2013 Annual Report & Notice of AGM

RNS Number : 0189E

Hill & Smith Hldgs PLC

03 April 2014

 



Hill & Smith Holdings PLC (the "Company")

2013 Annual Report and Notice of 2014 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.     2013 Annual Report

2.     Notice of 2014 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 2013 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 2013 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 2013 Annual Report

The information below, headed as Appendix A, B and C, and which is extracted from the 2013 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 11 March 2014 (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 2013 Annual Report. All page numbers and cross-references in the extracted information below refer to page numbers in the 2013 Annual Report.

Appendix A - Principal Risks and Uncertainties

■	Organic revenue growth	►	Target returns and leverage
●	Active portfolio management	u	Entrepreneurial culture
▲	Geographic diversification	ª	Sustainable business

Principal Economic Risks	Potential Impact	Mitigation and Assurance	Relevance to strategy
Economic conditions Our measured response to overall economic conditions and market growth.	The risk of uncertainty, changes in confidence and growth trends of the economy leading to a decline in demand and reduction of Government and industry spending patterns, affecting group financial performance.	-   The group is diversifying into new markets and new territories. -   Ongoing monitoring and reviewing of the timing of funding is undertaken in conjunction with responding to market conditions, led by Government Policy. -   Ongoing investigations into the prospects for group exporting opportunities are underway. -   Intra-group interaction is under regular evaluation, including identifying opportunities to leverage the global footprint of the group.	■ ▲ ª
Competition The effect of a greater number of competitors offering differentiated products, prices, service and quality.	The risk that competitive pressures could lead to the group not converting opportunities into sales or otherwise adversely affecting financial performance.	-   The group is diversifying into new markets and new territories. -   The effectiveness of the sales and marketing functions at subsidiary level are regularly reviewed. -   Ongoing investigations into the prospects for group exporting opportunities are underway. -   Intra-group interaction is under regular evaluation, including identifying opportunities to leverage the global footprint of the group. -   Subsidiary businesses regularly review the effectiveness of their quality management systems and instigate improvements where necessary. -   The group continues to invest in updating and expanding its products portfolio. -   Group-wide procurement standards have been implemented to assist in cost optimisation and greater supply chain control.	■ ▲ ► u
Principal Human Resources Risks	Potential Impact	Mitigation and Assurance	Relevance to strategy
Talent Recruitment and Retention The importance of recruiting and retaining the most capable employees.	Were the group unable to recruit suitably qualified and skilled personnel and to retain them, business plans and strategic goals could be compromised.	-   The group offers competitive remuneration packages to all employees. -   Contractual protections are implemented for employee retention and post termination circumstances. -   Regular reviews of salaries, benefits and incentives are undertaken and competitively benchmarked. -   Succession planning is encouraged at both the group and subsidiary business levels.	▲ u ª
Principal Operational Risks	Potential Impact	Mitigation and Assurance	Relevance to strategy
Business Interruption Moderating the impact of a natural catastrophe or failure of a key facility on our performance.	The risk of a permanent or a temporary cessation in activity caused by full or partial loss of a key manufacturing site or warehouse of the group, as a result of a natural catastrophe or for any other reason. An inability or interruption of our supply capability could cause customer dissatisfaction, adverse impacts on financial performance and reputation.	-   Subsidiary businesses undertake business continuity planning which will be strengthened by group wide initiatives in the forthcoming year. -   Subsidiary businesses implement local health, safety and environmental controls, which are monitored by regular group health and safety committee meetings and an external specialist. -   Subsidiary businesses are encouraged to communicate on an intra-group basis in order that geographically proximate businesses may support one another in the event of business disruption. -   Further initiatives will be implemented in the forthcoming year to strengthen business continuity resources and planning across the group, including working with our insurers on recovery plans and individual selective site surveyors. -   Preparing and reviewing the effectiveness of individual business interruption plans through the group's IT steering committee.	● ▲ ► ª
Products Minimising the effect of product issues, product approvals or product development.	In the event that the group's products fail or fail to attract customer approval the potential impact would be customer dissatisfaction and/or contractual claims resulting in re-work, which will ultimately affect financial performance and cause reputational loss and damage. The risk of a failure to undertake product developments is that growth could stagnate and the group suffer from a loss of opportunity.	-   Accreditations, regulatory approvals and testing are undertaken by the group in order to reach the desired quality and performance standards. -   Comprehensive quality management systems are in place across the group which are bolstered by insurances obtained from reputable insurers. -   The subsidiary businesses invest in new product development and where product improvements are not essential, the subsidiary businesses investigate opportunities to diversify into new markets and jurisdictions. -   Protocols are in place to ensure an effective and prompt response to product or trading issues which may affect the group's reputation or future business relationship. -   Evaluation of risk of new projects pre-commitment and review of contractual terms to understand and mitigate risk.	■ ● ► ª

Information Technology Systems Assessing the suitability of existing systems for anticipated operational or strategic activities.	The risk that the IT systems of subsidiary businesses may be outdated or unsuitable for envisaged activities, leading to financial performance impacts.	-   IT systems capability, suitability and integrity reviews have been initiated through the group's IT steering committee. -   The capital expenditure process will be used to test the integrity and suitability of proposed IT systems in relation to cost and capabilities. -   Certain IT policies have been implemented, serving to control and manage IT changes and upgrades. -   Further initiatives will be implemented in the forthcoming year to strengthen business continuity resources and planning across the group.	► ª
Geographical Span Leveraging the benefit of the geographical diversity of our operations.	Remote management and control of international operations together with the variety of jurisdictional risks, which are specific to such locations, resulting in operational risk which could impact successful delivery of the strategy.	-   Subsidiary businesses are encouraged to act in an entrepreneurial manner with central support for key legal, financial and strategic developments and initiatives. Businesses are able to seek support from the centre in respect of their local issues. -   Further strengthening of the central team, regular site visits by the group management team and a group internal intranet facility help to enhance cohesion of the group's management and its effectiveness. -   No undue reliance is placed on specific subsidiary businesses, customers or projects.	● ▲ ► u ª
Principal Commercial / Financial Risks	Potential Impact	Mitigation and Assurance	Relevance to strategy
Supply Chain Managing the influence of the escalation of supply chain costs, supplier contractual performance and ethics on our performance.	Increases in raw materials affect group purchasing costs and pressurise margins and competitiveness. The concern that group contractual performance with its customers is adversely affected by poor supplier performance and ethical standards.	-   Group-wide procurement standards have been implemented to assist in cost optimisation and greater supply chain control including credit, financial resilience and contractual controls. -   Financial resilience checks are required to be undertaken on suppliers of key materials/components and services. -   A group delegation of authorities structure requires group management review and approval of strategic procurement contracts. -   Subsidiary businesses are required to ensure multi-sourcing of key materials/components, wherever practicable, to reduce over reliance on any key suppliers. -   Key initiatives are planned for the forthcoming year to further enhance  contractual control structures to mitigate the impact of raw material cost escalation, supplier delivery and quality controls and supplier's ethical standards.	► u ª
Acquisitions Our management of businesses acquired to complement and enhance the group portfolio.	Acquired businesses do not perform as expected or integration is more difficult than anticipated.	-   Due diligence protocols are deployed to investigate target businesses effectively. -   Appropriate contractual assurances are sought from the seller to reflect shortcomings identified in the due diligence process. -   The group offers competitive remuneration, benefits and incentive packages to all employees and the salaries of employees in acquired businesses are appropriately aligned. This measure helps to mitigate any material integration issues by ensuring continuity of personnel throughout the transition.	● ▲ ►
Pension Deficit The controls we deploy in respect of pensions funding and management to safeguard group financial performance.	Capital that would otherwise be available for investment is tied up in funding liabilities and making good the deficit. Factors outside the group's control such as mortality rates, interest and inflationary pressures may lead to increases in the deficit and therefore, group contributions.	-   Quarterly reporting to the board of invested asset performance and dialogue with Trustees in respect of the investment strategy. -   Management and scheduling of deficit funding in line with the Trustees requirements. -   Reduction in liabilities, stemming from the cessation of future accrual for the UK executive scheme from 2012 has assisted to reduce the risk profile related to pensions. -   Final salary pension scheme is in maturity, thus steadily reducing risks. -   Reviewing the appropriateness of the asset investment strategy in the context of a mature scheme.	● ª
Treasury Risks The sensible management of changes in liquidity, foreign exchange and the taxation position of the group.	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 risk, liquidity risk 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 financial reporting policies and procedures. An internal audit programme underpins compliance in this respect and further requirements are communicated via the group intranet and directly to 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. -   Periodic reviews and assessments are undertaken in relation to foreign exchange risk from a translation perspective. -   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.	● ▲ ª
Principal Legal and Regulatory Risks	Potential Impact	Mitigation and Assurance	Relevance to strategy
Health, Safety and Environment Emphasising the importance of safeguarding the welfare of our employees, representatives and visitors to our facilities and minimising the environmental impact of our operations.	A failure to adequately control environmental, health or safety risks could have an adverse effect on group employees and operations. This could lead to a reduction in organic growth, market share, financial performance and the group's reputation as a whole.	-   A group-wide health, safety and environmental programme controls the standards applicable to the group which includes policies and procedures. An external resource is retained to ensure subsidiary businesses are able to seek specialist assistance with health, safety and environmental issues relevant to their businesses. -   Monthly reports are provided to the board of the Health and Safety Management of the group including accident statistics and ranked audit performances against the target benchmark. -   A group 'safety cloud' system was implemented in 2012 which is serving to ensure centralised monitoring and assurance, not only to highlight issues but to ensure corrective actions are implemented to the extent and standard required. -   Maintenance of bespoke insurance arrangements for costs associated with any employers' liability.	► u ª
Compliance Ensuring compliance with the laws and regulations applicable in the jurisdictions in which we operate.	A failure to comply with the various laws and regulations affecting the span of our international operations could have both financial and reputational consequences for the group. The management of group risks and our continued compliance with international laws and regulations is central to future investment and shareholder support.	-   Appointment of a group risk & compliance counsel with a direct reporting responsibility to the group chief executive and audit committee chairman. -   A new group Code of Business Conduct was launched during the year demonstrating the group's commitment towards its compliance responsibilities. -   Policies, process manuals, business process development, online and in-person training programmes and a focus on certain compliance and legal risks have been deployed. -   Internal and external legal and compliance controls and resources have been made available to the group businesses. -   Further strengthening, through information and training on the policies for anti-bribery and corruption, competition law, gifts and entertainment, whistleblowing and restricted parties screening protocols. -   A compliance hotline has been created to encourage the reporting of concerns from around the group. -   Compliance initiatives reach employees directly through use of the global group intranet facility and risk and compliance communications including policies, guidance and reports, which are periodically issued.	► u ª

Appendix B - Directors Responsibilities Statement pursuant to Disclosure and Transparency Rule 4

The following statement is extracted from page 67 of the 2013 Annual Report and is repeated here for the purposes of compliance with DTR 6.3.5. This statement relates solely to the 2013 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 group and parent company 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 group as a whole; and

-     the board considers that Hill & Smith Holdings PLC applies the principles and provisions of the UK Corporate Governance code maintained by the Financial Reporting Council, as described in the Corporate Governance sections on pages 40 to 66, and has complied with its provisions. The board further considers that the Annual Report, taken as a whole, is fair, balanced and understandable and provides the information necessary for shareholders to assess the group's 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 50 to 63 and in the related party details on page 110 (note 24) of the 2013 Annual Report.

Derek Muir

Chief Executive

Hill & Smith Holdings PLC

Tel: [phone]

 

END

 

 

ACSQKNDBPBKDPQK