Annual Financial Report

RNS Number : 7686D

IMI PLC

01 April 2014

 

1 April 2014

Annual Financial Report

IMI plc (the "Company") announces that copies of the Annual Report and Accounts for the year ended 31 December 2013 and the Notice of Annual General Meeting for 2014 are available from today on the Company's website www.imiplc.com and may be viewed and downloaded online at www.imiplc.com/investors (click on Annual Reports).

Hard copy documents are being posted to shareholders who have elected to receive them and are also available from the Company Secretary at the Company's registered office at Lakeside, Solihull Parkway, Birmingham Business Park, B37 7XZ.

Copies of the above documents, together with the notice of availability to shareholders receiving web-communications and the form of proxy for the 2014 Annual General Meeting have been submitted to the National Storage Mechanism and will shortly be available for inspection at: www.hemscott.com/nsm.do.

The Company's 2014 Annual General Meeting will be held at the Hilton Birmingham Metropole Hotel, National Exhibition Centre, Birmingham on Thursday 8 May 2014, commencing at 11am.

The Company's preliminary results announcement of 6 March 2014 contained a management report as well as the audited financial statements which were prepared in accordance with the applicable accounting standards.  The Annual Report and Accounts submitted to the National Storage Mechanism today also contains information regarding the Company's principal risks and uncertainties and a responsibility statement relating to the content of the Annual Report and Accounts (from the Directors in office as at 5 March 2014); an extract of this information is provided below as required under paragraph 6.3.5 of the DTR, however this material should be read in conjunction with and is not a substitute for reading the full Annual Report and Accounts.  There are no related party transactions requiring disclosure.  Page and note references in the text below refer to page numbers and notes in the Annual Report and Accounts.

DIRECTORS' RESPONSIBILITY STATEMENT

The following statement is repeated here solely for the purpose of complying with DTR 6.3.5.  This statement relates to and is extracted from page 144 of the Annual Report and Accounts and is signed by order of the Board by John O'Shea, Company Secretary.  Responsibility is for the full Annual Report and Accounts and not the extracted information presented in this announcement or the preliminary results announcement.

Directors' responsibility statement under the Disclosure and Transparency Rules

Each of the directors listed on pages 38 and 39 confirms that:

•          the Group and parent Company financial statements in this Annual Report, which have been prepared in accordance with applicable UK law and with the applicable set of accounting standards, give a true and fair view of the assets, liabilities, financial position and profit of the Group; and

•          the management report (which comprises the Directors' Report and the Business Review) includes a fair review of the development and performance of the business and the position of the Company and the Group taken as a whole, together with a description of the principal risks and uncertainties that they face. 

PRINCIPAL RISKS AND UNCERTAINTIES

We have in place a well-established risk management process and framework which together are designed to identify, manage and mitigate the business risks we face. We operate an integrated top down and bottom up approach to identifying and assessing business risks and a full summary of our risk management framework and process is given on page 46.

In addition to the risks described here, we are also exposed to a number of financial market risks including credit risk, liquidity risk, counterparty risk, fluctuations in foreign exchange rates, interest rates and commodity prices. A description of these risks and our centralised approach to managing them is described in Section 4.4 of the financial statements.

The Board has identified the top ten risks facing the Group, which are shown in the table below. For each risk, the current risk rating and change in risk during 2013 is shown, the latter by means of an arrow.

If we fail to manage the risks appropriately in such areas as compliance with legislation, health & safety, product integrity and supply chain, this results in both financial and reputational consequences for the Group which would divert resources away from activities required to fulfil our strategic objectives. Similarly our strategy is built around a steady stream of new product introductions and value enhancing acquisitions which, if not delivered successfully, could result in the Group failing to achieve its growth objectives.

Risk	Description of risk and potential impact	Mitigation
Failure to comply with legislation and a breach of our own high standards of ethical behaviour	We have set ourselves very high standards in our approach to ethics and corruption in business. We need to ensure, as we expand our operations in emerging markets, that we fully maintain these standards even though the local legal and regulatory requirements and business standards may be very different. We face legislation around anti-bribery, fair competition, fraud and tax law and need to ensure compliance. The consequences of non-compliance include serious financial and reputational damage.	·   Commitment to good governance practices which are embodied in The IMI Way, our code of conduct, providing a guiding set of values that exemplify how IMI employees should behave. ·   The annual corporate IMI Way Day was held in June which included face-to-face training for all employees. ·   Policies, manuals, training, business processes and monitoring of key compliance, tax and legal risks. ·   Group platform and specific territory resources dedicated to legal, tax, and regulatory compliance. ·   Training of employees focusing on how to apply The IMI Way in everyday situations and key risk areas such as competition law, fraud and anti- bribery and corruption. ·   Availability and promotion of the whistle blowing policy and the IMI hotline to report concerns anonymously. ·   Internal control audits by Group Assurance.
We fail to deliver some major transformational projects successfully	We will need to undertake a number of major change projects in line with our strategic objectives including; business reorganisations and implementation of IT systems. If we fail to deliver the desired objectives it could have an adverse financial impact on the Group.	·   Upgrade of resources and talent in project management. ·   Regular review of project progression by the Executive Committee. ·   Enhanced risk assessment process including full mitigation action plans for all major change projects. ·   Group Assurance reviews.
Failure of our health, safety and environmental (HSE) controls resulting in harm to employees or other stakeholders	We recognise that we have a duty of care to our employees. We have made great progress in recent years but understand the impact on our employees from the failure of this obligation. This could result in injury or death to our employees or others and environmental damage with the consequential impact of reputational damage and risk of regulator action.	·   Established global process in place to ensure that health, safety and environmental matters are appropriately addressed and any such risks are minimised including monthly reporting to, and review at the Executive Committee. ·   Sharing of best HSE practice through regional HSE forums. ·   Platform level HSE resource to proactively manage and audit platform HSE performance. ·   Group Environment, Health and Safety function with experienced specialist employees to provide support and guidance to businesses - including the conduct of regular risk control and health and safety audits.
Failure of products and technology	We pride ourselves on our innovative engineering solutions we provide for our customers. The quality and safety of our products is of the highest importance and if we fail to deliver quality and safe products or advanced technical solutions then we face a financial and reputational impact.	·   Continued focus on quality and safety, including audits to appropriate quality standards. ·   Processes to identify risk and mitigate the reputational and legal implications of any failure. ·   Upgrade of talent and focus on functional excellence in quality and product development. ·   The Group has a robust approach to managing contractual liabilities to protect us from undue financial exposures.
Loss of a key facility	A temporary or permanent loss of a key manufacturing site or warehouse as a result of a natural catastrophe or any other reason would have a material adverse impact on our ability to meet our customers needs.	·   Risk control surveys undertaken annually at all key sites to ensure compliance with best practice in property risk management. ·   Development and regular testing of robust business continuity plans.
Failure to develop a pipeline of new products	Our growth drivers around climate change, resource scarcity, urbanisation and an ageing population, require us to deliver new innovative products for our end customers. Failure to maintain new product momentum will impact our ability to grow.	·   Continued investment in research and development working with our key account management teams to ensure we meet our customer needs. ·   Centres of design and technological excellence established in a number of locations.
Mergers & acquisitions (M&A)	An important part of our growth agenda is to make acquisitions which compliment or extend our product portfolio. If we acquire businesses which do not deliver the expected synergies or have significant liability exposures it could have a negative financial impact on the Group and restrict our ability to meet growth targets.	·   Resourced central M&A function working with our divisions to identify acquisition opportunities. ·   Robust due diligence.
Failure to attract and retain talent	Our success as a business will depend on ensuring we get the right people in key positions in the organisations.  If we lose key personnel or cannot recruit and retain high calibre managers and engineering talent, this may lead to the Group not being able to effectively implement its business plans and strategy.	·   Succession plans in place and regularly reviewed. ·   Group-wide training and development programmes. ·   Increased resources in emerging markets. ·   Regular Group-wide employee surveys and action plans targeted by Company or geography.
Failure to manage the supply chain	We have a significant number of contracts with a broad base of suppliers. If we fail to meet our customers requirements in respect of quality or delivery as a result of an interruption in the supply chain then it could have a material impact on the Group's results.	·   Global Procurement function that co-ordinates IMI's approach to supply chain risk management. ·   Monitoring of risks and development of contingency plans to mitigate the impact of a supplier failure or increased prices. ·   Review of supply base to reduce over-reliance on key suppliers. ·   Moves to lower cost manufacturing facilities, on-going review of alternative low cost suppliers and, where appropriate, supplier consolidation. ·   Training and audit programme to validate suppliers' business processes, quality and standards.
IT failure/ system collapse and loss of data	We utilise a significant number of IT systems to support the Group's production, technology, marketing, sales and financial functions. Failure of any of the systems or corruption or loss of data could have a major impact on operations.	·   Development and regular testing of business continuity plans. ·   Ensuring business continuity plans are robust and address temporary unavailability of IT systems. ·   Cyber security risk assessments undertaken and appropriate actions taken. ·   Strategy to upgrade or replace key systems.

Risk Appetite

The Board has considered the Group's risk appetite and it is considered appropriate to achieve our strategic objectives. Risk appetite is higher for new product development, emerging market growth and acquisitions, in keeping with our growth strategy and is lower for employee safety and regulatory compliance.

Our risk appetite has been communicated to the Divisional Managing Directors to ensure their decision making behaviour is consistent with the risk appetite set by the Board.

Enquiries to:

John O'Shea                 Company Secretary                 Tel:            0121 717 3700

Will Shaw                      Investor Relations                     Tel:            0121 717 3700

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