REG - Hill & Smith Hldgs. - 2021 Annual Report and Notice of 2022 AGM
19/04/2022 09:15
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RNS Number : 5738I Hill & Smith Holdings PLC 19 April 2022
Hill & Smith Holdings PLC (the 'Company')
2021 Annual Report and Notice of 2022 Annual General Meeting ('AGM')
Hill & Smith Holdings PLC has posted, or otherwise notified as being
available on its website www.hsholdings.com (http://www.hsholdings.com/) ,
the Notice of its 2022 AGM. The 2021 Annual Report was posted to shareholders,
or otherwise notified as being made available on its
website www.hsholdings.com (http://www.hsholdings.com/) on 19 April 2022.
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 2021 Annual Report can be obtained upon request to the
Group Company Secretary, Hill & Smith Holdings PLC, Westhaven House,
Arleston Way, Shirley, Solihull B90 4LH.
The statutory accounts for the year ended 31 December 2021 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 2021 Annual Report
The information below, headed as Appendix A, B and C, and which is extracted
from the 2021 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 10 March 2022 (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 2021 Annual Report. All page numbers and cross-references in the
extracted information below refer to page numbers in the 2021 Annual Report.
Appendix A - Principal Risks and Uncertainties
Risk: Reduction in Government spending plans
Trend Description and potential impact Mitigation
No change Demand for sustainable infrastructure and transport is underpinned by
*Our existing entity portfolio contains diverse products, markets and
Government spending plans. Changes to these plans could have a detrimental territories and we will continue with this approach.
impact on Group revenues.
*Market and product development initiatives.
*Co-operation between Group businesses, leveraging the Group's
size/international footprint and exploiting synergies.
*Exposure to the benefits from longer term infrastructure investment
In November 2021, the Infrastructures Investment and Jobs Act was agreed, programmes.
confirming substantial US Government infrastructure spending with the
associated demand for our products and services in the US. Despite the
announced delay to some SMART motorway schemes, the UK Government's confirmed
commitment to the next phase of road investment spend (RIS2) remains,
presenting great opportunity for our UK businesses.
Risk: Changes in global outlook and geopolitical environment
Trend Description and potential impact Mitigation
Slightly higher The Group operates in a range of end-user markets
*The Group has a diverse portfolio of operating companies with exposure to a
range of markets and geographies, limiting exposure to any one country or
around the world and may be affected by political, market sector.
*Current and future financial performance is continuously monitored,
economic or regulatory developments in any of these countries. facilitating rapid response to changes in market conditions.
Material adverse changes in the political and economic environments in the
countries in which we operate, have the potential to put at risk our ability
to execute our strategy.
The COVID-19 pandemic continues to create uncertainty in the global economic
outlook. The diverse portfolio of Group businesses with exposure to a range of
markets and geographies, continues to help mitigate this exposure.
The conflict in Ukraine has created significant
uncertainty. The direct exposure from international sanctions for the Group is
limited, due to no current direct Russian customers or suppliers. There could
however be consequences on the global economic outlook as well as supply
chains and utility prices. As a result, an increase in the risk has been
recognised.
Risk: Increase in competitive pressure
Trend Description and potential impact Mitigation
No change Increased volatility, uncertainty and slowdown in
*The holding of leading positions in niche markets of sustainable
infrastructure and transport safety with high barriers to entry.
our markets could result in increased prices and the emergence of new
*In line with our entrepreneurial model, our decisions are made close to our
technologies, leading to a loss of customers and/or pricing pressure and as a markets and our businesses are agile and responsive to changes in their
consequence a loss of sales and reduced profits. competitive landscape.
*Regular operating company Board meetings that review market and customer
activity.
*Our operating companies aim to provide superior products and high service
levels to customers, whilst aiming to ensure there is no dependency on any one
particular customer.
Risk: Product failure
Trend Description and potential impact Mitigation
No change The Group operates in infrastructure markets where it is critical that its
*Products tested, approved and accredited by regulatory bodies.
products meet customer and legislative requirements and where the consequences
*Quality control protocols fully implemented and continuously monitored.
of product failure are potentially significant.
*Contractual controls in place to minimise economic impacts.
*Insurance cover maintained globally with insurance partners.
*Litigation supported/managed by external legal specialists.
*Thematic Internal Audit review completed across the Group during 2019 with
Product failure arising from component defects or recommendations implemented in 2019 and 2020.
warranty issues may require remediation including the replacement of defective
components or complete products, resulting in direct financial costs to the
Group and/or wider reputational risk.
Risk: Contractual failure
Trend Description and potential impact Mitigation
No change The Group delivers its commitments to its customers through a variety of
*Group material contract review process ensures specialist central oversight of
contractual arrangements of both a short and medium term nature. key contractual arrangements.
*Contracts training for key staff.
*Dedicated quantity surveyors and contract managers in operating companies to
control contracts and mitigate risk.
Weaknesses in the contract tendering process,
*Litigation supported/managed by external legal specialists.
*Insurance cover maintained globally with insurance partners.
inappropriate pricing, misalignment of contract terms, ineffective contract
*Trade credit insurance policies in place in the UK, France and India to
management or failure to comply with contractual conditions could result in mitigate exposure.
loss of revenues, pressure on operating margins and wider reputational damage
*Thematic Internal Audit review completed across the Group during 2021 with
to the Group. further recommendations to be implemented during 2022.
The potential for credit default risk due to the ongoing COVID-19 pandemic has
been identified, although this has not yet materialised. The Group continues
to closely monitor the position.
Risk: Supply chain failure
Trend Description and potential impact Mitigation
Slightly higher The Group's businesses depend on the availability and timely delivery of raw
*Group procurement standards in place, including robust due diligence of supply
materials and components, which could be affected by disruption in its supply chain partners and the requirement for dual sourcing where available.
chain. Supply chain failures as a result of performance, inflation cost,
*Maintenance of relationships with key suppliers through regular interaction
quality and/or insolvency may have an adverse impact on the Group's production and assessment of performance/financial status.
capacity and lead to an inability to meet customer requirements, resulting in
*Group oversight of material procurement contracts ensuring robust contractual
a reduction in revenues, potential loss of market share and possible protections.
reputational damage.
*Goods inwards and stock management processes in place to reduce the likelihood
of defects or a shortage of raw materials.
*Contingency plans in place throughout the supply chain to mitigate these
risks, such as purchasing additional stock of key raw materials and securing
During the year, our operating companies took swift and appropriate action to additional supply chain capacity.
manage supply chain headwinds. Actions taken included implementing price
*Supply chain resilience has been a focus of the Risk Committee during 2021
increases to offset significant input cost inflation, securing supply of raw with ongoing monitoring of operating companies' ability to respond to the
materials and ensuring the continuity of operations with a backdrop of labour continued challenges.
shortages in certain businesses. Whilst we continue to closely monitor and
*Internal Audit to complete a thematic review on Supply Chain Resilience during
manage these headwinds as we enter 2022, we do recognise a net increase in the 2022.
risk due to current inflation pressures. The conflict in Ukraine and potential
impact on global supply chains and utilities prices is likely to add further
inflationary pressure.
Risk: IT systems failure
Trend Description and potential impact Mitigation
Slightly higher The Group relies on the information technology systems used in the daily
*Group CISO recruited in 2021.
operations of its operating companies.
*Revised IT controls manual launched during the year setting out a robust set
of IT/information security controls covering basic cyber hygiene, system
backup procedures and hardware /software protection. The Group CISO and
Internal Audit monitor compliance against the controls and work with the
A failure or impairment of those systems or any inability to effectively operating companies on remediation plans.
implement new systems could cause a loss of business and/or damage to the
*Ongoing project for significant investment in the enhancement of IT security
reputation of the Group, together with significant remedial costs. controls and maturity across the Group covering areas such as IT asset
management, backup, endpoint protection, incident response and vulnerability
management.
*The Board maintains a watching brief on IT risks, particularly cyber risk
Poor security controls and procedures could lead to which is a focus area for improvement.
*Group wide monthly IT Operations meeting established to communicate issues and
our operating companies being susceptible to cyberattack, potentially initiatives to operating companies.
resulting in significant IT failure and associated disruption.
*Quarterly updates established to brief operating company leadership teams on
their responsibilities relating to IT management and information security.
*Group IT Steering established to set and approve IT strategy and improvement
plans.
During the year, the global cyber threat has continued to evolve, with
*Segregated business processing systems within each operating company means
increasing numbers of organised criminal groups carrying out sophisticated that any disruption due to illegal external activity is unlikely to jeopardise
ransomware attacks, for example. As a result of the conflict in Ukraine, the the Group as a whole.
UK's National Cyber Security Centre (NCSC) has warned of heightened cyber risk
across UK, US and European
businesses. Whilst there has been enhancement of the Group's IT security
controls during the year to improve mitigation against cyber-attacks, we
recognise at a net level there has been an increase in the risk.
Risk: Portfolio management
Trend Description and potential impact Mitigation
No change The Group's growth strategies include the acquisition of businesses around the
*Board approval required for Group acquisitions, in line with the Group Board's
world that complement or supplement its existing activities. Failure to Schedule of Matters Reserved.
execute an effective acquisition and integration programme would have a
*Due diligence protocols deployed in relation to assessment of target
significant impact on the Group's ability to generate sustainable profitable businesses, including financial, commercial and legal etc.
growth for shareholders.
*Contractual protections and assurances sought from sellers to mitigate
subsequent identification of risks.
Targeted disposals are also required to ensure the
*Post-acquisition integration plans established for all acquisitions with
regular performance monitoring and reporting to the Board.
strategic objectives of the Group can be achieved.
*Successful integration of Prolectric Services during 2021.
*Targeted disposals of operating companies that fail to meet our financial
criteria.
Risk: Lack of investment in product development and innovation
Trend Description and potential impact Mitigation
No change The Group operates in global infrastructure markets where continuous
*Group wide Innovation Framework launched during 2021 to: encourage and
innovation is integral to the Group's product offering and where a failure to stimulate more innovation across the Group, integrate innovation into
innovate could result in product obsolescence, the entry of new competitors Strategic Plans, improve the tax efficiency of innovation investment and
and/or loss of market share. The development of new products and technologies monitor "innovation health" across the Group.
carries risk including the failure to develop a commercially viable offering
*Entrepreneurial culture established through a decentralised management
within an acceptable timeframe. structure, ensuring that Group businesses are agile and responsive to changes
in their competitive environments.
*Executive Board approval of product development proposals within the Group's
capital spend approval policies.
*Active Intellectual Property management within individual operating companies
overseen by Group.
*Dedicated quality compliance resources in place across operating companies,
ensuring responsiveness to regulator and/or customer approval requirements.
*Board monitoring of emerging risks alongside external specialist support,
where both the risks identified and the potential opportunities arising are
considered.
Risk: Talent, development, diversity, recruitment and retention of key
employees
Trend Description and potential impact Mitigation
Slightly higher The changing nature of the demographics from which we source our employees and
*Two of our ESG focus areas (Talent development and engagement & Diversity,
the ways in which they like to work can make it difficult to attract and and inclusion) directly address the risk, with improvement initiatives and
retain both skilled and unskilled labour. We need to ensure effective metrics overseen by the ESG Steering Team.
recruitment channels and make the necessary investment to develop and retain
*Recruitment of Chief People Officer during 2021.
high-quality individuals in key positions to guarantee the long-term success
*Refreshed People Strategy with a greater focus on internal talent.
of the business. We need to ensure the diversity of our workforce reflects the
*Review of base hourly rates, which increased in many locations during 2021.
communities in which we work. Without talented employees we will be unable to
*Contractual protections and retentions in employment contracts of senior
deliver our strategic aims. management and other key employees.
*Training and development of employees, which includes a programme of IOD and
ILM courses for senior management and identified potential successors, and
apprenticeship and other vocational courses for specialist and technical
During the year some of our operating companies have continued to find it roles.
challenging to attract and retain direct labour due to very competitive labour
*Appropriate remuneration and benefits, together with bonus opportunities and
local markets impacted by COVID and hence an increase in the risk has been incentive plans offered to employees.
recognised.
*Recruitment process developed to include competency requirements and skills
gap analysis.
Risk: Prevention of harm or injury to people
Trend Description and potential impact Mitigation
No change The Group is committed to preventing all health and safety incidents and
*Health and safety is one of our ESG focus areas, with improvement initiatives
ensuring the health, safety and wellbeing of all employees and third parties. overseen by the ESG Steering Team.
The Group operates a number of manufacturing facilities around the world, a
*Group Head of Health & Safety recruited during 2021.
failure in the Group's health & safety procedures could lead to injury or
*Monthly health & safety reporting for all operating companies via online
to the death of employees or third parties. tools.
*Regular audits of UK, US, Sweden and India including assessment of our COVID
secure arrangements.
*Local audits completed in France, periodically overseen by Group.
During the year, the Group has followed all local
*Health & Safety Forums to monitor performance and share best practice.
*Culture of zero tolerance in respect of health & safety violations
guidelines to ensure that our facilities are COVID secure and our employees promoted by the Board and disseminated throughout Group businesses.
are safe. Measures first introduced during 2020 were continued, such as
*External health & safety accreditations and relationships maintained with
enhanced cleaning and hygiene procedures, social distancing, track and trace regulatory bodies.
procedures, provision of face masks and taking
*Health & Safety is a priority area of focus for new acquisitions.
*Monitoring and review of LTI rates by Group.
all reasonable steps to help people work from home where appropriate to do so.
*Any LTI event is followed up and investigated thoroughly and improvement
In addition, we are mindful of the mental wellbeing of our employees during recommendations are implemented to minimise any reoccurrence.
this difficult time and have offered appropriate support and assistance.
*Reduction of the Group's LTI rates is a key focus for Management and the
Board, with improvement metrics now established through the ESG Steering Team.
Risk: Violation of applicable laws and regulations
Trend Description and potential impact Mitigation
No change The Group's global operations must comply with a
*Group Code of Conduct sets out required approach for all staff.
*Staff training provided on Anti-Bribery and Corruption and Competition
range of national and international laws and regulations including those Compliance.
related to anti-bribery and corruption, human rights and employment, GDPR,
*Programme of audits undertaken on a cyclical basis to review operating
trade/export compliance and competition/anti-trust. companies' compliance with regulatory requirements, including for example,
simulated "dawn raids".
*Software solutions implemented globally to ensure compliance with trade and
export legislation.
A failure to comply with any applicable laws and
*Externally hosted whistleblowing hotline available to all employees to allow
them to raise concerns in confidence or anonymously, if preferred.
regulations could result in civil or criminal liabilities and/or individual or
*Modern Slavery compliance programme continued through 2021.
corporate fines and could also result in debarment from Government-related
*Toolkits issued to all UK operating companies to aid compliance with GDPR.
contracts, restrictions on ability to trade or rejection by financial
counterparties as well as reputational damage.
Our exposure to breaching sanctions placed on Russia is low due to no current
direct Russian customers and suppliers. Our export compliance software
performs daily screening of our customer and supplier databases against global
sanctioned and denied party lists with any changes in status flagged.
Appendix B - Responsibility Statement of the Directors pursuant to Disclosure
and Transparency Rule 4
The following statement is extracted from page 112 of the 2021 Annual Report
and is repeated here for the purposes of compliance with DTR 6.3.5. This
statement relates solely to the 2021 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 that 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
As of 1 January 2021, key management personnel 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 94 to 104 and the members of
the Executive Board who are not also Directors of the Group, and in the
related party details on page 182 (note 14) of the 2021 Annual Report.
Alex Henderson
Company Secretary
Hill & Smith Holdings PLC
Tel: +44 (0) 121 704 7430
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