Annual Financial Report

RNS Number : 6201C

Intertek Group PLC

19 March 2014

 



19 MARCH 2014

INTERTEK GROUP PLC - ANNUAL REPORT AND ACCOUNTS AND NOTICE OF ANNUAL GENERAL MEETING

Intertek Group plc (the "Company") announces that the Intertek Group plc Annual Report and Accounts 2013, the Notice of  2014 Annual General Meeting and Proxy Form for the 2014 Annual General Meeting have been published. These documents are publicly available on the Company website at www.intertek.com.

In compliance with 9.6.1 of the Listing Rules, the documents listed above have also been submitted to the UK Listing Authority via the National Storage Mechanism.

Additional Information required by Disclosure and Transparency Rule 6.3.5

In compliance with DTR 6.3.5, the following information is extracted from the 2013 Annual Report and should be read in conjunction with the Company's Preliminary Results announcement for the year ended 31 December 2013 issued on 3 March 2014. Both documents are available at www.intertek.com and together constitute the material required by DTR 6.3.5 to be communicated to the media in unedited full text through a Regulatory Information Service. This material is not a substitute for reading the 2013 Annual Report in full.

1.         Principal risks and uncertainties

This following sets out a description of the principal risks and uncertainties that could have a material adverse effect on the Intertek Group's strategy, performance, results, financial condition and reputation.

Risk framework

The Board has overall responsibility for the establishment and oversight of the Group's risk management framework.

The Head of Internal Audit and the Head of Legal, who report to the Chief Financial Officer and Chief Executive Officer respectively, have accountability for reporting the key risks that the Group faces, the controls and assurance processes in place and any mitigating actions or controls. Both roles report to the Audit & Risk Committee, attend its meetings and meet with members alone each year.

Risks are formally identified and recorded in a risk register for each operating division and support function. The risk register is updated at least twice each year and is used to plan the Group's internal audit and risk strategy. In addition to the risk register, all senior executives and their direct reports are required to complete an annual return to confirm that management controls have been effectively applied during the year. The return covers operations, compliance, risk management and finance.

The Risk Control and Assurance Committee ('RCA'), comprising senior Intertek executives, complements the work of the Audit & Risk Committee. The RCA oversees the development of the internal control framework, reviews the risk matrices and risk management procedures, monitors issues and provides guidance to management. The RCA makes recommendations to the Intertek Executive Management Team and develops the Group's integrated responses to changes in the regulatory environment.

Principal risks

The Group is affected by a number of risk factors, some of which, including macroeconomic and industry specific cyclical risks, are outside the Group's control. Some risks are particular to Intertek's operations. The principal risks of which we are aware are detailed below including a commentary on how the Group mitigates these risks. These risks and uncertainties do not appear in any particular order of potential materiality or probability of occurrence.

There may be other risks that are currently unknown or regarded as immaterial which could turn out to be material. Any of these risks could have the potential to impact the performance of the Group, its assets, liquidity, capital resources and its reputation.

OPERATIONAL
Principal risk	Context		Associated strategic priorities		Possible impact	Mitigation
Harm to the Group's reputation	The Group relies on its reputation to maintain and grow business. Adverse litigation, ethical breaches and operational failures have the potential to damage its reputation. There is also a risk that poor performance of services leads to a loss of confidence in the Group's standards and reputation for quality and safety service excellence.		Leading positions in key industries		Failure to meet financial performance and financial position expectations. Exposure to material legal claims, associated costs and wasted  management time. Share price may fall. Loss of existing or new business.	Risk Management Framework and associated controls and assurance processes, including contractual review and liability caps where appropriate. Quality Management Systems; adherence to these is regularly audited and reviewed by external parties, including accreditation bodies. Code of Ethics which is communicated to all staff, who undergo regular training. 'Whistle-blowing' programme, monitored by the Audit & Risk Committee, where staff are encouraged to report, without risk, any fraudulent or other activity likely to adversely affect the reputation of the Group. Zero-tolerance policy with regard to any inappropriate behaviour by any individual employed by the Group, or acting on the Group's behalf. Media comments with regard to Group activities are centrally reviewed so that senior management can, where necessary, take appropriate action on a timely basis. Relationship management and communication with external stakeholders.
Loss of accreditation leading to loss of business	The Group relies on being awarded and retaining appropriate accreditations and affiliations around the world in order to  provide its certification services.		Leading positions in key industries Customer orientated relationships		Loss of business in the relevant industry and damage to the Group's reputation.	Quality assurance procedures and controls embedded in its operations to ensure that it holds and maintains the necessary accreditations and that the required operational standards are applied. Operations are regularly subjected to audit and review by external parties including accreditation bodies, governments, trade affiliations, retailers, manufacturers and clients. Accreditation is usually held at an industry, country or site level and loss of accreditation will not mean loss of accreditation across the Group.
Key staff reliance and depth of management	The Group operates in specialised sectors and needs to attract and retain employees with relevant experience and knowledge in order to take advantage of all growth opportunities.		Investing in our people Customer orientated relationships		Reduced ability to compete effectively. Increased recruitment costs. Lose talent to competitors and lose market share.	HR policies and systems. Development and reward programme. Succession planning. Employee survey.
Political risk	The Group operates in over 100 countries including some where political instability can result in disruption to operations and the suspension, change or termination of contracts at short notice. The Group receives tax incentives in certain jurisdictions, resulting in a lower tax charge to the income statement. There is no guarantee that these reduced rates will continue to be applicable.		Global network		Reduction in opportunities in a particular geography. Changes to terms of contracts. Reduction or confiscation of Group assets, potentially without reasonable recompense; or increase in the Group's effective tax rate.	Monitoring of any incidents of political or social unrest and taking mitigating action. Operations across many industries and countries diversifies the risk profile of the Group. The Group utilises internal and external expertise to keep abreast of tax and other legislations.
Cyclical risk	All businesses are subject to cycles, with supply and demand fluctuating for economic or other factors over time. During times of cyclical strength this can place the business under pressure to meet peaks in demand whilst maintaining quality standards, whilst in cyclical downturns there is a requirement to restructure the business.		Leading positions in key industries Global network Targeted acquisitions		A sustained downturn in the economic cycle can result in a lower return on invested capital, as revenue and margin levels come under pressure.	The Group has a diversified service offering to a wide range of industries and geographies. This reduces the risk of a downturn in any one sector or region having a material impact on the long-term viability of the Group. Where a downturn does occur, the Group seeks to reduce, where possible, the cost base whilst retaining its core capability to take advantage of the cyclical upturn when it comes.
IT systems risk	The Group is dependent on IT systems for principal business processes. The failure of one of these systems can cause significant operational disruption and loss of revenue. Given the ongoing  consolidation of the Group's IT systems and data management, this has been added as a new risk this year.		Leading positions in key industries Global network Process Efficiency		Damage to reputation leading to loss of business and media attention. Cost to rectify. Loss of systems and data impacts the ability to perform services and earn revenue in an efficient manner.	Information systems policy and governance structure. Tested and constantly evolving disaster recovery and business continuity plans to minimise the impact if a failure does occur. Internal and external audit testing.
LEGAL & REGULATORY
Claims	The Group is involved in claims where an event is found or is perceived to be caused by the negligence of the Group. It could subject the Group to claims for personal injury or property damage by customers, sub-contractors, employees or members of the public which could lead to the payment of damages and result in reputational damage which could in turn lead to a loss of business. There is a risk that a legal dispute could adversely affect the reputation of the Group and result in significant financial loss.		Leading positions in key industries Customer orientated relationships		Financial impact (fines by regulators, suspension of accreditation, compensation). Loss of business (contract termination). Criminal and Civil Action. Loss of reputation.	Effective Quality Management Systems and assurance procedures and controls, including contractual review and liability caps where appropriate. All significant incidents that could potentially result in a claim against the Group are immediately reported to compliance officers and logged in an incident database so that they can be properly managed. The Group Head of Legal reports any significant claims to the Audit & Risk Committee. External legal counsel is appointed if appropriate. Crisis management policy in place. Seeking contractual protection from loss where possible.
Bribery and corruption	The Group operates in countries which are recognised to have higher bribery and corruption risks.		Global network		Legal action and fines against the Group. Debarment from being able to participate in tenders. Loss of reputation. Media activity.	Code of Ethics and training, risk assessments, Audit & Risk Committee, whistle-blowing policy and policies and systems. The Group employs local people in each country who are aware of local legal and regulatory compliance. There are also extensive internal compliance and audit systems to facilitate compliance. Expert advice is taken in areas where regulations are uncertain. The Group continues to dedicate resources to ensure compliance with the UK Bribery Act and all other anti-bribery legislation.
FINANCIAL
Financial irregularity risk	The Group could suffer financial loss either through misappropriation of assets or the misrepresentation of financial results.	Leading positions in key industries		Corresponding loss of value and reputation could result in funding being withdrawn or provided at higher interest rates, and negative market sentiment.			The Group has financial and management controls in place to ensure that the Group's assets are protected from major financial risks. A detailed system of financial reporting is in place to ensure that monthly financial results are thoroughly reviewed. The Group also operates a rigorous programme of internal audits and management reviews. Independent external auditors review the Group's half year results and audit the Group's annual financial statements.

2.         Related parties

Identity of related parties

The Group has a related party relationship with its key management. Transactions between the Company and its subsidiaries and between subsidiaries have been eliminated on consolidation and are not discussed in this note.

Transactions with key management personnel

Key management personnel compensation, including the Group's Directors, is shown in the table below:

	2013 £M	2012 £M
Short-term benefits	4.7	5.9
Post-employment benefits	0.4	0.4
Equity-settled transactions	2.8	2.0
Total	7.9	8.3

More detailed information concerning Directors' remuneration, shareholdings, pension entitlements, share options and other long-term incentive plans is shown in the audited part of the Remuneration Report.

Apart from the above, no member of key management had a personal interest in any business transactions of the Group.

3.         Statement of Directors' responsibilities

Statement of Directors' Responsibilities in respect of the Annual Report and the financial statements

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 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 (IFRSs) as adopted by the EU 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 IFRSs 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 Strategic Report, Directors' Report, Directors' Remuneration Report and Corporate Governance Statement that complies 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.

Responsibility statement of the Directors in respect of the annual financial report

Each of the Directors confirm that to the best of their 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;

-     the Directors' 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; and

-     the Company's 2013 Annual Report & Accounts, taken as a whole, presents a fair, balanced and understandable assessment of the Company's position and prospects, and provides information necessary for shareholders to assess the Company's performance, business model and overall strategy.

The Directors' Report and the Group Strategic Report have been approved by the Board and signed on its behalf by the Chief Executive Officer.

The Company's Annual Report and Accounts 2013 will be delivered to the Registrar of Companies in due course and copies of all of these documents may also be obtained from:

Paul Moore

Group Company Secretary

T: [phone]

Registered Office

25 Savile Row

London

W1S 2ES

Registered Number: 4267576

 

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