Annual Financial Report and Annual General Meeting

RNS Number : 8812B

Kier Group PLC

12 October 2015

 

12 October 2015

Kier Group plc

Publication of the 2015 Annual Report and the 2015 Notice of Annual General Meeting

Kier Group plc (the "Company") announces that its annual general meeting will be held at the Andaz Hotel, 40 Liverpool Street, London EC2M 7QN at 12.00 noon on Thursday, 12 November 2015.

The annual report and accounts for the year ended 30 June 2015 (the "Annual Report"), the notice of annual general meeting, the form of proxy and documentation relating to the scrip dividend alternative were posted, or made available, to shareholders on 9 October 2015.

These documents are available on the Company's website at www.kier.co.uk/shareholders and have been submitted to the National Storage Mechanism, where they are available for inspection at www.hemscott.com/nsm.do.

The Company announced its results for the year ended 30 June 2015 on 17 September 2015.  Additional information has been extracted from the Annual Report in unedited full text and is included in the Appendix to this announcement for the purposes of compliance with the Disclosure and Transparency Rules.  Page numbers and note references in the Appendix refer to page numbers in the Annual Report and the notes to the Company's consolidated financial statements for the year ended, 30 June 2015.

For enquiries, please contact:

Beth Melges

Deputy Company Secretary

Tel: [phone]

Cautionary statement

This announcement does not constitute an offer of securities by the Company.  Nothing in this announcement is intended to be, or intended to be construed as, a profit forecast or a guide as to the performance, financial or otherwise, of the Company or the group of companies of which the Company is the holding company (the "Group") whether in the current or any future financial year.  This announcement may include statements that are, or may be deemed to be, ''forward-looking statements''.  These forward-looking statements can be identified by the use of forward-looking terminology, including the terms ''believes'', ''estimates'', ''anticipates'', ''expects'', ''intends'', ''plans'', ''target'', ''aim'', ''may'', ''will'', ''would'', ''could'' or ''should'' or, in each case, their negative or other variations or comparable terminology.  By their nature, forward-looking statements involve risks and uncertainties because they relate to events and depend on circumstances that may or may not occur in the future and may be beyond the Company's ability to control or predict.  Forward-looking statements are not guarantees of future performance.  Important factors that could cause these differences include, but are not limited to, general economic and business conditions, industry trends, competition, changes in government and other regulation, changes in political and economic stability and changes in business strategy or development plans and other risks.  Other than in accordance with its legal or regulatory obligations, the Company does not accept any obligation to update or revise publicly any forward-looking statement, whether as a result of new information, future events or otherwise.

APPENDIX

Risks

The following information is extracted from pages 33 to 37 (inclusive) of the Annual Report.

Principal risks and uncertainties

The nature of the industries and the business environment in which the Group operates are inherently risky. Although it is recognised that it is not possible to eliminate all such risks and uncertainties, the Group has well-established risk management and internal control systems to manage them.

On behalf of the Board, the RMAC identifies the risks that it considers most likely, without effective mitigation, to have an impact on the Group and its strategic priorities. If emerging risks are identified in between these annual reviews, these are incorporated immediately into the risk management process. There has been no change to the Group's principal risks this year: these are set out below, together with a summary of the actions taken to mitigate each risk.

Risk	Mitigations	Current ranking and movement since 2014
Contract delivery The Group has several hundred live contracts at any point in time and the risks to which the Group is exposed are dependent on the nature of the work, the location, the duration and the legal form of the contract. If these risks are not managed effectively, the Group will suffer contract losses, delays and potential reputational damage. Relevant strategic priorities: Achieve top quartile performance and efficiency Provide sector-leading customer experience	Contracts in progress are controlled and managed through the Group's operating structure and procedures. This includes regular monthly contract reviews of contract-to-date financial performance against budget as well as comparing end-life forecast against tender. Project risk registers are also reviewed. In addition, our procurement function manages subcontractor and supplier relationships across contracts. The monthly reviews are supplemented by a quarterly review process which operates across all divisions of the Group.	1st (2014: 2nd)
Systems The efficient operation of the Group is increasingly dependent on the proper operation, performance, security and development of its IT systems. The Group is maintaining legacy systems prior to implementing an ERP system. If implementation is unsuccessful, this will impact the Group's efficiency and profitability. Relevant strategic priorities: Achieve top quartile performance and efficiency Ensure we have investment in technology and back-office systems	Kier recognises that IT plays a fundamental role in supporting the business. All IT activity is managed by Kier's IT department in partnership with the business and according to agreed service levels. Significant investments and programmes are subject to Board review and approval, such as the development of the new ERP system that will standardise the back-office functions. Kier has contingencies in place to deal with cyber security threats.	2nd (2014: 3rd)
Funding The Property and Residential divisions rely on finance provided by the Group and external sources. The Construction and Services divisions rely on Group bonding facilities. Without these, revenue and profit would reduce. Relevant strategic priorities: Accelerate growth to be a top three player in our chosen markets	Cash flow is forecast regularly to provide up-to-date and accurate information on the Group's current cash position and its future requirements. Borrowing facilities have been recently renegotiated and extended. The Group has strong, long-term relationships with the providers of its bonding lines and has an in-house team which monitors headroom and advises on bond terms and conditions. The Group's Investment Committee is responsible for approving capital investment and optimising the allocation of capital.	3rd (2014: 4th)
People The Group depends on members of its senior management team and on a flexible, highly skilled, diverse and well-motivated workforce. As core markets emerge from recession, employee turnover has increased. If the Group does not succeed in attracting, developing and retaining skilled people, as well as understanding and embracing the diversity of those people, it will not be able to grow the business as anticipated. Relevant strategic priorities: Accelerate growth to be a top three player in our chosen markets Attract and retain highly motivated, high-performing teams	The Group monitors staff turnover closely. Pay and conditions are reviewed regularly against the prevailing market to ensure that we remain competitive. Succession planning and staff development are managed at all levels in the Group. The Group has a performance review process which is designed to assist in the career development of its staff and also to identify potential successors to roles within the Group (including at senior management level).	4th (2014: 1st)
The market The Group's strategy depends on the planned level of expenditure within both the public and private sectors. Smaller markets will likely result in lower revenue for the Group. Relevant strategic priorities: Accelerate growth to be a top three player in our chosen markets	The Group has a structure to manage and mitigate risk with the following key components: • A wide geographic regional network of offices across the UK well integrated into local communities, the client base and the supply chain; • A high number of framework agreements and partnerships with Government, local authorities and the private sector; • Kier's integrated offering, with Property typically peaking earlier in the economic cycle and Services later, provides a natural mitigation against recession; and • A developing capability to predict market changes, in particular future Government priorities. The Group also carries out monthly and quarterly reviews of its workload and forecasts its overhead levels as a percentage of future work in order to maintain a steady ratio of overhead costs to revenue. Fuel and other materials that are in high demand, such as steel, are hedged or forward-purchased when deemed necessary.	5th (2014: 8th)
Tender pricing The work for which Kier tenders is often complex and long-term with significant associated risks. Tender assumptions may be inaccurate or the risks associated with the tender may not be fully understood. If risks are under-priced, contract losses and potential reputational damage will result. If risks are over-priced, order books will suffer. Relevant strategic priorities: Achieve top quartile performance and efficiency Provide sector-leading customer experience	The Group's appetite for very long-term, large, competitively tendered construction contracts is limited. This is influenced by the desire to maintain quality of workload and to manage risk. Tenders for contracts are subject to a governance structure which includes Group-wide standing orders and a gateway process, with approval by the chief executive/finance director, other executive directors or divisional directors, depending upon the value and nature of the contract. Tenders with defined specific risks are reviewed by the Group's Risk Review Committee.	6th (2014: 7th)
Compliance The Group is subject to a number of complex, demanding and evolving legal and regulatory requirements. A breach of laws or regulations could lead to legal proceedings, investigations or disputes resulting in a disruption of business, ranging from additional costs incurred on a project or in the overall management of the breach, to civil and/or criminal penalties as well as reputational damage. Relevant strategic priorities: Operate a safe and sustainable business Provide sector-leading customer experience	The Group monitors and responds to legal and regulatory developments in the areas in which it operates. It conducts risk assessments to assess material changes and the policies and procedures it needs to manage them. The Group's policies require that all of its subsidiaries, employees, suppliers and subcontractors comply with applicable laws and regulations. The Group updates its policies to ensure that it complies with changes in legislation and regulation. Certain mandatory training is provided on relevant areas of law and regulation. The Group operates and encourages the use of a whistle-blowing process that enables employees to raise concerns. Contracts entered into by the Group are subjected to a review process to ensure that contractual risks are identified and, wherever possible, mitigated appropriately.	7th (2014: 9th)
Change Shortly before year end, the Group acquired Mouchel and is currently undertaking its integration through a tightly governed change programme. In addition, the ERP programme has completed its planning and development phase and is expected shortly to move into implementation and roll-out. Unless carefully managed, these programmes risk diverting management attention away from core operations, causing a loss of focus on key market opportunities and control of the existing business. Relevant strategic priorities: Achieve top quartile performance and efficiency Ensure we have investment in technology and backoffice systems	All change programmes are tightly controlled by both a programme steering group and by regular review by the RMAC. The integration programme, in particular, provides a weekly update report that provides details on progress, risks, issues and executive decisions that are required.	8th (2014: 10th)
Safety The Group's activities are inherently complex and potentially hazardous and require the continuous monitoring and management of health, safety and environmental risks. Failure to manage these risks could result in injury to employees, subcontractors or members of the public or damage to the  environment. This could also expose the Group to significant potential liability and reputational damage. Relevant strategic priorities: Operate a safe and sustainable business Accelerate growth to be a top three player in our chosen markets	Detailed policies and procedures exist to minimise such risks and are subject to review and monitoring by the operating businesses and Group. All operating businesses have a director who is responsible for co-ordinating health & safety activities. Compliance with the SHE management system is monitored through a number of tools including audit, leadership tours and inspections. The Group's behavioural change programme is designed to change behaviours at the supervisor and workforce level while the Visible Leadership Programme is encouraging appropriate engagement by the business leadership with the workforce. The SHE audit programme continues to be used as a key method in identifying common areas of non-compliance across the business, helping us drive improvements proactively rather than reactively.	9th (2014: 5th)
Reputation The Group's ability to tender for new business and its relationship with customers, supply chain partners, its employees and other stakeholders depends in large part on the good reputation that it has established and how it is perceived by others. The Group's growth targets are unlikely to be achieved if this risk is not managed. Relevant strategic priorities: Operate a safe and sustainable business Accelerate growth to be a top three player in our chosen markets Provide sector-leading customer experience Attract and retain highly motivated, high-performing teams	With the increasing profile of the Group in both business to business and business to customer markets, the ability to monitor and measure the Group's reputation through client and customer feedback is key. Customer satisfaction monitoring has been implemented across the Group and, with the development of a digital strategy including social media, we are better informed of issues that may arise.	10th (2014: 6th)

Related party transactions

The following information is extracted from note 29 to the Company's consolidated financial statements for the year ended 30 June 2015.

Related parties

Identity of related parties

The Group has a related party relationship with its joint ventures, key management personnel and pension schemes in which its employees participate.

Transactions with key management personnel

The Group's key management personnel are the executive and non-executive directors as identified in the directors' remuneration report on pages 84 to 106.

In addition to their salaries, the Group also provides non-cash benefits to directors and contributes to their pension arrangements as disclosed on page 95. Key management personnel also participate in the Group's share option programme (see note 25).

Key management personnel compensation comprised:

	2015 £m	2014 £m
Emoluments as analysed in the directors' remuneration report	3.3	3.2
Termination payments	0.2	-
Employer's national insurance contributions	0.5	0.4
Total short-term employment benefits	4.0	3.6
Share-based payment charge	0.3	0.7
	4.3	4.3

Transactions with pension schemes

Details of transactions between the Group and pension schemes in which its employees participate are detailed in note 8.

Transactions with joint ventures

	2015 £m	2014 £m
Staff and associated costs	1.8	38.1
Management services	0.7	0.5
Interest on loans to joint ventures	1.0	1.5
	3.5	40.1

Amounts due from joint ventures are analysed below:

	2015 £m	2014 £m
Saudi Comedat Company Limited	(2.2)	-
Staffordshire Property Partnership	0.1	-
Kier Trade City Holdco 1 LLP	7.4	-
Kier Reading Holdco 1 LLP	14.6	-
3 Sovereign Square Holdings 1 LLP	1.8	-
Salford Village Limited	2.0	2.0
Biogen Holdings Limited	3.8	(2.0)
Kier Hammersmith Holdco Limited	6.2	6.6
Watford Health Campus Partnership LLP	0.1	0.2
Tri-Link 140 Holdings 1 LLP	(0.8)	-
Information Resources (Oldham) Limited	-	0.9
	33.0	7.7

Directors' responsibility statement

The following responsibility statement is repeated here solely for the purpose of complying with Disclosure and Transparency Rule 6.3.5.  This statement is extracted from page 111 of the Annual Report and relates to the Annual Report and not the extracted information presented in this announcement.

Introduction

The directors are responsible for preparing the annual report and the Group and parent company financial statements in accordance with applicable law and regulations.

Company law requires the directors to prepare the Group and parent company financial statements for each financial year. Under that law, they are required to prepare the Group financial statements in accordance with International Financial Reporting Standards as adopted by the European Union ('IFRS') and applicable law and have elected to prepare the parent company financial statements in accordance with UK Accounting Standards and applicable law ('UK Generally Accepted Accounting Practice').

Under company law, the directors must not approve the financial statements unless they are satisfied that they give a true and fair view of the state of affairs of the Group and parent company and of their profit or loss for that period.

In preparing each of the Group and parent company financial statements, the directors are required to:

·      Select suitable accounting policies and then apply them consistently;

·      Make judgements and estimates that are reasonable and prudent;

·      For the Group financial statements, state whether they have been prepared in accordance with IFRS, as adopted by the EU;

·      For the parent company financial statements, state whether applicable UK Accounting Standards have been followed, subject to any material departures disclosed and explained in the parent company financial statements; and

·      Prepare the financial statements on the going concern basis unless it is inappropriate to presume that the Group and the parent company will continue in business.

The directors are responsible for keeping adequate accounting records that are sufficient to show and explain the parent company's transactions and disclose with reasonable accuracy at any time the financial position of the parent company and enable them to ensure that its financial statements comply with the Companies Act 2006. They have general responsibility for taking such steps as are reasonably open to them to safeguard the assets of the Group and to prevent and detect fraud and other irregularities.

Under applicable law and regulations, the directors are also responsible for preparing a directors' report, a directors' remuneration report and a corporate governance statement that comply with that law and those regulations.

The directors are responsible for the maintenance and integrity of the corporate and financial information included on the Company's website. Legislation in the UK governing the preparation and dissemination of financial statements may differ from legislation in other jurisdictions.

Directors' responsibility statement

Each of the directors of Kier Group plc, whose names and functions are set out on pages 64 to 66 (inclusive), confirms that to the best of his or her knowledge:

·      The financial statements contained in this annual report and accounts, 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 as a whole;

·      The management report contained in this annual report and accounts includes a fair review of the development and performance of the business and the position of the Company and the undertakings included in the consolidation taken as a whole, together with a description of the principal risks and uncertainties that they face; and

·      This annual report and accounts taken as a whole is fair, balanced and understandable and provides the information necessary for shareholders to assess the Company's performance, business model and strategy.

 

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