The proceeds of the issue were used to reduce drawings against the revolving credit facility. At the time of receipt the group had, in accordance with treasury policy, converted 55% of its US dollar interest exposure from floating rates into fixed rates through interest rate swaps. Therefore, the fixed interest rates payable on the notes were swapped into floating rates for the term of the notes, at an average margin of 0.60% over Libor, so that the proportion of group debt held under fixed interest rates remained at 55%.

On 7 March 2008 the group signed committed bank facilities amounting to £350m. These facilities expire on 31 December 2008, although the group can exercise an option to extend the facilities to 30 June 2009. The margin is 0.35% over Libor. The purpose of these facilities is to provide the group with headroom whilst assessing options in the capital markets. The group does not expect to draw down on these facilities.

The group has other short-term committed facilities of £30m and uncommitted facilities of £411m.

The group’s net debt at 31 December 2007 of £804.9m represented a gearing of 72%. The group has sufficient capacity to finance current investment plans.

Interest rates The group’s investments and borrowings at 31 December 2007 were, after taking into account the swap in respect of the loan notes issued in March, at variable rates of interest linked to Libor and Euribor, with the group’s exposure being predominantly to interest rate risk in US dollar and euro. The group’s interest risk policy requires treasury to fix a proportion of net debt on a sliding scale, with a maximum of 80% short term debt held at fixed rates, reducing to a maximum of 20% of medium term debt held at fixed rates, utilising interest rate swaps. The maturity of these interest rate swaps at 31 December 2007 was limited to five years. The market value of the loan note related pay-variable receive-fixed swaps outstanding at 31 December 2007, accounted for as fair value hedges, was a gain of £14.3m. The market value of the pay-fixed receive-variable swaps outstanding at 31 December 2007, accounted for as cash flow hedges, was a loss of £5.1m.

Foreign currency The group has many overseas subsidiaries and associates whose results and net assets are denominated in various different currencies. Treasury policy is to manage significant translation risks in respect of net operating assets and income denominated in foreign currencies by using borrowings denominated in foreign currency supplemented by forward foreign exchange contracts.

The most significant currency movements during both 2007 and 2006 were the in the US dollar. The average rate for the dollar during 2007 was $2.00=£1 compared to $1.85=£1 for 2006. However, the rate at 31 December 2007 of $1.99=£1 was closer to the rate of $1.96=£1 at 31 December 2006. This variance has impacted the group’s dollar-denominated assets and assets denominated in New Market currencies that follow the dollar. In contrast, the average rate for the euro during 2007 of €1.46=£1 was very close to the average for 2006 of €1.47=£1. But the rate for December 2007 of €1.36=£1 was significantly below the rate of €1.48=£1 at 31 December 2006. This variance has impacted the group’s euro-denominated assets and assets denominated in European currencies that follow the euro. Exchange differences on the translation of foreign operations included in the statement of recognised income and expense amount to gain of £18.4m (2006: loss of £31.0m). These differences include a £12.2m loss (2006: £55.4m gain) on the retranslation of net debt, a £4.3m cash outflow (2006: £11.8m inflow) from forward exchange contracts and a £19.0m loss (2006: £11.6m gain) on the market valuation of outstanding forward contracts.

The market value of forward contracts outstanding at 31 December 2007 was a loss of £13.6m.

Cash management To assist the efficient management of the group’s interest costs and its short term deposits, overdrafts and revolving credit facility drawings, the group operates a global cash management system. At 31 December 2007, 83 group companies participated in the pool, with the number continuing to grow. Debit balances of £82.9m and credit balances of £84.5m were held within the cash pool. IFRS does not permit the netting off of these balances, which are therefore disclosed gross within current assets and current liabilities.

Retirement benefit obligations The group’s primary defined benefit retirement benefit schemes are those operated in the UK, but it also operates such schemes in a number of countries, particularly in Europe and North America. The latest full actuarial assessments of the UK schemes were carried out at 31 March 2007 in respect of the Group 4 scheme (approximately 8,000 members in total) and at 5 April 2006 in respect of the Securicor scheme (approximately 20,000 members in total). These assessments and those of the group’s other schemes have been updated to 31 December 2007, including the review of longevity assumptions. The group’s funding shortfall on the valuation basis specified in IAS19 Employee Benefits was £136m before tax or £98m after tax (2006: £226m and £158m respectively).

The valuation of gross liabilities was broadly unchanged from 2006, with the charge of the year’s finance cost being offset by an increase in the appropriate AA corporate bond rate from 5.2% to 5.8%. The value of the assets held in the funds increased by £77m during 2007, assisted by additional company contributions of £26m.

The group believes that the short-term volatility in reported retirement benefit obligations, in response to movements in asset prices and financial circumstances, is of limited relevance in the context of liabilities which are exceptionally long-term in nature and furthermore that, over the long term, investment returns on the retirement benefit scheme assets will be sufficient to fund retirement benefit obligations. However, in recognition of the regulatory obligation upon pension fund trustees to address reported deficits if they arise, the group anticipates that additional cash contributions will continue to be made at a similar level to that in 2007. This level of contributions will be reviewed annually and formally reassessed at the next actuarial valuation dates, which are 5 April 2009 in respect of the Securicor scheme and 31 March 2010 in respect of the Group 4 scheme.

Corporate governance The group’s policies regarding risk management and corporate governance are set out in the Corporate Governance Statement on pages 34 to 36 of the accounts.

Going concern The directors are confident that, after making enquiries and on the basis of current financial projections and available facilities, they have a reasonable expectation that the group has adequate resources to continue in operational existence for the foreseeable future. For this reason they continue to adopt the going concern basis in preparing the financial statements.

Risks All businesses are subject to risk and many individual risks are macro-economic or social and common across many businesses. Many risks are to a greater or lesser extent controllable, but some are not controllable. Through its internal risk management process, the group identifies business-specific risks. It classifies the key risks as those which could materially damage the group’s strategy, reputation, business, profitability or assets and these risks are listed below. This list is in no particular order and is not an exhaustive list of all potential risks. Some risks may be unknown and it may transpire that others currently considered immaterial become material.