REG - Hill & Smith Hdgs. - 2015 Annual Report and Notice of 2016 AGM <Origin Href="QuoteRef">HILS.L</Origin> - Part 1
RNS Number : 3359VHill & Smith Hldgs PLC15 April 2016Hill & Smith Holdings PLC (the 'Company')
2015 Annual Report and Notice of 2016 Annual General Meeting ('AGM')
Hill & Smith Holdings PLC has today posted, or otherwise notified as being available on its website www.hsholdings.com, the following documents:
1. 2015 Annual Report
2. Notice of 2016 AGM
In accordance with Listing Rule 9.6.1 a copy of each of these documents has been uploaded to the National Storage Mechanism and will be available for viewing shortly.
A hard copy of the 2015 Annual Report can be obtained upon request to the Company Secretary, Hill & Smith Holdings PLC, Westhaven House, Arleston Way, Shirley, Solihull, B90 4LH.
The statutory accounts for the year ended 31 December 2015 have been approved by the Board and will be delivered to the Registrar of Companies following the Company's AGM.
Compliance with Disclosure and Transparency Rule 6.3.5 ('DTR 6.3.5') - Extracts from the 2015 Annual Report.
The information below, headed as Appendix A, B and C, and which is extracted from the 2015 Annual Report, is included solely for the purpose of complying with DTR 6.3.5 and the requirements it imposes on how to make public Annual Financial Reports. It should be read in conjunction with the Company's Preliminary Announcement issued on 9 March 2016 (available at www.hsholdings.com). Together these constitute the material required by DTR 6.3.5 to be communicated to the media in unedited full text through a Regulatory Information Service. This material is not a substitute for reading the full 2015 Annual Report. All page numbers and cross-references in the extracted information below refer to page numbers in the 2015 Annual Report.
Appendix A - Principal Risks and Uncertainties
Risk and potential impact
Mitigation
Link to Strategy
Economic
Managing the impact
of those risks which
we cannot eliminate
or mitigate at source;
e.g. global market
conditions.
Competitive pressure puts downward
force on revenue growth, market
positioning and profitability.
Implementation of procurement standards to help manage cost
creep.
Ongoing subsidiary quality assurance improvement initiatives.
Product differentiation through product quality, delivery
performance, reliability and professional customer service.
Product development and geographical expansion initiatives are
used to surpass present competitor reach.
Portfolio management
Geographic diversification
Target returns and leverage
Entrepreneurial culture
Overall market or selective geographical
conditions deteriorate or there is a
reduction in demand leading to a
decline in Government and private
sector confidence and spending,
affecting Group financial performance.
Diversification into new markets and territories.
New product development.
Close relationship between Group and subsidiary management.
Expansion into new export markets.
Intra-Group co-operation, leveraging the Group global footprint.
Contracts negotiated with customers on a Group wide basis
leveraging Group size and synergies between Group companies.
Volatility in raw materials markets
reduce availability and increase cost of
raw materials putting Group margins
under pressure and impacting Group
financial performance.
Use of Group procurement standards requiring dual sourcing and
robust due diligence of supply chain partners.
Hedging against raw material price volatility where appropriate.
Contractual protections sought against raw material fluctuation
impacts.
Foreign exchange rates could impact
Group financial performance by
potentially eroding commercial margins
At the inception of contracts involving foreign currency cash
flows, the Group uses derivative instruments including forward
currency contracts to mitigate the risk of subsequent movements
in foreign exchange rates.
**Global economic events, profound
social instability or failure of national
governance in any of the territories in
which we operate impacting our ability
to manufacture and ultimately our
financial performance.
Diversification into new markets and territories.
Pursuing opportunities in the private sector.
Maintaining close relationships with Government agencies
Human
Resources
Recognising the
importance of
recruitment, talent
management,
employee
engagement
and employee
management to our
Group.
A loss of key staff and a failure to
implement effective succession
planning could lead to a loss of
expertise, impacting technical and
financial performance.
Development and implementation of a Group succession
planning model, driven by the Group Chief Executive.
Implementation of contractual protections and retentions in
employment contracts.
Group policy supporting the training and development of its
employees.
Geographic diversification
Entrepreneurial culture
A failure to recruit employees who
have the relevant skills, experience and
attributes could impact the Group's
ability to achieve its optimum growth
potential.
Competitive remuneration, benefits and incentive plans offered
to employees and regularly benchmarked.
Development of a recruitment process including competency
requirements and skills gap analysis.
Value based culture.
The geographical spread of
management and the appointment
of new management teams could
compromise effective communication
and responsiveness impacting the
Group's strategic goals.
Use of internal communications systems, e.g. Group intranet.
Regular international conferences held at the subsidiary level.
A formal delegation of authorities structure has enhanced
ownership and control, whilst encouraging entrepreneurial drive
and spirit.
Entrepreneurship is encouraged as a key tenet of the Group's
business strategy and the adoption of a singular business culture
is, therefore, not always possible and flexibility in the Group's
management style is favoured instead.
The Group Code of Business Conduct establishes core behaviours
expected of all staff.
Operational
Ensuring that we
take all necessary
steps to manage risk in our manufacturing
plants and our
installation activity
both in our facilities
and in the field.
A failure to manage our property
portfolio effectively, could lead to
production downtime and reduce
our potential for increased income
generation. Production capability and
capacity restrictions could reduce our
ability to meet demand. Downtime
caused by plant failure, loss of utilities
or natural catastrophe could suppress
performance on an extended basis.
Ongoing subsidiary site assessment of future space and
efficiency requirements and related investment in additional
capacity or equipment.
Subsidiary businesses are strengthening business continuity
plans to ensure that they are equipped to handle business
continuity events, including leveraging their proximity to other
Group subsidiaries and working with the IT Steering Committee
to mitigate systems downtime risks.
Subsidiary businesses implement local health, safety and
environmental controls which are monitored by health and
safety committee meetings and an external specialist.
Portfolio management
Geographic diversification
Target returns and leverage
Entrepreneurial culture
Insufficient investment in research
and development and/or a failure to
innovate restricting organic growth and
geographical diversification ultimately
resulting in the longer term financial
goals being compromised. Regulatory
and customer approvals can delay the
introduction of products which are
developed by the Group, ultimately
resulting in the short to medium term
financial goals being compromised.
Subsidiary discretion to engage in research and development
activities, subject to budgetary constraints.
Robust quality controls in place.
Dedicated quality compliance resources in most affected
subsidiaries who have conducted research and implemented
controls to ensure responsiveness to regulator and customer
approvals information requests and audits.
Board consideration of emerging risks including seeking external
specialist support and internal identification of emerging risks at
both the subsidiary and Group level. Both the onset of the risk
and the potential opportunities it may generate for the Group
are being considered.
Acquisition of new subsidiary businesses which have advanced
IT solutions and could be applied Group-wide.
Active portfolio management is a key
tenet of the Group's strategy and as
such, if the management of our merger
and acquisitions activity, integrations
and business restructuring is ineffective,
the Group may not meet its strategic
and business goals and financial
performance targets.
Comprehensive and structured due diligence protocols are
deployed in respect of investigating target businesses and
contractual assurances are sought from sellers to mitigate any
identified issues or risks.
Employment contract terms and conditions are aligned post integration
between Group employees and new employees,
facilitating smooth integration.
Formal Board level approvals are required in accordance with
the Group's delegation of authority structure for any acquisitive
activity.
A standardised and proven 100 Day Integration Plan is followed
post-acquisition to streamline the integration process
Inadequate and weak IT systems can
affect the Group's financial performance
and its ability to be responsive to its
customers.
The Group's IT Steering Committee reviews IT systems capability,
suitability and integrity on a regular basis.
The capital expenditure approval process is used to test the
suitability of proposed IT system enhancements.
IT Policies are included in the Group policy manual.
Supply chain failures through
performance, cost and/or solvency
issues could destabilise production
capability and ultimately lead to a
reduction in sales performance.
Implementation of Group procurement standards requiring dual
sourcing and robust due diligence of supply chain partners.
Robust contractual protections sought.
Dedicated procurement functions at subsidiary level.
Regular interaction with key suppliers helps maintain
relationships and understand supplier capacity, performance
and financial status.
**Project delay or cancellation (internal
or external factors) including a
reduction in government spending,
inclement weather or a delay in the
new product approvals process.
Diversification into new markets and territories.
Pursuing opportunities in the private sector.
Maintaining close relationships with customers.
Commercial
& Financial
Mitigating internal
and external
commercial and
financial trading risks
in our day to day
business activities.
The cost of remediating product failures
or defects caused by production or
quality issues can lead to claims for
loss and damage, adverse customer
perceptions, reputational and financial
consequences for the Group.
Regulatory approvals, testing and accreditations obtained.
Rigorous quality control protocols are fully implemented and
enhanced whenever possible.
Policies in respect of handling product failures have been
strengthened.
Contractual controls help mitigate the economic impacts.
Insurance cover is provided globally by insurers of repute.
Litigation is managed by external legal specialists from reputable
firms.
Portfolio management
Geographic diversification
Target returns and leverage
Entrepreneurial culture
The size of the Group's available
customer base, together with the
risk of losing key customers, changes
in customer buying behaviours or
significant worsening of contractual
terms could result in Group financial
under performance.
Products and geographical markets diversification.
Ongoing monitoring of the timing and trends in government
funding for road and infrastructure spending.
Generation of contractual guidance and precedent
documentation to preserve contractual terms.
Contracts reviewed under the delegation of authorities structure.
An inability to collect cash in
accordance with customer payment
terms, obtain credit insurance or an
increase in anticipated bad debts would
result in an inability to plan financially
with any certainty and achieve the
Group's financial ambitions.
Subsidiary cash management is monitored by the Group finance
function.
Standardisation of payment terms.
The delegation of authorities process results in contractual
payment terms being centrally reviewed and approved.
Credit ratings agencies continue to be used as a source of risk
assessment and credit insurance is effectively deployed.
The Group's ability to ensure it does
not accept unduly onerous contractual
commitments is central to its
commercial risk management and to
mitigate the risks of poor performance
due to factors within or outside of its
control. This, together with ineffective
contracts management post award,
could pressurise margins and increase
liabilities ultimately impacting the
Group's financial performance and
reputation.
Contract precedents and guidance have been produced and
new standard terms produced for certain subsidiary businesses.
Further work ongoing in this sphere during 2016.
Advice in respect to contractual risk is available to the Group,
together with legal, commercial and financial support from the
central team.
The operation of the delegation of authorities process requires
Group senior management and/or Executive Director approval
for the execution of material contracts.
Roll out of contracts training in the UK and US during 2015,
further training to be held during 2016.
Certain of the Group's subsidiaries have appointed dedicated
quantity surveyors and contracts managers to control their
projects.
Future investment projects and the
growth in foreign earnings for the Group
are adversely affected. The Group is
affected by the short term risk that its
earnings may be impacted by certain
financial risks e.g. credit and liquidity
risks and foreign exchange volatility. The
Group operates in a range of different
jurisdictions, political and fiscal regimes,
which present operating and cultural
risks
From a transactional perspective, Group companies operate
a common set of reporting policies and procedures. An
internal audit programme underpins compliance and further
requirements are communicated via the Group intranet and
directly to the financial professionals around the Group.
The Group benefits from centralised cash and banking controls
and the Group Financial Controller acts to govern and monitor all
financial controls applicable across the Group.
Regular monitoring of tax developments in relevant jurisdictions
assists to ensure that the Group utilises the most appropriate tax
structures.
Specialist and/or local independent tax advice is sought as appropriate from reputable accounting practices.
Legal &
Regulatory
Ensuring compliance
with the laws
and regulations
which govern the
operations in the
territories in which
we operate.
The impact of regulatory changes
such as green initiatives (including
carbon footprint results) acts to create
additional process steps, enhanced
procurement requirements and
increases costs and administrative
effort, ultimately impacting margins.
This could also result in the non achievement
of Group environmental
aspirations.
These requirements are managed by specialists through agreed
Target returns and leverage
Entrepreneurial culture
Group initiatives including: economies of bulk purchasing, site
usage monitoring and reporting, energy market intelligence and
carbon commitment management.
The dilution of the Group's valuable
intellectual property can result in lost
earnings, particularly via the copying
of product in the Asia-Pacific region.
Insufficient Intellectual Property Rights
('IPR') monitoring could lead to a loss of
brand protection, patent protection and
increase competitive pressures.
Use of patent attorneys with global remit.
Use of in-region IPR specialist legal advice.
Central IPR register and management of renewals, authorised
uses and assignments.
Contractual protections obtained to protect Group IPR where
possible.
Monitoring of IP registrations to ensure consistent protection.
A violation of competition/anti-trust
laws could result in downtime, fines,
penalties and adverse reputational
consequences for the Group by both
customers and investors. There may
also be personal consequences for the
Group's Directors.
The Group Code of Business Conduct ('CBC') requires that the
Group conducts its business in an open, vigorous and competitive
fashion.
Competition compliance manual implemented by each Group
subsidiary.
Online competition training and testing undertaken globally by
all key employees, including the Board.
Simulated dawn raids are undertaken each year to audit
subsidiary compliance.
Competition assessments are included in material contract
reviews.
The Group has a whistleblowing hotline and email to allow
employees to raise concerns in confidence, or anonymously if
preferred.
A direct reporting relationship between the Group Risk &
Compliance Counsel and the Chief Executive and Audit
Committee emphasises the commitment to further
strengthening the Group's compliance culture.
A violation of international import
and export non-compliance (including
trading, restricted parties and
sanctioned countries compliance) can
result in the denial of export privileges,
the imposition of fines and penalties,
diverted management time and
personal implications for the violators
together with adverse implications for
Group financial performance, facilities
and reputation.
The Group CBC requires that the Group must trade in accordance
with all valid international economic sanctions and legal
requirements for the import and export of goods, technology
and services.
Restricted party screening software and procedures have been
globally implemented by the Group.
An International Trade Compliance Policy was issued in response
to the changing legislative and financing landscape surrounding
sanctions.
Central analysis and advice is provided in respect to the
administration of trade with both routine and less routine
countries and territories.
A violation of health, safety and
environmental laws and regulations
or the impact of health, safety and
environmental accidents and incidents
affects employees, communities
and operations and impacts Group
reputation and financial performance.
Robust health and safety policies and procedures are deployed.
Use of the health and safety cloud monitoring and reporting
framework - see page 42.
Retention of an external health, safety and environmental
consultant.
Open relationship with regulatory bodies.
Health and safety committee monitoring.
A culture of zero tolerance in respect of health and safety violations is promoted by the Board.
Were any member of the Group to
commit a violation of Anti-Bribery &
Corruption laws, (including breach by
a commercial intermediary appointed
by the Group, such as an agent or
distributor), the resultant consequences
could include fines, adverse publicity,
claims from customers, loss of
management time and personal
consequences for those found to be
in violation of the same, ultimately
impacting Group financial performance
and conformance with its strategic
plans.
A direct reporting relationship between the Group Risk &
Compliance Counsel and the Chief Executive and Audit
Committee emphasises the commitment to further
strengthening the Group's compliance culture.
Non-compliance with employment
laws.
.
Group policies on employees' rights in the workplace.
The Group CBC requires that the Group comply with local laws
including employment laws and regulations.
All subsidiary businesses have access to local, dedicated
employment law expertise.
Whistleblowing hotline allows for reporting of potential noncompliance
with local employment laws.
** Fraudulent conduct by employees or
external parties.
The Group CBC requires that the Group apply the Group's Anti-
Bribery & Corruption Policy and expressly prohibits improper
payments in all business dealings, in every country around the
world.
The Group Gifts & Entertainment policy tightly controls how we
give or receive business gifts, entertainment and hospitality.
A rolling programme of online anti-bribery and corruption
training and testing is undertaken by new employees.
A commercial intermediaries protocol operates in the context of
the appointment of third party representatives e.g. agents and
distributors.
The Group has a whistleblowing hotline and email to allow
employees to raise concerns in confidence, or anonymously if
preferred.
The Group CBC continues to be the central focus for setting out
ethical behaviours.
Close monitoring by the Group finance team of monthly financial
information.
Whistleblowing hotline allows for reporting of potential
fraudulent conduct by employees.
** Identified, by the enhanced risk assessment process, as a new risk in 2015.
Board confirmation of principal risks and uncertainties
The Board is satisfied that the Group operates an effective risk management process and confirms that it has conducted a robust assessment of the principal risks facing the Group. It considers that the risks identified in the above table correctly summarise the principal risks and uncertainties facing the Group together with the remediation and mitigation activities that are being used to address such risks.
The Board has overall responsibility for the Group's risk management programme including implementing and monitoring the following:
Operational, financial and compliance internal controls;
Ensuring that the current risk management process remains a suitable means of establishing the correct risk culture;
Ensuring that the Group's risk profile is managed and controlled; and
Ensuring that there is consideration as to how much risk the Group is willing to take in pursuit of the strategic objectives and ensuring that such risks are managed appropriately and within acceptable parameters.
The principal risks and uncertainties facing the Group, set out above, include detail as to how these risks are being effectively managed to accord with the Group's risk appetite, as established by the Board. This appetite being the amount of risk that the Board is willing to take in pursuit of its strategic objectives as outlined on pages 18 to 27.
Appendix B - Directors Responsibilities Statement pursuant to Disclosure and Transparency Rule 4
The following statement is extracted from page 84 of the 2015 Annual Report and is repeated here for the purposes of compliance with DTR 6.3.5. This statement relates solely to the 2015 Annual Report and is not connected to the extracted information set out in this announcement or the Preliminary Announcement.
We confirm that to the best of our knowledge:
- The Financial Statements, prepared in accordance with the applicable set of accounting standards, give a true and fair view of the assets, liabilities, financial position and profit or loss of the Company and the undertakings included in the consolidation taken as a whole; and
- The Strategic Report includes a fair review of the development and performance of the business and the position of the issuer and the undertakings included in the consolidation taken as a whole, together with a description of the principal risks and uncertainties they face.
We consider the Annual Report and Accounts, taken as a whole, is fair, balanced and understandable and provides the information necessary for shareholders to assess the Group's position and performance, business model and strategy.
Appendix C - Related Party Transactions
The key management are considered to be the Board of Directors of Hill & Smith Holdings PLC, whose remuneration can be seen in the Directors' Remuneration Report on pages 66 to 80, and in the related party details on page 129 (note 25) of the 2015 Annual Report.
Alex Henderson
Company Secretary
Hill & Smith Holdings PLC
Tel: +44 (0) 121 704 7430
This information is provided by RNSThe company news service from the London Stock ExchangeENDMSCEAXLSFSNKEEF
Recent news on Hill & Smith
See all newsREG - Hill & Smith PLC - Total Voting Rights
AnnouncementREG - Hill & Smith PLC - Transaction in Own Shares
AnnouncementREG - Hill & Smith PLC - Transaction in Own Shares
AnnouncementREG - Hill & Smith PLC - Transaction in Own Shares
AnnouncementREG - Hill & Smith PLC - Transaction in Own Shares
Announcement