REG - Hill & Smith PLC - Notice of AGM
19/04/2024 07:30
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RNS Number : 3066L Hill & Smith PLC 19 April 2024
Hill & Smith PLC (the 'Company')
2023 Annual Report and Notice of 2024 Annual General Meeting ('AGM')
Hill & Smith PLC has posted, or otherwise notified as being available on
its website (www.hsgroup.com), the Notice of its 2024 AGM. The 2023 Annual
Report was posted to shareholders, or otherwise notified as being made
available on its website on 17 April 2024.
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 2023 Annual Report can be obtained upon request to the
Group Company Secretary, Hill & Smith PLC, Westhaven House, Arleston Way,
Shirley, Solihull B90 4LH.
The statutory accounts for the year ended 31 December 2023 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 2023 Annual Report
The information below, headed as Appendix A, B and C, and which is extracted
from the 2023 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 12 March 2024 (available at
www.hsgroup.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
2023 Annual Report. All page numbers and cross-references in the extracted
information below refer to page numbers in the 2023 Annual Report.
Appendix A - Principal Risks and Uncertainties
Risk: Reduction in US infrastructure spending
Trend Description and potential impact Mitigation
No change Our growth is supported by multi-year planned government spending to upgrade · Cross-party support for infrastructure investment plans.
US infrastructure (e.g. IIJA and the Chips Act), technology change and private
investment from US manufacturers and producers to onshore vital components. · Our portfolio covers diverse products, markets and territories.
Changes to these plans could have a detrimental impact on Group revenues.
· Market and product development initiatives.
· Strategic planning process overseen by the Exec and Board to
We remain confident that infrastructure investment will continue to form part anticipate and mitigate potential downside risks.
of national spending plans in the US despite ongoing macro-economic
uncertainty.
Risk: Changes in global economic outlook and geopolitical environment
Trend Description and potential impact Mitigation
Slightly higher Material adverse changes in the political and economic environments in the · The Group has a diverse portfolio of operating companies
end-user markets in which we operate, have the potential to put at risk our with exposure to a range of markets and geographies, limiting exposure to any
ability to execute our strategy. one country or market sector.
· Strong balance sheet with low leverage and mix of fixed and
floating rate debt.
2023 has seen escalating geopolitical tensions. While this had limited impact
on our supply chains and end markets, we continue to monitor the risk. · Current and future financial performance is continuously
monitored, facilitating rapid response to changes in market conditions.
During 2023 central banks in both the US and UK raised interest rates in an
attempt to control inflation. While this is a concern for the cost of living, · In line with our entrepreneurial model, our decisions are made
an increase in interest rates has had a limited impact on the Group's ability close to our markets and our businesses are agile and responsive to changes in
to grow given our cash generative model. Alongside this our businesses operate their external competitive landscape.
in resilient, less discretionary infrastructure markets.
Risk: Increase in competitive pressure
Trend Description and potential impact Mitigation
No change Increased volatility, uncertainty and slowdown in our markets could result in · The Group holds leading positions in niche infrastructure markets
increased competition, leading to a loss of customers and/or pricing pressure with high barriers to entry.
and consequently a loss of sales and reduced profits.
· In line with our entrepreneurial model, our decisions are made
close to our markets and our businesses are agile and responsive to changes in
their competitive landscape.
· Our operating companies strive to provide superior products and
high service levels to customers, while aiming to ensure there is no
dependency on any one 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
of product failure are potentially significant. · Quality control protocols fully implemented and continuously
monitored.
· Contractual controls in place to minimise economic impacts.
Product failure arising from component defects or warranty issues may require
remediation including the replacement of defective components or complete · Product liability insurance cover maintained globally.
products, resulting in direct financial costs to the Group and/or wider
reputational risk. · Litigation supported/managed by external legal specialists.
Risk: Climate Change
Trend Description and potential impact Mitigation
New Failure to adapt to and manage the threats and opportunities from climate · Sustainability Committee to oversee and govern our carbon
change could have significant reputational, financial and operational impacts reduction plans and initiatives.
on the Group. Chronic changes in climate and extreme weather events may
disrupt our operations. · TCFD analysis to understand our risks and opportunities arising
from climate change.
· Climate scenario modelling to evaluate the threat from climate
Global warming could place further stress on our supply chain, with extreme hazards such as extreme heat, flooding, and extreme winds, both now and in
weather events impacting supply becoming more likely and chronic changes to 2040, for our operational sites.
heat / rainfall averages potentially impacting where we source certain
materials. · Costed plan established to set out how we will achieve net-zero
(for scopes 1 and 2) by 2040, reducing our exposure to transition risks.
Transitioning to a low-carbon economy presents technological challenges and
the high energy demand of some of our operations could incur carbon taxes. · Insurance cover, continuity planning and extreme weather
protocols in place to mitigate our exposure from physical risks.
Climate change does present opportunity for the Group through our sustainable
products and products to improve infrastructure resilience to increasingly See Our Approach to Sustainability (including our TCFD report) for further
extreme weather hazards. details, see pages 36 to 55.
Climate change has been added as a Principal Risk for 2023.
Risk: Supply chain failure
Trend Description and potential impact Mitigation
No change The Group's businesses depend on the availability and timely delivery of raw · Group procurement standards, including robust due diligence of
materials and components, which could be affected by disruption in its supply supply chain partners and the requirement for dual sourcing where available.
chain. Supply chain failures because of performance, cost inflation, quality
and/or insolvency may have an adverse impact on the Group's production · Regular interaction and assessment of performance/ financial
capacity and lead to an inability to meet customer requirements, resulting in status of key suppliers.
a reduction in revenues, potential loss of market share and possible
reputational damage. · Group oversight of material procurement contracts ensuring robust
contractual protections.
· Contingency plans in place throughout the supply chain, such as
Climate change transition costs could also inflate the price of the goods we purchasing additional stock of key raw materials, and securing additional
purchase. supply chain capacity.
· Group wide thematic Internal Audit review of Supply Chain
completed during 2022 with recommendations implemented during 2023.
During the year, our operating companies continued to take appropriate action
to manage supply chain headwinds. Actions taken included implementing price
increases to offset input cost inflation and securing supply of raw materials.
Risk: IT systems failure
Trend Description and potential impact Mitigation
Slightly higher The Group relies on the information technology systems used in the daily · The Board maintains a watching brief on IT and cyber risk, and has
operations of its operating companies. A failure of those systems or poor overseen significant investment across the Group to enhance IT security
implementation of new systems could have a significant operational impact on controls.
the Group, impacting customer service, revenue and margins.
· Wholesale network security improvements completed during 2023.
· IT controls manual mandating a robust set of information security
Poor security controls and procedures could lead to our operating companies controls covering basic cyber hygiene, system back-up procedures and hardware
being susceptible to cyber attack, potentially resulting in significant IT / software protection.
failure and associated disruption.
· Ongoing program of IT controls compliance reviews completed by
Internal Audit.
During the year the global cyber threat has continued to evolve, with
increasing numbers of organised criminal groups undertaking increasingly
sophisticated ransomware and other cyber attacks. The UK's National Cyber
Security Centre (‛NCSC') has warned of heightened cyber risk from the rise
of artificial intelligence and due to increasingly strained geopolitical
tensions.
While there has been a continued enhancement of the Group's IT security
controls during 2023, the Board considers the risk to be heightened due to the
increasing sophistication and frequency of cyber threats across the world.
Risk: Portfolio management
Trend Description and potential impact Mitigation
No change The Group's growth strategies include the acquisition of businesses around the · All potential acquisitions are tightly evaluated to ensure they fit
world that complement or supplement its existing activities. Failure to within our purpose and core strategic goals.
execute an effective acquisition and integration programme would have a
significant impact on the Group's ability to generate sustainable profitable · Due diligence protocols deployed in relation to assessment of target
growth for shareholders. businesses, including financial, commercial, and legal etc.
· Contractual protections and assurances sought from sellers to
mitigate subsequent identification of risks.
· Board approval required for Group acquisitions, in line with its
Schedule of Matters Reserved.
· Post-acquisition integration plans established for all acquisitions
with regular performance monitoring and reporting to the Board.
Risk: Failure to take advantage of product development and innovation
Trend Description and potential impact Mitigation
No change The Group operates in global infrastructure markets where continuous · Entrepreneurial culture and autonomous structure to encourage
innovation is integral to the Group's product offering and where a failure to innovation and enable agile response to a changing competitive landscape.
innovate could result in product obsolescence, the entry of new competitors
and/or loss of market share. The development of new products and technologies · Our acquisitions strategy brings innovative products and technology
carries risk including the failure to develop a commercially viable offering to our portfolio.
within an acceptable timeframe.
· Board monitoring of emerging risks alongside external specialist
support, where both the risks identified and the potential opportunities
arising are considered.
· Group wide Innovation Framework with two workshops conducted during
2023 to encourage and stimulate increased innovation.
· Active Intellectual Property management within individual operating
companies overseen by Group.
Risk: Failure to attract, retain and develop an appropriately diverse, skilled
and experienced workforce
Trend Description and potential impact Mitigation
Slightly lower Talented employees are fundamental to the success of the Group. We aim to · Board level review of succession planning for senior leaders.
employ the best people for the job, and we know we can only do this by
considering talented people from the whole community. · Training and development programme in place for supervisors and line
managers.
· New training and development programme for high potential talent to be
Failure to attract, develop and retain high-quality individuals may impact our launched in 2024.
ability to deliver against our strategic goals.
· Bespoke coaching and mentoring for identified MD successors to support
development.
During 2023 we experienced some easing in labour market conditions, albeit · Continued use of internships and apprenticeships and other vocational
certain skillsets, e.g. welders and maintenance technicians remain challenging courses for specialist and technical roles.
to recruit. This is being partly addressed through apprenticeships.
· Appropriate remuneration and benefits, together with bonus
opportunities and incentive plans offered to employees
· Annual engagement survey results inform local operating action plans to
improve engagement.
· Women's network established in 2023, to attract, retain, and develop
female employees.
Risk: Prevention of harm or injury to people
Trend Description and potential impact Mitigation
No change The Group is committed to ensuring the health, safety and wellbeing of all · Culture of zero tolerance in respect of health and safety violations
employees and third parties. The Group operates multiple manufacturing promoted by the Board and disseminated throughout Group businesses with clear
facilities around the world, a failure in the Group's health and safety targets and improvement metrics.
procedures could lead to injury or to the death of employees or third parties.
· Appointment of UK and US Heads of Health and Safety.
· Monthly Health and Safety reporting for all operating companies
LTIR has reduced from 1.1 in 2022 to 0.43 in 2023. Further improvement is facilitated via online tools.
required to reach the 2030 Health and Safety target of 0.25 and health and
safety remains a key focus area for the Group. In our efforts to continuously · Monitoring and review of LTI rates with all LTI incidents
improve our proactive approach to health and safety, investigated and findings presented to the Executive
we have changed the group structure from a global to a regional one to allow · Board. Improvement recommendations are implemented and shared across
the group health and safety resources to be closer to individual operating the Group to minimise any reoccurrence.
companies within their region.
· Improvement made in our incident investigation to enhance the focus
on root cause analysis to prevent further incidents.
· Regular health and safety site audits.
· Health and safety forums to monitor performance and share best
practice.
· External health and safety accreditations and relationships
maintained with regulatory bodies.
· Health and safety is a priority area of focus for new acquisitions.
Risk: Violation of applicable laws and regulations
Trend Description and potential impact Mitigation
No change The Group's operations must comply with a range of national and international · Group Code of Conduct sets out required approach for all staff.
laws and regulations including those related to modern slavery, anti-bribery
and corruption, human rights, and employment, GDPR, trade/ export compliance · Staff training provided on Modern Slavery red flags, Anti-Bribery and
and competition/anti-trust. Corruption and Competition compliance.
· Programme of audits undertaken on a cyclical basis to review
operating companies' compliance with regulatory requirements.
A failure to comply with applicable laws and regulations could result in civil
or criminal liabilities and/or individual or corporate fines and could also · Software solutions implemented globally to ensure compliance with
result in debarment from Government-related contracts, restrictions on ability trade and export legislation.
to trade or rejection by financial counterparties as well as reputational
damage. · Externally hosted whistleblowing hotline available to all employees
to allow them to raise concerns in confidence or anonymously, if preferred.
· Modern Slavery compliance programme continued through 2023.
· Toolkits issued to all UK operating companies to aid compliance with
GDPR.
Appendix B - Responsibility Statement of the Directors pursuant to Disclosure
and Transparency Rule 4
The following statement is extracted from page 117 of the 2023 Annual Report
and is repeated here for the purposes of compliance with DTR 6.3.5. This
statement relates solely to the 2023 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
The key management personnel are considered to be the Board of Directors of
Hill & Smith PLC, whose remuneration can be seen in the Remuneration
Committee Report on pages 94 to 106 and the members of the Executive Board who
are not also Directors of the Group, and in the related party details on page
196 (note 15) of the 2023 Annual Report.
Alex Henderson
Company Secretary
Hill & Smith PLC
Tel: +44 (0) 121 704 7430
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