2013 Annual Report & Accounts & Notice of 2014 AGM

RNS Number : 6375E

Mears Group PLC

11 April 2014

 



For Immediate Release	11 April 2014

Mears Group PLC

("Mears" or "the Group" or "the Company")

2013 Annual Report and Accounts and Notice of 2014 AGM

The following documents have today been posted or otherwise made available to shareholders:

·      Annual Report and Accounts for the year ended 31 December 2013 (the "2013 Annual Report")

·      Notice of the Annual General Meeting ("AGM") and a circular with explanatory notes for shareholders about the resolutions to be proposed at the AGM ("AGM Circular and Notice")

·      Form of Proxy for the 2014 AGM

In accordance with Listing Rules, following the announcement on 18 March 2014 of Mears' final results for the year ended 31 December 2013, copies of each of those documents have today been submitted to the National Storage Mechanism, and will shortly be available for inspection at the National Storage Mechanism at www.morningstar.co.uk/uk/NSM.

The 2013 Annual Report and AGM Circular and Notice are also available on the Company's website at www.mearsgroup.co.uk.

The AGM will be held at 9.30am on Wednesday 4 June 2014 at at the offices of Buchanan, 107 Cheapside, London, EC2V 6DN.

In accordance with DTR 6.3.5, this announcement contains in the attached appendix information on the principal risk factors, a responsibility statement and details of related party transactions which has been extracted in full unedited text from the 2013 Annual Report. However, these extracts should be read in conjunction with the full 2013 Annual Report and is not a substitute for reading the full 2013 Annual Report. A condensed set of audited financial statements were appended to Mears' final results announcement on 18 March 2014 together with a management report.

For further information, contact:

Mears Group PLC

David Miles, Chief Executive                                                             Tel: [phone]

Andrew Smith, Finance Director                                                       Tel: [phone]

Bob Holt, Chairman                                                                            Tel: [phone]

Alan Long, Executive Director                                                           Tel: [phone]

www.mearsgroup.co.uk 

Buchanan

Richard Darby/ Sophie McNulty/ Helen Greenwood                    Tel: [phone]

www.buchanan.uk.com 

Notes for editors

Mears is a leading social housing repairs and maintenance service provider to Local Authorities and Registered Social Landlords in the UK and now commands a leading position in the UK Local Authorities' outsourced care market, providing personal care services to people in their own homes.

Mears employs in excess of 15,000 people and provides maintenance and repairs services to in excess of 10% of the UK social housing stock. Mears also provides care to over 20,000 service users.

Appendix

Unedited extract from Annual Report and Accounts for the year 2013

Risk management and principal risks

The effective management of risks is a key feature in the continuing success of Mears. We have a clear framework for identifying and prioritising our risks together with a robust mitigation process to reduce their impact.

Risk management process

The Board

The Board has ultimate responsibility for the effectiveness of the systems and processes of risk management and internal control.

The Audit Committee

The Audit Committee is responsible for assisting the Board in discharging its responsibilities. The Audit Committee reports to the Board on its activities and makes recommendations and escalates significant risks or matters to the Board as appropriate.

The Senior Management Team

The Senior Management Team reviews and identifies the key risks which may impact upon the achievement of the Group's strategic goals and will consider how these risks are developing with changes in the operations, markets and the regulatory environment.

The nature of the risk is reviewed including the possible triggering events and the aggregated impacts before setting appropriate mitigation strategies directed at the causes and consequences of each risk. The risk is assessed in relation to the likelihood of occurrence and the potential impact of the risk upon the business and assessed against a matrix scoring system which is then used to escalate risks within the Group as appropriate.

The Senior Management Team has responsibility for managing the Group's key risks.

Risk management function

The Group Risk Function supports the risk management process by providing guidance, support and challenge to management whilst acting as the central point for coordinating, monitoring and reporting on risk across the Group. To ensure our risk management process continues to drive improvement, the Group Risk Function monitors the ongoing status and progress of mitigation plans on a quarterly basis.

The control environment is underpinned by a detailed scheme of delegated responsibilities that defines processes and procedures for the approval process in respect of decision making. This ensures that decisions within the organisation are made by the appropriate level of management.

Risk management

In line with the FRC guidance, we have endeavoured to simplify our reporting of our key risks to ensure that shareholders understand those principal risks which we see as business critical or potentially catastrophic.

We have described in detail how we seek to manage and mitigate those risks. We have also linked these risks to other areas of our Strategic Report: our business model, our markets and our strategic objectives.

For completeness, we have also provided a list of other risks.

These other risks continue to be closely monitored and managed as the Board considers appropriate. These other risks may be significant at a divisional or subsidiary level but are not considered sufficiently significant at Group level to warrant detailed disclosure within our Annual Report.

We consider these additional risks to be 'business as usual' and wished to avoid giving them too much focus as to do so would potentially detract from our shareholders' understanding of those principal risks which the Board believes represent the biggest challenge to the Group delivering its strategic goals.

We continue to drive improvements in our risk management process. We also review our business model, core markets and business processes to ensure that we have properly identified all risks. We also continuously review our mitigating actions to ensure that they are sufficient to minimise our residual risk.

Principal risks

Risk and description	How we mitigate the risks
Reputation The ultimate success of Mears relies upon maintaining a positive reputation. An event, or series of events, may occur that could damage our brand in the eyes of our customers. Poor service delivery would damage our reputation. Both our Social Housing and Care markets are close-knit communities where examples of poor performance are quickly communicated widely. Furthermore, in Care we deliver services to people who are elderly and vulnerable. A service delivery failure within our Care division could result in the physical harm or, in the most extreme cases, death of a service user. In the environment of caring for vulnerable people, there is a risk of isolated incidences of abuse and neglect which rightly receive significant press coverage with the inevitable reputational damage. The ability to tender contracts with public sector organisations is fundamental to the achievement of our strategic objectives. Over recent years we have seen negative press comment attached to a number of companies involved within the arena of public sector outsourcing where past actions could negatively impact upon the ability of those organisations to tender for future work.	·      In-house IT system developed to provide operational management with a real time dashboard of service delivery indicators. ·      Internal auditing of KPI reporting including 'mystery shoppers'. ·      Well communicated policy for dealing with press enquiries and incident management. ·      Care risk plans for dealing with vulnerable customers. ·      Compliance management of bribery and corruption legislation and whistleblowing policy. ·      We induct and train all new starters. This induction ensures that all employees understand our values and it reinforces the Group's culture. ·      We ensure that staff are properly trained for their roles. We ensure that we deliver relevant training and implement best practice.
People A failure to attract, develop, motivate and retain quality people at all levels in the organisation will have a significant impact upon the Group delivering against its strategic objectives. Notably in our Care division, recruitment and retention remains the biggest inhibitor to achieving our growth aspirations. We have over 15,000 employees - the majority of these employees are interacting with our customers on a daily basis. It is this day-to-day front line contact that is fundamental in delivering a differentiated service and maximising customer satisfaction. It is therefore imperative that the Group's strategic goals are well communicated and understood by all employees. Mears sees sound commercial management of contracts and the business as a whole as essential to achieving our objectives. The success of the Group is underpinned by the delivery of services profitably whilst exceeding our clients' expectations and our contractual obligations.	·      We induct and train all new starters. This induction ensures that all new employees understand our strategy, vision and values. ·      We regularly review and benchmark our remuneration packages to ensure that they remain competitive. ·      In Care, the market is highly price driven which has made it difficult to provide better rewards. Our Local Authority clients will not typically commit to any guaranteed work volume, which has made zero hour contracts commonplace. We have canvassed the sector and Government to encourage outcome-based care contracts and associated incentives and rewards which can be shared with our front line carers. Our new pioneering Wiltshire outcome-based contract is hopefully the first of many that result from our influence and success. ·      In Care, an increased level of resource and focus is being applied to recruitment; a more robust process in respect of handling, processing and tracking applicants is expected to increase the volume of quality carers. Local Care branches are targeted on a monthly basis in the area of recruitment and retention. ·      At the senior end of the business we have increased our focus on succession planning and increased our investment in senior management development. During 2013 we commenced a Senior Leadership Programme which has identified a cross section of the Group's brightest talent that we would envisage will play central roles in our future business. ·      The Group's Learning & Development strategy was launched during 2012 and has undertaken a number of key initiatives with a view to investing in management trainees, skills academies and apprenticeship schemes to ensure there is a constant inflow of new talent. These are detailed further on pages 14 and 15. ·      An annual appraisal process is completed for all employees to ensure that all people receive feedback in respect of their performance as well as identifying future training and development requirements. In 2013 we have once again secured the national accreditation as an Investor in People. ·      We are continuously looking to improve our position as an employer of choice by improving the level of engagement with our employees through formal communications, awards to recognise success, local events and family fun days. ·      Continual monitoring of our future skills requirements. ·      We regularly undertake employee surveys to gauge employee satisfaction, engagement and any barriers to high level performance.
Health and safety Mears' services and operations involve a series of high risk activities ranging from dealing with vulnerable customers in need of our care, to our building related services e.g. working at heights, working with gas and electricity and dealing with asbestos. Failure to have robust and safe systems of work could lead to serious personal injury or a fatality. In addition such a failure could lead to financial penalties and significant reputational damage.	·      Significant investment in single centralised HSE function to maintain consistency and quality. ·      Comprehensive safe systems of work which are well communicated through a robust and coordinated internal training regime. ·      Robust process of inducting new staff to ensure importance of health and safety is emphasised together with detailed method statements for working safely. ·      Regular HSE training and updates predominantly delivered by internal function. ·      Significant resources have been invested to claims defensibility to ensure that invalid claims can be robustly defended. ·      Internal SHE auditing and third party validation. ·      Annual Group SHE strategy and plan.

Additional risks

Our markets

Both markets are subject to Government legislation and are impacted by the political environment, local or national, including public sector policy and funding. Any changes in policy could have a detrimental effect on the Company's business.

Integrity, ethics, anti-bribery and corruption

The Company policy is well communicated to ensure that all employees comply. This has been reinforced by training of key staff. We have a whistleblowing process to ensure comprehensive investigations are completed and robust action taken for negative findings.

Taxation, legal and regulatory

The Group is subject to numerous tax, legal and regulatory requirements. Policies and procedures are issued and controls are in place to ensure compliance. Additional technical support is sourced as required to enhance the internal teams and to provide validation as to our compliance.

Business continuity

We are reliant upon our information systems and technology platforms. A failure of our IT systems would have a detrimental impact to our ability to deliver our services - vulnerable people depend upon our services, hence even a short period of downtime could cause severe reputational damage. Our networks are protected with antivirus and firewall systems. A procedure for regular system back-ups is in place. A Business Continuity Plan is in place for each business unit and with particular emphasis upon our IT and Finance central support functions which would provide the greatest challenge in the event of a system failure or data loss.

Liquidity

The Group has a revolving credit facility (RCF). The Group's cash flow forecast indicates that there is significant headroom in place to fund the Group's strategic objectives. The forecasts also indicate that the business will generate strong free cash flow to reduce the future level of debt. We expect to be able to rely on the debt market to refinance the RCF at its maturity in July 2018. The Group has entered into an interest rate swap to reduce the Group's exposure to interest rate movements. The Group transacts with the public sector which means there is little credit risk with our customers. This area is considered further in the going concern section of the Statement of Directors' responsibilities.

Responsibility statement of the Directors in respect of the 2013 Annual Report

The Directors are responsible for preparing the Annual Report, the Remuneration Report and the financial statements in accordance with applicable law and regulations.

Company law requires the Directors to prepare financial statements for each financial year. Under that law the Directors are required to prepare Group financial statements in accordance with International Financial Reporting Standards (IFRS) as adopted by the European Union and have elected to prepare the Company financial statements in accordance with United Kingdom Generally Accepted Accounting Practice (United Kingdom Accounting Standards and Applicable Laws). 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 and profit or loss of the Group and the Company for that period. In preparing these 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;

·      state whether applicable accounting standards have been followed, subject to any material departures disclosed and explained in the financial statements; and

·      prepare the financial statements on the going concern basis unless it is inappropriate to presume that the Company will continue in business.

The Directors are responsible for keeping adequate accounting records that are sufficient to show and explain the Group and Company's transactions and disclose with reasonable accuracy at any time the financial position of the Group and the Company and enable them to ensure that the financial statements and Remuneration Report comply with the Companies Act 2006 and Article 4 of the IAS regulation. They are also responsible for safeguarding the assets of the Company and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities.

The Directors confirm that:

·      so far as each Director is aware there is no relevant audit information of which the Company's auditor is unaware; and

·      the Directors have taken all the steps that they ought to have taken as Directors in order to make themselves aware of any relevant audit information and to establish that the auditor is aware of that information.

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

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 Annual Report 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.

The Directors are responsible for preparing the Annual Report in accordance with applicable law and regulations. The Board considers the Report and Accounts, taken as a whole, as fair, balanced and understandable and that it provides the information necessary for shareholders to assess the Company's performance, business model and strategy.

Going concern

We principally operate in robust defensive markets, Social Housing and Care, where spend is largely non-discretionary and our contracts tend to be long-term partnerships.

The Group had net debt of £0.5m at 31 December 2013. The core debt required to satisfy the day-to-day requirements of the business is in the region of £70m. This represents significant headroom against the £120m unsecured revolving credit facility with an additional accordion mechanism allowing the facility to be increased to a maximum of £160m, maturing in July 2018. The original refinancing was completed in 2011 and during 2013 the facility agreement was amended and extended on improved terms.

After reviewing the Group's and Company's budget for the next financial year and longer term plans, the Directors consider that, as at the date of approving the financial statements, it is appropriate adopt the going concern basis in preparing the financial statements.

Related Party Transactions and Remuneration of key management personnel

Identity of related parties

The Group has a related party relationship with its pension schemes, its subsidiaries and with its Directors.

Pension schemes

Details of contributions to pension schemes are set out in note 26 to the financial statements.

Subsidiaries

The Group has a central treasury arrangement in which all subsidiaries participate. The Directors do not consider it meaningful to set out details of transfers made in respect of this treasury arrangement between companies, nor do they consider it meaningful to set out details of interest or dividend payments made within the Group.

Transactions with key management personnel

The Group has identified key management personnel as the Directors of Mears Group PLC.

Key management personnel held the following percentage of voting shares in Mears Group PLC:

	2013	2012
	%	%
Directors	0.4	0.4
Key management personnel's compensation is as follows:
	2013	2012
	'000	'000
Salaries	2,645	2,025
Contributions to defined contribution pension schemes	185	185
Share-based payments	50	50
	3,080	2,260

Further details of Directors' remuneration are disclosed within the Remuneration Report.

Transactions with other related parties

During the year the Group purchased customer care related services from Asert LLP, a company in which Mears Group PLC is a 50% partner, totaling 0.01m (2012: 0.01m). At 31 December 2013 the Group was owed £0.02m (2012: 0.01m) by Asert LLP.

The Group also purchased call centre related services from Mears 24/7 LLP, a company in which Mears Limited is a 50% partner, totaling £1.9m (2012: £0.01m). At 31 December 2013 the Group owed £0.3m (2012: £0.1m) to Mears 24/7 LLP.

During the year the Group purchased strategic advice from OC&C Services Limited, a company related by common Directorship, of £0.02m (2012: £nil). At 31 December 2013, the Group owed £nil (2012: £nil) to OC&C Services Limited

 

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