Annual Financial Report

RNS Number : 6081T

Morgan Sindall Group PLC

21 March 2019

 

Morgan Sindall Group plc ('the Company')

Legal Entity Identifier (LEI) number: 2138008339ULDGZRB345

Annual Financial Report

21 March 2019

Further to the release of the Company's Preliminary Results announcement on 21 February 2019, the Company announces that it has today published and issued to shareholders the 2018 Annual Report and Accounts ('Annual Report'), Notice of Annual General Meeting 2019 and the Form of Proxy. The following documents can be downloaded from the Company's website at www.morgansindall.com:

·     2018 Annual Report

·     Notice of Annual General Meeting 2019

A copy of each document listed above has been submitted to the Financial Conduct Authority's national storage mechanism ('NSM') and will shortly be available via the NSM website at www.morningstar.co.uk/uk/NSM.

The Company will hold its Annual General Meeting at 10.00am on Wednesday 8 May 2019 at the offices of Jefferies International Limited, Vintners Place, 68 Upper Thames Street, London EC4V 3BJ.

In accordance with the requirements of Rules 4.1 and 6.3.5 of the Disclosure Guidance and Transparency Rules, a description of the principal risks and uncertainties affecting the Group is set out in Appendix 1 to this announcement. The Company's Preliminary Results announcement released on 21 February 2019 contained all other information required by DTR 6.3.5.

ENQUIRIES:    

Morgan Sindall Group plc                                  Tel: [phone]

Clare Sheridan, Company Secretary

 

Appendix 1

The Group's risk profile continues to be supported by a strong balance sheet and order book, and a continued focus on contract selectivity. There have been no noticeable Brexit impacts, but we remain vigilant.

Our approach

Risk is inherent in our business and cannot be completely eliminated if we are to achieve growth. Our risk governance model ensures that our principal risks and the controls implemented throughout the Group are under regular review at all levels

Group Board

The Board is responsible for setting the Group's risk appetite and for ongoing risk management, including assessing the principal risks that threaten our strategy and performance.

Audit committee
The audit committee assists the Board in monitoring risk management and internal control, and formally reviews the Group and divisional risk registers on behalf of the Board.
Divisional boards				Risk committee
Each division identifies the risks facing its business and takes measures to mitigate the impacts. Senior managers take ownership of specific risks and ensure that tolerance levels are not exceeded.				Our risk committee consists of heads of key Group functions, including legal, company secretarial, IT, finance, internal audit, tax, treasury and commercial. The committee identifies risks for entering in the Group risk register. It also reviews the Group and divisional risk registers before they are presented to the Board and audit committee.
Risk reviews		Strategic planning		Delegated authorities		Divisional Reporting
Twice a year each division carries out a detailed risk review, recording significant matters in its risk register. Each risk is evaluated, both before and after the effect of mitigation, on its likelihood of occurrence and severity of impact on strategy. The Group head of audit and assurance follows the same process for identifying and reviewing Group risks, conferring with the risk committee.		Risk management is part of our business planning process. Each year objectives and strategies are set that align with the risk appetite defined by the Board.		Our finance director and Group head of audit and assurance have produced a formal document which delegates approval for material decisions to appropriate levels of management. Such decisions include project selection, tender pricing, and capital requirements. Board approval is required before undertaking large, complex projects. The approval system is regularly reviewed.		The divisional risk registers record the activities needed to manage each risk, with mitigating activities embedded in day-to-day operations for which every employee has some responsibility. Rigorous reporting procedures are in place to monitor significant risks throughout the divisions and ensure they are communicated to the Group head of audit and assurance.
Internal audit
The Group head of audit and assurance reviews and collates the divisional risk registers and draws from them when compiling the Group risk register. An annual review across the Group is undertaken, focusing on significant projects and trends, and areas of concern.

Overview of the Group's risk profile

During 2018 the Board reviewed the Group's risk appetite and no significant changes were identified. The ongoing negotiations over the UK's exit from the EU continue to generate uncertainty and we are keeping a close watch on developments. However, the economy has continued to perform well in the reporting period and this is reflected in our trading position. We will adjust our strategy in response to any clear indicators, but are reassured that the majority of our regeneration schemes and a sizeable portion of our construction order book and pipeline are supported by public sector or regulated clients, via frameworks and joint venture arrangements secured over the medium to longer term.

Our diversity of offering through construction and regeneration protects the business from cyclical changes in individual markets. Government commitments continue to support our business model and strategy, particularly in housebuilding and regeneration - areas expected to be a primary growth driver - and in infrastructure, where our work in the public and regulated sectors has longer-term visibility.

Based on current trading patterns, a strong balance sheet, our high-quality secured order book and visible pipeline of opportunities, our outlook for 2019 and beyond looks positive. All businesses remain focused on long-term partnerships, our favoured route to market with more predictable outcomes. Our regeneration activities are mostly non-speculative, land option style arrangements, with efficient capital structures, all underpinned by a long-term visible pipeline.

Residential schemes at our price point have continued to be in demand during EU negotiations, meeting our expectations across a broad UK portfolio. With government support for housing, we are confident that the homes we build will continue to be in demand and affordable. Should the market change, the majority of our schemes are subject to economic viability conditions: future phases can be remodelled or deferred, which together with robust risk and capital controls would help mitigate negative fluctuations. Construction's long-term focus on selectivity is reflected in its outturn margin, cash and future order book. Fit Out, while more susceptible to GDP fluctuations, has good visibility of its order book in the earlier part of 2019.

In terms of resourcing our medium- and long-term plans, we have committed banking facilities until 2022, a strong cash profile and robust capital controls in place. Voluntary employee turnover is at optimum levels in most businesses and where we are recruiting we have witnessed a healthy interest in the new positions we require to help us achieve our strategic objectives.

Principal risks

The principal risks to the business are set out on the following pages, as they relate to our Group strategic objectives. The list is not exhaustive but includes those risks currently considered most significant in terms of potential impact, together with mitigating actions being taken.

The risks have been extensively reviewed but have not changed significantly in the reporting period. Any changes in severity and likelihood of impacts compared to 2017 have been indicated, and signify the Board's opinion of pre-mitigation risk movement.

Win in targeted markets                                                                                                                      

Global and UK economic conditions could potentially impact our longer-term strategy in our markets.

Risk and potential impact		Risk change in reporting period		Mitigating activities
Changes in the economy There could be fewer or less profitable opportunities in our chosen markets. Allocating resources and capital to declining markets or less attractive opportunities would reduce our profitability and cash generation.		Slight increase •  A no-deal Brexit scenario could influence consumer confidence, which in turn could affect the wider housing market and lead to lower sales volumes. EU exit negotiations continue to have limited impact in our markets, but longer-term effects remain difficult to predict and could affect investor and consumer confidence. •  Our business operates mainly in the UK; therefore, we have not been required to consider any changes to our model. Specific risks include: the potential for increased material costs as a result of exchange differences arising from materials imported from EU countries; potential delays to construction programmes in importing materials; and potential skills deficiencies arising from difficulties in obtaining EU workers within the supply chain. We have reviewed these potential impacts and consider that we have sufficient mitigations in place via contract terms or allowances that offset increased costs. •  The industry relies on a pool of EU labour to sustain construction output. To date we have not experienced any major issues, and consider this to be a more long-term challenge. •  Opportunities continue to flow in all our markets and there is high demand for our development and regeneration schemes (typically long term in nature) which continue to benefit from historical investment. •  Competition in construction remains high against a backdrop of lower growth and rising inflation. However, a large proportion of our work and forward order book continues to be secured via frameworks which typically includes preferential terms. •  Elsewhere our strategy continues to be very selective and procurement routes, margins, contract terms and order book remain favourable. •  The continued scrutiny of UK construction balance sheets is a differentiator for us and continues to underpin our position in our sector.		•  The government and cross-party groups remain committed to investment in areas that complement our strategy, including housing and infrastructure. This supports our business model, which is designed to provide a mix of earnings across different market cycles. •  Maintaining a high profile and competency in sectors identified for investment, such as infrastructure, housing and urban regeneration. •  Monitoring changes in the economy, which helps us detect shifts in spending and adapt our strategy if necessary. •  Strategic focus on market spread, geographical capability and diversification to protect against the cyclical effect of individual markets. •  Business planning that focuses on markets and opportunities consistent with our risk appetite. •  High proportion of order book secured with public sector and regulated entities, via long-term agreements and with a healthy level of demand. •  Construction and regeneration divisions working together, adding value for clients and offering a scale of service that enables us to compete in areas with higher barriers to entry. •  Regular monitoring and reporting of financial performance, work won, prospects and pipeline of opportunities.

Risk and potential impact		Risk change in reporting period		Mitigating activities
Exposure to UK housing market The UK housing sector is strongly influenced by government stimulus and consumer confidence. If mortgage availability and affordability are reduced this could make existing schemes difficult to sell and future developments unviable, reducing profitability and tying up capital.		Slight increase •  Despite Brexit, there continues to be clear government and cross-party support and demand for new housing, which supports our business model and market positioning. •  Our regeneration portfolio is geared to offset impacts if they arise and/or share risk, but given our price point and demographics, we believe that our services will still be in demand despite market fluctuations. •  Sales volumes, pace and inflation across the regions have held up during the year in both the investor and private markets. There has been some plateauing in the London market but with signs of stabilisation. •  Our residential portfolio is geographically spread, affording protection against any regional variation. •  We are well positioned to support current and future affordable and regeneration housing, with high demand across our existing property portfolio. •  There is high demand for housing on our regeneration schemes, and we work closely with local authorities to provide viable development.		•  Monitoring key UK statistics, including unemployment, lending and affordability. •  A residential portfolio that targets and supports strategic partnerships and the government's demand for affordable housing supply. •  Rigorous three-stage approval process before committing to development schemes. •  A constrained land bank, preferring and targeting option-type agreements with owners, that limit and/or defer long-term exposure and boost return on capital employed. •  Committing only to viable development schemes, allowing us to maximise our residential portfolio while responding quickly to any market changes. •  Largely non-speculative, risk-share development vehicles, subject to viability conditions that minimise any negative impact from market fluctuations. •  Regeneration schemes that typically include a mix of assets, such as residential, leisure, hotels, commercial and light industrial, providing some flexibility through economic cycles. •  High majority of schemes in partnership with the public sector and in regenerative areas that attract government funding and support. •  Targeting forward-selling and funded sections of large-scale residential schemes to institutional investors. •  Regular forecasting and monitoring of development pipeline and order book. •  Close and trusted working relationships with government agents such as Homes England.

Risk and potential impact		Risk change in reporting period		Mitigating activities
Poor contract selection In a volatile market where competition is high, a division might accept a contract outside its core competencies or for which it has insufficient resources. Failure to understand the project risks may lead to poor delivery and ultimately result in reputational damage and loss of opportunities.		No change •  The majority of our regeneration schemes and a high proportion of construction activity (order book and pipeline) is supported by public sector and regulated clients via framework and joint venture style arrangements, which we believe are less likely to be affected in the short or medium term by any Brexit economic impacts. •  Fit Out is the most vulnerable to any downturn in the office subsector but currently has good visibility and order book into 2019 with potential effects already reflected in current strategy and forecasting. •  Our forward order book continues to provide comfort with a high proportion being secured in limited competition via favourable procurement routes. It maintains a high proportion of public sector and framework clients with typically healthier risk profiles. •  An enhanced understanding of medium-term pipeline quality, assisted by insights generated from new analytical software, enables us to predict trends more accurately and adjust our strategy in response. •  An increasing proportion of construction work is being secured via sister company regeneration schemes, where expertise provided at an early stage can have the greatest influence on the likelihood of project success.		•  Clear selectivity, strategy and business plan to target optimal markets, sectors, clients and projects, which have proven to have delivered favourable outcomes. •  A strong order book and cash position that allows us to remain selective when bidding for contracts. •  Divisions selecting projects according to pre-agreed types of work, contract size and risk profile. •  A multi-stage process of bid approval, including tender review boards, risk-profiling and sign off by appropriate levels of management. •  Staff planning and profiling to ensure appropriate levels of qualified resource for future work. •  Initiatives to select supply chain partners who match our expectations in terms of quality, sustainability and availability. •  Regular reporting on sales, pipeline and order book, using customer relationship management software. •  A deliberately large proportion of projects conducted via framework or joint venture arrangements with repeat clients who share our philosophy and values, making predictable outcomes more likely. •  In particular, a significant proportion of our larger projects continuing to be secured with long-term clients with whom we have good relationships and sensible terms.

Risk and potential impact		Risk change in reporting period		Mitigating activities
Health, safety and environment (HSE) Health and safety will always feature significantly in the risk profile of a construction business. We carry out a significant portion of our work in public areas and complex environments, requiring strict observation of Health and Safety Executive standards. In terms of environmental matters, our greatest impacts would be in areas of energy use and waste generated by our activities. Incidents that cause harm to an individual or the community could result in legal action, fines, costs and insurance claims as well as project delays and damage to reputation. Poor HSE performance could also affect our ability to secure future work and achieve targets.		No change •  The Group health and safety forum has focused on mental health; occupational health; human factors in site safety; supply chain engagement; behavioural safety; and shared learning. •  Fit Out successfully trialled new behavioural safety initiatives that significantly reduced health and safety risks, such as working at height and material movement, and is looking to widen their use. •  Construction & Infrastructure released an online MIND survey to assess the mental health and wellbeing of employees. The results helped form the division's 2018 mental health strategy and have been shared with other divisions. •  Health and safety leadership team meetings were held during the year to discuss safety matters and trends impacting the business. The meetings were attended by divisional managing directors and health and safety directors. •  We have continued to focus on managing HSE issues to the standards required to protect individuals, the community and the environment. We reduced our carbon intensity by 3% in 2018.		•  Board level HSE committee focused on health and safety culture to drive better behaviour and performance. •  Quarterly meetings of the Group health and safety forum where representatives from all divisions continue to share best practice and exchange information on emerging risks. •  Individuals in each division, and on the Board, with specific responsibility for HSE matters. •  Communication of each division's HSE policy to all employees and senior managers appointed to ensure they are implemented. •  Established safety systems, site visits, monitoring and reporting procedures including near-miss and potential hazard reporting. Fit Out and Construction & Infrastructure use a health and safety app to improve safety on sites. •  Investigations and root cause analysis of accidents or incidents and near misses. Information is shared across the Group. •  New system implemented to monitor high potential incidents. •  Regular HSE training that includes behavioural change, housekeeping on site and leadership engagement in driving site standards. •  Major incident management plans and business continuity plans, periodically reviewed and tested. •  HSE report to the Board each month, HSE audits on projects and training schedules and incident investigation reports if necessary. •  Maintaining our A- position in the CDP (formerly the Carbon Disclosure Project) index which places us in the CDP's leadership band. We continue to target improvements in carbon emissions and waste production.

Develop and retain talented people

We recognise that talented, motivated people improve our performance and contribute to growth. Employee surveys show that people are happy with their places of work, culture and leadership styles.

Risk and potential impact		Risk change in reporting period		Mitigating activities
Failure to attract and retain talented people Talented people are needed to provide excellence in project delivery and customer service. Skills shortages in the construction industry remain an issue for the foreseeable future.		Slight decrease •  Our current success is helping us attract and retain people, reflected in falling voluntary employee turnover rates and high levels of applicants. •  In divisions whose voluntary employee turnover is higher, improvements continue to be made to the working environment and investment made in technology and leadership training. •  Recent divisional surveys have provided positive reinforcement of our efforts to improve employee satisfaction. •  Our investment in graduate, trainee and apprenticeship schemes is well established, with participants progressing to more senior positions. •  Our leadership development programme continues to be well received. •  Construction & Infrastructure won the 'Inspiring Change in the Workplace' award presented by the Civil Engineering Contractors Association, for its drive to promote an inclusive culture. •  Initiatives to help improve employees' wellbeing include financial education and digital GP programmes. •  We partner with organisations such as Women into Construction and the 5% Club to promote diversity in our workforce.		•  Annual appraisals providing two-way feedback on performance. •  Training and development plans to build skills and experience. •  Attractive remuneration packages benchmarked where possible. •  Industry-leading working environments, technology tools and software to enrich people's working experience. •  Giving people empowerment and responsibility together with clear leadership and support. •  Monitoring future skills requirements and embedding succession plans. •  Debriefs with leavers and joiners to understand the reasons for their decision. •  Divisional 'people boards' that meet twice a year to review talent in the business. •  Employee engagement surveys. •  Monthly HR reports to the Board including a report on leavers and joiners. •  Monitoring recruitment.

Disciplined use of capital

Our long-term success depends not only on our disciplined use of capital but also the liquidity of our clients, partners and suppliers, which could be affected by overtrading in an increasingly uncertain market.

Risk and potential impact		Risk change in reporting period		Mitigating activities
Insolvency of key client, subcontractor, joint venture (JV) partner or supplier. An insolvency could disrupt project works, cause delay and incur the costs of finding a replacement, resulting in bad debt and significant financial loss. There is a risk that credit checks undertaken in the past may no longer be valid.		Slight increase •  A high proportion of our current order book is public sector focused. With commercial clients we obtain, where necessary, relevant securities in the form of guarantees, bonds, escrow and/or favourable payment terms. •  Given recent sector-related issues, some supply chain partners could overstretch their finances, leading to underperformance or insolvency. •  We do not employ any form of debtor finance when paying our supply chain. With this and our strong balance sheet, our supply chain partners regard us as dependable in an otherwise unsettled sector.		•  A business strategy focused on the public sector and commercial clients in sound market sectors. •  Rigorous due diligence and credit checks on clients, partners and suppliers. •  Formal, staged approval process before entering into contracts, supported by tender review boards. •  Formal JV selection due diligence papers and approval at Group executive director level. •  JV agreements that contain protection in the event of default by one of the partners. •  Working with preferred or approved suppliers wherever possible, which aids visibility of both financial and workload commitments. •  Regular meetings with key supply chain members to exchange feedback and maintain dialogue, resulting in meaningful relationships and a greater understanding of their business. •  Monitoring supply chain utilisation to ensure we do not overstress either their finances or operational resource. •  Monitoring work in progress (uninvoiced income), debts and retentions.

Risk and potential impact		Risk change in reporting period		Mitigating activities
Inadequate funding A lack of liquidity could impact our ability to continue to trade or restrict our ability to achieve market growth or invest in regeneration schemes.		No change •  Our average net daily cash continues to be healthy and clearly indicates the cash-backed nature of the business. •  Our balance sheet provides certainty for our clients and supply chain in an increasingly uncertain market. •  The strength of our balance sheet provides the opportunity to explore further investment in regeneration schemes and continue to be selective in construction.		•  Medium-term committed banking facilities to 2022, which together with our strong cash position provide significant headroom. •  A Group-led, disciplined allocation process for significant project-related capital, which considers future requirements and return on investment. •  Daily monitoring of cash levels and regular forecasting of future cash balances and facility headroom. •  Regular stress-testing of long-term cash forecasts.

Risk and potential impact		Risk change in reporting period		Mitigating activities
Mismanagement of working capital Poor management of working capital leads to insufficient liquidity and funding problems.		No change •  Overall working capital continues to improve as a result of the phasing of scheme starts and completions in regeneration, plus the continuing benefits from positive cash generation in construction. •  Our cash position is not supported by any form of supply chain debtor finance and gives a clear indication of our health. •  Cash management maintains its positive momentum in construction due to a combination of improved returns, and cash optimisation and conversion. •  Our average net daily cash for the period underlines our disciplined working capital management, but there are still areas for improvement that we are working on.		•  Monitoring and management of working capital with acute focus on any overdue work in progress, debtors or retentions. •  Reinforcing a culture in the bidding and project teams of focusing on generating positive cash outcomes. •  Daily monitoring of cash levels and weekly cash forecast reports. •  Cash profiling of key construction opportunities at an early stage to ensure they meet expectations. •  Efficient management of capital on regeneration schemes, such as phased scheme delivery, institutional and government funding solutions, and forward funding where possible.

  

Maximise efficiency of resources

Contract terms need to reflect risks arising from the nature and duration of the works. Projects must be properly resourced to ensure successful delivery for clients.

Risk and potential impact		Risk change in reporting period		Mitigating activities
Mispricing a contract If a contract is incorrectly costed this could lead to a reduction in gross margin. It might also damage the relationship with the client and supply chain.		No change •  Contract procurement routes and terms have remained favourable, as indicated by our outturn margins and quality of forward order book. •  Our continued focus on key sectors means we have relevant experience when pricing a project and are less likely to misprice than if entering new markets or bidding bespoke procurement products. •  We have maintained our focus on selecting projects that are right for the business and match our risk appetite, thus offering a higher probability of success. •  We continue to secure projects with repeat clients via negotiation, open book and framework style arrangements, with limited, selective open market bids. •  A high proportion of our future pipeline is visible via our positions on long-term frameworks.		•  A well-established bidding process with experienced estimating teams. •  Robust review of pipeline at key stages, with rigorous due diligence and risk assessment, and senior level approval. •  Our order book quality and strong cash position mean we can remain selective in our bidding. •  A provision, where appropriate, for increases in costs that hedges against supply chain costs exposed to fluctuations in exchange rates or inflation. •  Construction strategy and culture in prioritising bid selectivity over volume. •  Tender reviews at three key stages of pre-qualification, pre-tender and final tender submission, with each stage approved by senior management via tender review boards. •  Using the tender review process to challenge and mitigate any impacts of rising supply chain costs.

Risk and potential impact		Risk change in reporting period		Mitigating activities
Changes to contracts and contract disputes Changes to contracts and contract disputes could lead to costs being incurred that are not recovered, loss of profitability and delayed receipt of cash. Ultimately, we may need to resort to legal action to resolve disputes which can prove costly with uncertain outcomes, as well as damaging relationships.		No change •  We have continued to develop digital tools such as change management, a supply chain portal for facilitating payment, risk management, and field scheduling and management, to improve efficiencies. •  Construction's order book maintains a greater proportion of repeat work, meaning we are more likely to achieve sustainable and predictable outcomes via negotiated settlement. •  The high proportion of framework related, two-stage and negotiated work in our current order book continues to reduce the likelihood of unforeseen changes and disputes. •  Our digital early warning tools and metrics continue to develop, flagging potential issues and enabling intervention much earlier in the construction cycle.		•  Carrying out work under standard terms wherever possible. •  Reviewing contract terms at tender stage and ensuring variations are approved by the appropriate level of management. •  Well-established systems of measuring and reporting project progress and estimated outturns that include contract variations. •  Regular project reviews, including feedback from peers, to provide positive challenge around progress and project performance. •  Continued use and development of electronic dashboards for project management and commercial metrics designed to highlight areas of focus and provide early warnings. •  Regular reporting on all projects with a particular focus on matters likely to impact on programme, cost and quality. •  Where legal action is necessary, taking appropriate advice and making suitable provision for costs. •  Notifying all material disputes to the Board as they occur. •  Monthly monitoring of financial and operational performance on projects. •  Use of electronic change control tools to inform clients and project teams of the status of the final account and programme at each stage of construction.

 

Risk and potential impact		Risk change in reporting period		Mitigating activities
Poor project delivery Failure to meet client expectations could incur costs that erode profit margins, lead to the withholding of cash payments and impact working capital. It may also result in reduction of repeat business and client referrals.		No change •  Early warning tools that flag problems in project delivery, enabling earlier intervention and provisioning, have been rolled out further across Construction. •  Our continued focus on project selectivity reduces risk in the order book and the probability of poor performance. •  Various initiatives have been delivered in Construction that focus on improvements in product quality, predictability and client experience. •  There is a stretch in the labour market which has been manageable in the short term but would be exacerbated if the government were unable to secure EU skills mobility. •  Our Perfect Delivery1 initiative and culture implemented in the construction divisions is starting to make a significant impact on outcomes. •  Digital business intelligence enhancements in Construction continue to develop in our pursuit of early warning indicators and intervention. Further tools are being developed and explored to improve and simplify reporting.		•  Incentivising project teams on Perfect Delivery1 outcomes to achieve high levels of client satisfaction. •  Strategic supply chain trading arrangements to help ensure consistent quality. •  Electronic project management tools which help improve quality and efficiency. •  Fit Out's sophisticated initiative to drive client service continues to differentiate its offering. •  Continued application of early warning tools to highlight delivery issues. •  An escalation process to ensure senior management intervention at an early stage if necessary. •  Formal internal peer reviews that highlight areas of improvement and share best practice and 'lessons learned' exercises. •  Collection and analysis of client feedback. •  Monthly monitoring of project performance and electronic dashboards for project management and commercial metrics. •  Regular formal and informal stakeholder feedback to ensure our performance is meeting expectations. •  Regular client satisfaction reviews and feedback, allowing us to intervene when required and hone our offering to provide exceptional outcomes.

¹  Perfect Delivery status is granted to projects that meet all four customer service criteria specified by each division.

 

Pursue innovation

Innovation drives quality, efficiency and competitive advantage and continued investment in technology will improve our delivery and service. Business continuity depends on secure and resilient IT systems and the persistent threat of cyber-risks continues to present a challenge.

Risk and potential impact		Risk change in reporting period		Mitigating activities
Failure to innovate A failure to produce or embrace new products and techniques could diminish our delivery to clients and reduce our competitive advantage.  It could also make us less attractive to existing or prospective employees.		No change •  All divisions have continued to develop solutions to improve efficiency, client service and employee satisfaction. Examples range from safety initiatives, such as dust control campaigns and the promotion of safe behaviours on site, to online site access systems that provide site workers with inductions and training. •  In regeneration, we work with leading investment partners to create innovative funding solutions that improve the viability of schemes and facilitate early engagement. •  Our work in regeneration requires us to consistently evolve market-leading development structuring that helps unlock underperforming assets, and continues to differentiate our offering. •  Our initiatives around quality delivery and exceptional client experience are not just founded on process, but are integral to our cultural approach.		•  One of our core values is to challenge the status quo and innovation is strongly encouraged. New ideas are welcomed from every employee, partner and supplier, with an emphasis on efficiency over bureaucracy. •  Our employees enjoy working on high profile, innovative projects that provide them with the opportunity to enhance their knowledge and experience. •  Infrastructure works with some of the UK's leading companies who encourage innovation and optimised construction techniques and share in the risk and reward. •  Business and IT come together via forums that sponsor and promote new innovations across the business. •  Our involvement in major infrastructure projects puts us at the forefront of new innovation in construction, management and project control techniques. This allows us to compete in areas with high barrier to entry while sharing new ideas across the Group.

Risk and potential impact		Risk change in reporting period		Mitigating activities
Failure to invest in information technology (IT) Investment in IT is necessary to meet the future needs of the business in terms of expected growth, security and innovation, and enables its long-term success.		No change •  We completed our data centre migrations during 2018 as part of an ongoing plan to ensure the resilience of our IT network. •  All our businesses are investing in significant new technology to enhance our stakeholder experience and improve efficiency. We foresee this trend continuing. Construction & Infrastructure has invested in new risk management software and a supply chain certification and payment portal, with many more initiatives in the pipeline. •  We have continued to invest in established information security controls and have engaged an external security partner who advises on strategy. •  Our IT team reached an important milestone in 2018 by achieving ISO 27001 accreditation. •  We are adding construction-specific features to our recently upgraded financial software. •  We have rolled out endpoint encryption, active monitoring and threat analysis of external web-based threats, as well as data protection and information security training. •  We have migrated our active directory to Microsoft Azure as part of an estate update that will include Office 365 and Windows 10. This will ensure we have the latest business software and that our data is secure and protected.		•  A dedicated team focused on providing a stable and resilient IT environment. •  Continued investment in our core infrastructure and application service that has allowed us to introduce new and improved technology into the business with confidence. •  A centralised IT service that improves efficiency, oversight, reporting, security and performance, with divisional resource providing business-specific product support. •  Group-wide and divisional IT forums that discuss and report IT strategy and operations. •  A dedicated information security team certified and accredited by key industry bodies in data protection and information security. •  Group-wide financial software that provides a fully integrated construction platform to manage the project life cycle. •  Group-wide risk and IT security strategies that address creating awareness, threat alert, risk and vulnerability prioritisation and response. •  Government-accredited security installations and certification to hold protectively marked information, including under the government's Cyber Essentials Scheme.

 

END

 

 

ACSUAOARKVAOUAR