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Annual Financial Report

Thu, 5th Oct 2017 10:15


RNS Number : 8042S
Galliford Try PLC
05 October 2017
 

GALLIFORD TRY PLC

 

PUBLICATION OF ANNUAL REPORT AND FINANCIAL STATEMENTS 2017 AND NOTICE OF 2017 ANNUAL GENERAL MEETING

 

Galliford Try plc has today, in accordance with LR 9.6.1 R of the Listing Rules, submitted to the Financial Conduct Authority's National Storage Mechanism copies of the following:

 

·      The Annual Report and Financial Statements 2017

·      Notice of 2017 Annual General Meeting

·      Form of Proxy for the 2017 Annual General Meeting

 

The documents will shortly be available for inspection at www.morningstar.co.uk/uk/NSM.

 

The Annual Report and Financial Statements and Notice of Annual General Meeting are also available on the Galliford Try plc website at www.gallifordtry.co.uk/investors/reports-and-presentations/reports/2017

 

A condensed set of the Group's financial statements and information on important events that have occurred during the financial year and their impact on the financial statements were included in Galliford Try plc's Final Results Announcement on 13 September 2017.  That information together with the information set out below which is extracted from the Annual Report and Financial Statements 2017 constitute the material required by DTR 6.3.5 of the Disclosure Guidance and Transparency Rules which is required to be communicated to the media in full unedited text through a Regulatory Information Service.  This announcement is not a substitute for reading the full Annual Report and Financial Statements 2017.  Page and note references in the text below refer to page numbers in the Annual Report and Financial Statements 2017.  To view the results announcement, slides of the results presentation and the results webcast please visit www.gallifordtry.co.uk/investors.

 

Principal risks

Identifying, evaluating and managing our risks. The way in which we manage our principal risks and uncertainties is integral to the way we do business and to achieving our strategy of sustainable growth. The Group's approach to risk management has been enhanced during the year.

Approach to risk management

Risk is inherent in our operations and the decisions that we make in pursuit of our strategy. The Board has overall responsibility for determining both the nature and extent of the principal risks that the Group is willing to take and the Group's systems of risk management and internal control. In addition to the ongoing monitoring processes that the Board has in place, it has undertaken a formal and robust review of the Group's risk management and internal control systems during the year. The Board has also carried out a robust assessment of the principal risks facing the Group, including those that would threaten its business model, future performance, solvency or liquidity. Our consideration of the key risks and uncertainties relating to the Group's operations, along with their potential impact and the mitigations in place, is set out on pages 20 and 21. There may be other risks and uncertainties besides those listed which may also adversely affect the Group and its performance. More detail can be found in the Audit Committee Report on pages 53 and 54.

 

The Audit Committee is responsible for keeping under review the adequacy and effectiveness of the Group's internal controls systems and for reviewing and approving statements included in the Annual Report concerning internal controls, risk management and the viability statement. The Board's assessment of the viability of the Group is set out on page 19 opposite.

 

Although they are not absolute assurance against the risk of material misstatement or loss, the Group's systems of risk management and internal control are designed to identify, manage, mitigate, monitor and report on risks to which the Group is exposed.

 

Operational responsibilities

The Board has delegated implementation of risk management and internal control, together with their day-to-day operation, to the Group's executive management. The process is overseen by the Executive Risk Committee, which has been chaired by the General Counsel and Company Secretary since May 2017, and is managed on a day-to-day basis by the Director of Risk and Internal Audit. During the year the Executive Risk Committee was restructured and refreshed with additional processes introduced to monitor and manage the Group's risks.

 

Risk identification, assessment and mitigation

We develop and maintain risk registers at business unit, divisional and Group level, which identify key operational, financial and strategic risks applicable to that level within the organisation, and which are assessed and consolidated into a Group-wide register using a standardised methodology. The methodology requires each identified risk to be assessed and measured using a risk matrix which quantifies the likelihood and impact of each risk (the inherent risk), the effect of the mitigating actions (to determine the residual risk) and the desirable risk profile (the target risk), as aligned to the Group's risk appetite. The methodology evaluates the impact of each risk on the Group's profitability and reputation.

 

Risk appetite

Our risk management processes evaluate risk and initiate actions, where necessary, to bring identified risks down to an acceptable level. Our risk appetite is described as the total residual risk defined on the Group risk register.

 

Risk management, risk reporting, internal controls and internal audit

The material components of the Group's established framework of risk management and internal controls comprise the following:

 

·     organisational structure: each business has its own management board and each business unit is led by a managing director and management team;

 

·    contractual review and commitments: the Group has clearly defined policies and procedures for entering into contractual commitments which apply across its business units and operations and are enforced through the Group's legal authorities matrix;

 

·    investment in land and development: land expenditure approval is subject to clearly defined policies and procedures, with significant investments approved at Executive Board and Board levels under Group policies and procedures;

 

·    operational activity: there are established frameworks to manage and control all site operations including health, safety and environmental procedures, regular performance monitoring, quality and external accountability to stakeholders;

 

·    financial planning framework: the Group reviews and refines its business plan on an annual basis, following specific Board meetings held to consider strategy. A detailed annual budget is prepared for each financial year which is approved by the Board;

 

·     operational and financial reporting: we continue to improve the Group's reporting and financial systems as we optimise both of the Oracle and Hyperion systems. An exacting profit and cash reporting and forecasting regime is in place across the Group. As well as the emphasis placed on cash flow, income and balance sheet reporting, health, safety and environmental matters are prioritised within monthly operational reports;

 

·    Code of Conduct: the Group requires its employees to operate ethically and with demonstrable integrity. Group standards are set out in a Code of Conduct issued to all employees, and supported by specific training modules in key areas;

 

·     pension plan administration: the administration of the Group's fully closed final salary and ongoing defined contribution pension plans is outsourced to professional service providers. Each of the final salary schemes has an independent scheme secretary and a proportion of independent trustees to provide additional layers of external scrutiny; and

 

·     assurance provided by non-audit functions: a number of other Group functions provide assurance in areas including, but not limited to, health, safety and environment; legal contract review and compliance; and construction industry regulation.

 

The Group's high-level governance reporting structure shown on page 49 clarifies the effective Board structures upon which the delegated authorities matrices and corporate and finance manuals are overlaid.

 

The Executive Risk Committee, Executive Board and plc Board regularly review the risk registers and associated mitigating actions. During the last year the ongoing review included the impact of the EU referendum, the general election result and major contract pricing. In addition to this process we undertake an annual review of our risk management processes in the context of market developments, projects secured and Group strategy to ensure that they remain up-to-date and relevant. This also encompasses a review of the internal controls framework, together with the findings of the internal audit function over the past year, which may indicate weaknesses that have had, could have had, or may have in the future, a material impact on results, and any remedial actions taken. Based on these assessments, the Board is satisfied with the effectiveness of the Group's systems of risk management and internal control.

 

Viability statement

In accordance with provision C.2.2 of the UK Corporate Governance Code, the Board has assessed the prospects of the Group over a period of three years in line with its typical business planning and risk management review period.

 

The Group's business plan includes information in relation to the Group's revenues, profits, cash flows, dividends, net debt and other key financial and non-financial metrics. The plan considers the potential impact of the principal risks to the business as described overleaf, and the cyclical nature of the markets in which the Group operates, and incorporates an appropriate level of flexibility to mitigate against these risks. This is achieved through the preparation of sensitivity analyses on a range of scenarios including variations in revenue, house prices, sales rates, build costs, cash generation and access to financing.

 

Based on the results of this analysis, the Board has a reasonable expectation that the Group will be able to continue in operation and meet its liabilities as they fall due over the three-year period of its assessment.

 

Risk heat map - effects of mitigation on inherent risks

The heat map shows the movement of the principal risks mitigating actions, illustrating the effects of the Group's risk management process. 

 

Risk management governance structure

The Group's risk management governance structure, as set out above, highlights the way in which risks are identified, reported and managed within the framework set by the Board. The Risk and Internal Audit function plays an integral role in identifying, reporting and managing risk throughout the governance structure.

 

To view the risk heat map and risk management governance structure, please see page 19 of the Annual Report and Financial Statement 2017, which can be found at: http://www.gallifordtry.co.uk/investors/reports-and-presentations/reports/2017  

 

Principal risks

Category

Description of inherent risks

Mitigation

Economic

The biggest risk is the macro-economic environment and the possibility of an economic downturn. The ongoing uncertainty following last year's EU referendum and this year's general election has the potential to distort some of our markets. The Construction and Partnerships & Regeneration businesses are well placed to deal with any uncertainty due to the nature of their businesses. Linden Homes, while more exposed to a potential slowdown and changes in consumer confidence, has a great brand and is

solidly positioned, with an appropriate landbank, good locations and well-designed homes.

We manage the impact of macro-economic risks, for example by building a strong order book and maintaining an appropriately-sized landbank. We have been doing that successfully and had order books in Construction and Partnerships & Regeneration of £3.6 billion and £1.0 million respectively at the year end. The sales carried forward position in Linden Homes at the year end was £373 million. We monitor closely political and economic developments: we have modelled a range of macro-economic scenarios and planned measures which can be implemented should the macro-economic environment improve or deteriorate as against our internal models.

Government

A reduction in government spending on infrastructure projects or affordable housing development, including schemes such as Help to Buy, would directly affect our business. Other initiatives relating to project bank accounts or payment terms may impact the cost of doing business.

The Group regularly engages with government and the Homes and Communities Agency (HCA), both directly and via our membership of industry bodies. Prudent pricing models, increased hurdle rates and other contingencies are built into our land appraisal process, including removal of any government support. Support for Help to Buy appears to be in place until 2021.

Health and Safety (H&S)

A failure of routine H&S processes leading to a catastrophic incident with fatalities and/or significant injuries can, in addition to its impact on victims and corporate reputation, lead to fines or prosecutions for individual members of staff or directors. A high cumulative level of H&S prosecutions would reduce our ability to win work.

We have operational controls in place, including an H&S site risk assessment for every site. We have processes in place which allow us to respond promptly and appropriately to incidents. Both the 'Golden Rules' and H&S database implemented in 2015/16 and the award-winning 'Challenging Beliefs, Affecting Behaviour' safety programme help to reduce risk in this area.

Commercial

A failure to agree appropriate commercial terms or to manage fixed-price contracts correctly can result in reduced profits or, in some cases, losses on projects.

We are carefully managing our existing fixed-price contracts and closely review bids for contracts of this kind. We enhanced our risk management procedures, bringing greater rigour around contract selection.

Legal and regulatory compliance

Legal and regulatory failure, for example involvement in bribery or other fraudulent activity, or non-compliance with law (including for example the Bribery Act, Fraud Act, Competition Act, Money Laundering Regulations and Proceeds of Crime Act) could lead to disbarment from bidding for certain public or regulated sector work, fines, jail and reputational damage.

The Group has comprehensive policies and guidance in place at every level, including the Group's Code of Conduct, mandatory e-learning for all employees, regular legal updates and briefings, six-monthly compliance declarations and conflicts of interest registers and authorisations. In addition, an anonymous and independent whistleblowing helpline is available to all staff.

Customer satisfaction and quality control

Poor customer satisfaction may have a negative impact on reputation affecting revenue and profit through sales rates and increased costs.

There are rigorous quality control procedures in place in all three of our businesses, including The Linden Way, which defines our approach at each stage of the housebuilding process.

People

The ability to attract, develop, retain and build relationships with diverse and high-quality employees and members of the supply chain impacts every level of the Group, from developing and building our products to succession planning for the Board and is particularly important during a period of growth.

The Group has an established HR strategy based

on best practice, Investors in People principles and relevant legislation which, among other things, includes the regular review of remuneration and benefits packages to ensure we remain competitive. Our succession planning and talent management processes enable continuity and identify future leaders.

Supply chain

A shortage of trades people can create resourcing issues and increase the cost of the supply chain.

The Group aims to develop long-term relationships with subcontractors to ensure we are a preferred customer in the supply of resources and skills, as well as materials. The 'Advantage through Alignment' initiative in our Construction business is working well.

Business continuity

Loss of our Shared Service Centre or IT infrastructure, especially our financial system, including a natural disaster or malicious attack, may affect our ability to carry on day-to-day business.

Disaster recovery plans have remained in place throughout the year, and are tested on a regular basis, including penetration tests in respect of cybercrime.

Ambitious growth targets

Ambitious growth of a business in terms of revenue and footprint may increase the risk of its existing business suffering from quality issues, failure to achieve budgeted growth and failure of new offices, all impacting Group results.

Strong management teams are in place within each business to ensure that growth plans are well managed. In addition, the Executive Board and plc Board regularly monitor the financial performance of each business.

Forecasting

Given the nature of the three businesses, cash forecasting is the result of subjective estimates which carry an intrinsic risk of error. Poor cash forecasting can impact business planning, investments and reporting of financial information.

Each business unit reviews its cash forecast monthly and the Group prepares a detailed daily cash book for the following eight-week period, to highlight any risk of intra-month fluctuations. These forecasts are reviewed at business unit, division and Group.

 

 

Statement of directors' responsibilities

The directors are responsible for preparing the Annual 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 company law the directors have prepared the Group and Parent Company financial statements in accordance with International Financial Reporting Standards (IFRS) as adopted by the European Union (EU). 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 the Company and of the profit or loss of the Group and Company for that period.

 

In preparing the financial statements, the directors are required to:

 

·      select suitable accounting policies and then apply them consistently;

 

·      make judgements and accounting estimates that are reasonable and prudent;

 

·     state whether applicable IFRSs as adopted by the EU 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 Group and 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 the Directors' Remuneration Report comply with the Companies Act 2006 and, as regards the Group financial statements, Article 4 of the IAS Regulation. They are also responsible for safeguarding the assets of the Group and the Company and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities.

 

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

 

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

 

Each of the directors, whose names and functions are listed on pages 46 and 47, confirms that to the best of their knowledge:

 

·     the Company financial statements, which have been prepared in accordance with IFRSs as adopted by the EU, give a true and fair view of the assets, liabilities, financial position and profit of the Company;

 

·    the Group financial statements, which have been prepared in accordance with IFRSs as adopted by the EU, give a true and fair view of the assets, liabilities, financial position and profit of the Group; and

 

·     the Strategic Report contained in pages 1 to 45 includes a fair review of the development and performance of the business and the position of the Group and Company, together with a description of the principal risks and uncertainties that it faces.

 

 

 

For further enquiries:

 

Galliford Try plc

Kevin Corbett, Company Secretary

01895 855001

 

Clara Melia, Investor Relations

07748 171 236

Tulchan Communications

James Macey White

0207 353 4200

 

Martin Pengelley

 

 

Matt Low

 

 

Notes to Editors

Galliford Try plc is a leading UK housebuilding, regeneration and construction group. It is listed on the London Stock Exchange and a member of the FTSE 250.  Housebuilding - through our Linden Homes business - develops private and affordable homes in prime locations. Galliford Try Partnerships - our regeneration business - delivers mixed-tenure solutions working with housing association, local authority and private sector partners.  Operating as Galliford Try and Morrison Construction, our Construction business carries out building and infrastructure with clients in the public, private and regulated sectors. At the end of the last financial year to 30 June 2017, the Group generated revenue of £2.7 billion.

 

 


This information is provided by RNS
The company news service from the London Stock Exchange
 
END
 
 
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