 28,16 8,47 101 -39% 1,4% 22 2108 3222

2013 7061 0 69,24 23 -77% 0,3% 35 1955 2979

2014 6889 0 123,48 15 -35% 0,2% 159 1924 2963

2015 6863 0 0 20 33% 0,3% 1828 2749

2016 0 154,18

21

APPENDIX 9. MERGERS AND ACQUISITIONS

0

100

200

300

400

2006 2008 2010 2012 2014 2016

High Value M&A Activity

Major Acquisition Activity Sales

0

100

200

300

400

500

2004 2006 2008 2010 2012 2014 2016

Acquisition CF

0.0%

1.0%

2.0%

3.0%

4.0%

5.0%

6.0%

7.0%

8.0%

2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

Acquisition CF As % of Revenue

0

50

100

150

200

2006 2008 2010 2012 2014 2016

Divesture CF

0

500

1000

1500

2000

2500

2004 2006 2008 2010 2012 2014 2016

Goodwill

0

1000

2000

3000

4000

2004 2006 2008 2010 2012 2014 2016

Total Fixed Assets

Relative strength

Date FTSE100 G4S (p) RS Scaled RS

03.02.2017 7188,3 252,4 0,035 0,977

31.01.2017 7099,2 255,2 0,036 1,093

30.12.2016 7142,8 235 0,033 0,914

30.11.2016 6783,8 244,1 0,036 1,137

31.10.2016 6954,2 220 0,032 0,958

30.09.2016 6899,3 227,8 0,033 0,971

31.08.2016 6781,5 230,6 0,034 1,227

29.07.2016 6724,4 186,3 0,028 0,985

30.06.2016 6504,3 182,9 0,028 0,937

31.05.2016 6230,8 186,9 0,030 0,994

29.04.2016 6241,9 188,4 0,030 0,978

31.03.2016 6174,9 190,6 0,031 0,904

29.02.2016 6097,1 208,1 0,034 0,916

29.01.2016 6083,8 226,8 0,037 1,000

‹ CURRENT TREND: Investors currently are bullish on G4S as we cansee that the 50-days moving average penetrates the 200-daysmoving average from below in September 2016 (when the price hasrisen to a new equilibrium) and the stock price is rising above themoving average even since. The current primary trend is positive andthe recent peak has risen above the last peak with the recentthrough been above the latest one. The strong performance of thestock is also confirmed by the scaled relative strength: scaled RS didnot penetrate 0.9 within the past year (a stable performance).

‹ On the other hand, despite the growth in January, which can beattributed to a known ‘January effect’, the trading volume was verylow. Overall, although we observe the positive trend in the market,we shall note that the market is biased when assessing theperformance of an equity. We expect a high volatility in the marketfollowing the 8th of March when the annual results will be releasedand a decline in price as the results will likely not meet themanagement expectation of 6%. The current low trade volume maysignal a potential trend reversal.

22

APPENDIX 10. TECHNICAL ANALYSIS

140

160

180

200

220

240

260

280

Last Price MA 50 MA 200

0

5000000

10000000

15000000

20000000

Bullish

Bullish

Peak above

Through above

Peak above

Source: Bloomberg

Advance-Decline line table

Date 03.02.2017 02.02.2017 01.02.2017 31.01.2017 30.01.2017

Issues traded 8 575 893 6 521 150 11 787 935 22 357 528 11 283 483

Advances 3 433 445 2 238 881 3 282 735 8 746 217 6 404 204

Declines 3 095 035 2 438 142 4 289 975 5 524 765 2 849 957

Net advances 338 410 - 199 261 - 1 007 240 3 221 452 3 554 247

Cumulative net advances

5 907 608 5 569 198 5 768 459 6 775 699 3 554 247

Source: Bloomberg

-

2,000,000

4,000,000

6,000,000

8,000,000

Cumulative net advances

Cass Business School 23

Disclosures: Ownership and material conflicts of interest:

The author(s), or a member of their household, of this report does not hold a financial interest in the securities of this company. The author(s), or a member of their household, of this report does not know of the existence of any conflicts of interest that might bias the content or publication of this report. Receipt of compensation:

Compensation of the author(s) of this report is not based on investment banking revenue. Position as a officer or director:

The author(s), or a member of their household, does not serve as an officer, director or advisory board member of the subject company. Market making:

The author(s) does not act as a market maker in the subject company’s securities. Disclaimer:

The information set forth herein has been obtained or derived from sources generally available to the public and believed by the author(s) to be reliable, but the author(s) does not make any representation or warranty, express or implied, as to its accuracy or completeness. The information is not intended to be used as the basis of any investment decisions by any person or entity. This information does not constitute investment advice, nor is it an offer or a solicitation of an offer to buy or sell any security. This report should not be considered to be a recommendation by any individual affiliated with CFA Society United Kingdom, CFA Institute or the CFA Institute Research Challenge with regard to this company’s stock.

CFA Institute Research Challenge