Last checked at 20 Apr 2017 16:34
20 April 2017
Hill & Smith Holdings PLC (the 'Company')
2016 Annual Report and Notice of 2017 Annual General Meeting ('AGM')
Hill & Smith Holdings PLC has posted, or otherwise notified as being available on its website www.hsholdings.com, the following documents:
1. 2016 Annual Report
2. Notice of 2017 AGM
In accordance with Listing Rule 9.6.1 a copy of each of these documents has been uploaded to the National Storage Mechanism and will be available for viewing shortly.
A hard copy of the 2016 Annual Report can be obtained upon request to the Company Secretary, Hill & Smith Holdings PLC, Westhaven House, Arleston Way, Shirley, Solihull, B90 4LH.
The statutory accounts for the year ended 31 December 2016 have been approved by the Board and will be delivered to the Registrar of Companies following the Company's AGM.
Compliance with Disclosure and Transparency Rule 6.3.5 ('DTR 6.3.5') - Extracts from the 2016 Annual Report
The information below, headed as Appendix A, B and C, and which is extracted from the 2016 Annual Report, is included solely for the purpose of complying with DTR 6.3.5 and the requirements it imposes on how to make public Annual Financial Reports. It should be read in conjunction with the Company's Preliminary Announcement issued on 8 March 2017 (available at www.hsholdings.com). Together these 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 full 2016 Annual Report. All page numbers and cross-references in the extracted information below refer to page numbers in the 2016 Annual Report.
Appendix A - Principal Risks and Uncertainties
Economic | ||
Risk: Changes in government spending plans | ||
Trend Higher
Link to strategy · Portfolio management · Geographic diversification · Target returns and leverage · Entrepreneurial culture
| Description and potential impact The Group generates the majority of its revenues from its operations located in the UK and the USA.
A reduction in UK or US government infrastructure spending, particularly in relation to national roads infrastructure in the UK, could have an adverse impact on the Group's financial performance. The financial burden on the governments of both jurisdictions from economic downturn may lead to reduced spending in the principal markets in which the Group operates. | Mitigation Strategy of diversification into new markets and territories.
Identification of export opportunities to encourage growth in alternative markets.
Product development initiatives.
Co-operation between Group businesses, leveraging the Group's size/international footprint and exploiting synergies. |
Risk: Changes in global outlook and geopolitical environment | ||
Trend Higher
Link to strategy · Portfolio management · Geographic diversification · Target returns and leverage · Entrepreneurial culture
| Description and potential impact The Group operates in a range of end-user markets around the world and may be affected by political, economic or regulatory developments in any of these countries.
Material adverse changes in the political and economic environments in the countries in which we operate have the potential to put at risk our ability to execute our strategy. | Mitigation The Group has a diverse portfolio of businesses with exposure to a range of markets and geographies, limiting exposure to any one country or market sector.
Current and future financial performance is continuously monitored, facilitating rapid response to changes in market conditions.
Entrepreneurial culture established through a decentralised management structure, ensuring that Group businesses are agile and responsive to changes in their competitive environments. |
Commercial & Financial | |||||
Risk: Product failure | |||||
Trend No change
Link to strategy · Target returns and leverage · Entrepreneurial culture
| Description and potential impact The Group operates in infrastructure markets where it is critical that its products meet legislative requirements and where the consequences of product failure are potentially serious.
Significant product failure arising from component defects or warranty issues may require remediation including the replacement of defective components or complete products, resulting in direct financial costs to the Group and/or wider reputational risk. | Mitigation Products tested, approved and accredited by regulatory bodies.
Quality control protocols fully implemented and continuously monitored.
Contractual controls in place to minimise economic impacts. Insurance cover maintained globally with insurance partners.
Litigation supported/managed by external legal specialists. | |||
Risk: Contractual arrangements | |||||
Trend No change
Link to strategy · Target returns and leverage · Entrepreneurial culture | Description and potential impact The Group delivers its commitments to its customers through a variety of contractual arrangements of both a short and medium term nature.
Weaknesses in the contract tendering process, inappropriate pricing, misalignment of contract terms, ineffective contract management or failure to comply with contractual conditions could result in loss of revenues, pressure on operating margins and wider reputational damage to the Group. | Mitigation Group material contract review process implemented ensuring specialist central oversight of key contractual arrangements.
Contracts training provided to all relevant employees during the current and prior year.
Dedicated quantity surveyors and contracts managers embedded in subsidiary management structures to control projects.
Litigation supported/managed by external legal specialists. | |||
Operational | |||||
Risk: Supply chain deficiency | |||||
Trend Slightly higher
Link to strategy · Target returns and leverage · Entrepreneurial culture
| Description and potential impact The Group's businesses depend on the availability and timely delivery of raw materials and purchased components, which could be affected by disruption in its supply chain.
Supply chain failures as a result of performance, cost, quality and/or insolvency may have an adverse impact on the Group's production capacity and lead to an inability to meet customer requirements, resulting in reduction in revenues, potential loss of market share and possible reputational damage. | Mitigation Implementation of Group procurement standards, including robust due diligence of supply chain partners and requiring dual sourcing where available.
Maintenance of relationships with key suppliers through regular interaction and assessment of performance/ financial status.
Central oversight of material procurement contracts ensuring robust contractual protections. | |||
Risk: Weaknesses in IT systems | |||||
Trend No change
Link to strategy · Target returns and leverage
| Description and potential impact The Group relies on the information technology systems used in the daily operations of its subsidiaries.
A failure or impairment of those systems or any inability to effectively implement new systems could cause a loss of business and/or damage to the reputation of the Group, together with significant remedial costs. | Mitigation Group IT Steering Committee established to review IT systems capability, suitability and integrity.
Steering Committee assesses, approves and monitors significant IT change programmes.
Disaster recovery plans documented, tested and monitored by Group businesses.
The Group's Policy Manual incorporates IT policies in respect of system back-up procedures and hardware/software protection. | |||
Risk: Ineffective management of acquisitions | |||||
Trend Slightly higher
Link to strategy · Portfolio management · Geographic diversification · Target returns and leverage
| Description and potential impact The Group's growth strategies include the acquisition of businesses around the world that complement or supplement its existing activities.
Failure to execute an effective acquisition and integration programme would have a significant impact on the Group's ability to generate long term value growth for shareholders. | Mitigation Board approval required for Group acquisitions, in line with the Group's delegation of authority structure.
Due diligence protocols deployed in relation to assessment of target businesses, including financial, commercial, legal and others where appropriate.
Contractual protections and assurances sought from sellers to mitigate subsequent identification of risks.
'100 Day' post-acquisition integration plan established for all material acquisitions with regular performance monitoring and reporting to the Board. | |||
Risk: Insufficient investment in product development and innovation | |||||
Trend No change
Link to strategy · Portfolio management · Geographic diversification · Target returns and leverage · Entrepreneurial culture
| Description and potential impact The Group operates in global infrastructure markets where continuous innovation is integral to the Group's product offering and where a failure to innovate could result in product obsolescence, the entry of new competitors and/or loss of market share.
The development of new products and technologies carries risk including failure to develop a commercially viable offering within an acceptable timeframe. | Mitigation Subsidiary discretion to engage in research and development activities. Robust quality controls.
Dedicated quality compliance resources in place across Group businesses, ensuring responsiveness to regulator and/or customer approval requirements.
Executive Board approval of product development proposals within the Group's capital spend approval policies.
Board monitoring of emerging risks alongside external specialist support, where both the risks identified and the potential opportunities arising are considered. | |||
Human Resources | |||||
Risk: Loss of key employees | |||||
Trend No change
Link to strategy · Geographic diversification · Entrepreneurial culture
| Description and potential impact The Group encourages an entrepreneurial culture through a decentralised management structure.
An inability to attract, develop and retain high-quality individuals in key management positions could severely affect the long term success of the Group. | Mitigation Development and implementation of a succession planning model driven by the Group Chief Executive.
Implementation of contractual protections and retentions in employment contracts of senior management and other key employees.
Competitive remuneration, benefits and incentive plans offered to employees and regularly benchmarked.
Recruitment process developed to include competency requirements and skills gap analysis.
Group policies supporting the training and development of employees.
Regular interaction between Group and local executive management, including attendance at subsidiary Board meetings. | |||
Legal & Regulatory | ||||
Risk: Failure to comply with applicable health and safety legislation | ||||
Trend No change
Link to strategy · Target returns and leverage · Entrepreneurial culture
| Description and potential impact The Group operates a number of manufacturing facilities around the world.
A failure in the Group's health and safety procedures could lead to environmental damage or to injury to or death of employees or third parties, with a consequential impact on operations and the increased risk of regulatory or legal action being taken against the Group. Any such action could result in both financial damages and damage to reputation. | Mitigation Implementation of health and safety monitoring and 'safety cloud' online reporting framework.
Retention of an external independent health, safety and environmental consultant. Group Health and Safety Forum established to monitor performance.
Culture of zero tolerance in respect of health and safety violations promoted by the Board and disseminated throughout Group businesses.
Open relationships maintained with regulatory bodies. | ||
Risk: Violation of applicable laws and regulations | ||||
Trend Slightly higher
Link to strategy · Target returns and leverage · Entrepreneurial culture
| Description and potential impact The Group's global operations must comply with a range of national and international laws and regulations including those related to anti-bribery and corruption, human rights and employment, trade/ export compliance and competition/anti-trust.
A failure to comply with any applicable laws and regulations could result in civil or criminal liabilities and/or individual or corporate fines and could also result in debarment from government-related contracts, restrictions on ability to trade or rejection by financial counterparties as well as reputational damage. | Mitigation Group Code of Conduct issued to all employees setting out the Group's requirements in relation to legal and regulatory matters.
Training/testing modules in respect of Anti-Bribery and Corruption and Competition Compliance required to be taken by all Group employees.
Competition compliance manual implemented by each Group business.
Programme of audits undertaken on a cyclical basis to review subsidiary compliance with regulatory requirements, for example simulated 'dawn raids'.
Software solutions implemented globally to ensure compliance with trade and export legislation.
Whistleblowing hotline available to all employees to allow them to raise concerns in confidence or anonymously, if preferred.
Modern Slavery compliance programme implemented in 2016. | ||
Appendix B - Directors Responsibilities Statement pursuant to Disclosure and Transparency Rule 4
The following statement is extracted from page 88 of the 2016 Annual Report and is repeated here for the purposes of compliance with DTR 6.3.5. This statement relates solely to the 2016 Annual Report and is not connected to the extracted information set out in this announcement or the Preliminary Announcement.
We confirm that 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 Strategic Report includes a fair review of the development and performance of the business and the position of the issuer and the undertakings included in the consolidation taken as a whole, together with a description of the principal risks and uncertainties they face.
We consider 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's position and performance, business model and strategy.
Appendix C - Related Party Transactions
The key management are considered to be the Board of Directors of Hill & Smith Holdings PLC, whose remuneration can be seen in the Directors' Remuneration Report on pages 68 to 76, and in the related party details on page 136 (note 25) of the 2016 Annual Report.
Alex Henderson
Company Secretary
Hill & Smith Holdings PLC
Tel: +44 (0) 121 704 7430