Last checked at 22 Mar 2012 09:32
The Morgan Crucible Company plc
2011 Annual Report
In accordance with Listing Rule 9.6.1, The Morgan Crucible Company plc (the Company) has submitted copies of the following documents to the National Storage Mechanism which will shortly be available for inspection at www.hemscott.com/nsm.do:
a. Annual Report and Financial Statements for the year ended 1st January 2012;
b. Shareholder Circular incorporating the Notice of the Annual General Meeting to be held on 8th May 2012; and
c. Form of proxy for the 2012 Annual General Meeting.
The documents were posted or otherwise made available to shareholders on 21st March 2012.
In accordance with DTR 6.3.5(3), the 2011 Annual Report and the 2012 Notice of Annual General Meeting are available on the Company's website at www.morgancrucible.com in the 'Investors' section.
On 15th February 2012, the Company issued its preliminary financial results for the year ended 1st January 2012. The results included a management report which contained an indication of important events which had occurred during the year and their impact on the financial results. That information, together with the information set out below, which is extracted from the 2011 Annual Report, constitute the material required by DTR 6.3.5 to be communicated via an RIS in unedited full text. This announcement is not a substitute for reading the full 2011 Annual Report. Page and note references in the text below refer to page numbers in the 2011 Annual Report. To view the preliminary announcement, visit our company website at www.morgancrucible.com.
Principal Risks and Uncertainties
The Group has an established risk management methodology together with a comprehensive internal control framework and appropriate assurance processes. The risk management processes are forward-looking in the identification, management and mitigation of business risks that could impact the Group's immediate and long-term performance and value. Whilst they will not fully eliminate risks, they will facilitate mitigation to an acceptable level within the context of the business environment in which the Group operates.
Management of business risk is an integral part of delivering performance and is the responsibility of all managers. Some specific areas of risk (for example supply chain) are assessed and managed through steering groups. The risk management decision-making and reporting procedures are integrated into formal business reporting up to the Board. Assurance of the effectiveness of risk management processes, procedures and internal control continues to be monitored by the Audit Committee. Divisional management attend the Audit Committee at least annually to report on internal control and compliance with Group policies. Key risks and issues are reported to the Board via the Risk Management Committee and the Executive Committee. The following key risk areas are those that the Group feels could have the most serious adverse effect on its performance and reputation. The relative importance of some of these risks has changed during 2011 as business conditions change. Where necessary, monitoring and controls to manage risk have been adjusted to ensure that the risks continue to be managed within acceptable limits.
RISK | MITIGATION |
Strategy and strategic planning risks | |
Obstacles to delivery of strategy
Ability to exploit new business opportunities. Ability to deliver anticipated benefits from investments. Delivering the benefits of acquisitions and disposals. Balancing cyclical business sectors to smooth results. Overdependence on key customers. | The Board approves and monitors strategy, consulting external advisers and experts when necessary. Within its delegated authority, the Executive Committee and Divisional management implement strategic plans and regularly report performance.
Businesses are spread geographically, with reduced reliance on cyclical markets. Where the Group chooses to continue to operate in cyclical markets, it selects industries with different cycles to reduce the impact on Group results.
Processes are in place to ensure a structured approach to strategy, three-year plans, budgets, investment approval as well as monitoring and reporting performance.
Acquisitions and disposals are managed through an established process with appropriate monitoring and reporting. |
External risks | |
Changing political, economical and social environment
This includes the types of risks that have manifested themselves in 2011, for example Arab Spring, Japanese earthquake and tsunami and China slowdown. Many of these events impacted local markets and some had a worldwide impact on supply chains and markets.
Current Eurozone issues | Risk mitigation and contingency planning minimised the negative impact of the 2011 events on the Group.
Key risks and events are regularly tracked at a Business, Divisional and Group level with contingency plans adjusted to manage the changing situation.
Mitigation plans are in place to manage the financial and business impact of the Eurozone crisis and any large currency swings. These include not only cash and banking but also operational issues in the businesses. |
Changing global financial environment
The Group, like its peers, is exposed to the risks presented by the ongoing state of the financial markets, the banking sector and the challenge to the euro. | Financial and treasury controls limit exposure to foreign currency, interest rate, credit and liquidity risk.
Our pension funds are managed using independent, competent Trustee Boards and external advisers.
The Group maintains a carefully managed debt facility to ensure that its debt ratio is within acceptable market tolerances. |
Market dynamics and competition | |
Maintaining technology and innovation lead
Dealing with increasing competition.
As some of our business opportunities are in substitute materials, we are frequently in competition with existing technology producers or other innovators. | The Divisions monitor technology, business developments and future regulation to ensure that they are in a strong position to optimise future events.
R&D investment is maintained in new/improving technologies through the Group's research and development facilities.
As many of the Group's products are designed for a specific customer, they are developed in tandem with them to maintain leading-edge solutions. |
Operational risks | |
Treasury risks
The uncertainty in the financial markets and the banking sector impact foreign exchange, interest rate, credit and liquidity risks as well as the risk of bank failure impacting the Group's cash. | Through the Treasury function there are strict controls on the selection of banks and cash management. Additional actions have been taken to respond to the Eurozone crisis. |
Supply chain exposures including raw materials
Supply chain risks include internal risks within the Group, especially where some sites supply and contribute to the profitability of several businesses. | Dual sourcing of materials or strategic stocks.
Key risk areas identified, managed and monitored.
Supply Chain Steering Group monitors risks throughout the Group.
Key processes and equipment assessed. Risks mitigated to an acceptable risk level using improved procedures, protection and controls. |
Natural or man-made catastrophes impacting operations and business continuity
The Group's facilities and processes are exposed to a number of potential catastrophes including fire and explosion that are inherent to the industry. In addition, some sites are exposed to natural hazards such as windstorm, flooding and earthquake, that are inherent to their geographical location. A major incident could impact the continuity of the business. | There is an ongoing risk management process together with external experts to identify and assess key risk areas. Risk is mitigated through improved processes and protection is installed where needed (fire protection, equipment controls, natural hazard protection, etc).
Crisis management and business continuity plans are in place and tested. |
Recruiting, maintaining and motivating high-quality staff
As many of the Group's processes require a high degree of skill, loss of these employees to other markets or competitors would impact the businesses.
Similarly, loss of key persons in commercial or management areas could also impact profitability. | The Group maintains human resource policies and processes to manage the risks relating to its people. These cover areas including reward and recognition, health and safety, talent management, including succession planning, skills assessment and development, performance management and employee consultation. |
Product safety and liability
Products used in applications for which they were not intended. Materials that require special handling. Potential liability from product quality, performance, service, safety. | Many products designed to customers specifications. Where necessary products are tested and certified to meet national/international standards. Quality control processes on materials and finished products. Monitoring of legislation and regulation to manage future risk issues. |
Compliance and ethics risks | |
Changes to or non-compliance with laws and regulation
Unethical behaviour including bribery, corruption, anti-trust, human rights, etc. The Group operates in countries where bribery, corruption, and anti-trust are known risks.
The increasing volume and scope of legislation and regulation complicate the business environment and increase non-compliance risk and the associated penalties. | The Group monitors changes in legislation and regulation, pro-actively modifying existing controls and compliance frameworks and providing training where needed.
The Group has a Responsible Business Programme dealing with most areas of ethics, compliance and regulation.
The Group's ethical standards are defined and driven by the Group Ethics Policy and an external hotline is maintained in countries in which we operate.
In 2011 controls and training were reviewed and upgraded to support worldwide compliance with the UK Bribery Act.
Where the Group is occasionally subject to legal action, we maintain adequate provisions (see notes 21 and 25 on pages 126 and 127). |
Environment, health and safety risks | Further detail of the programmes in place to manage these risks are included on pages 37 to 40. |
Directors' Responsibility Statement
The 2011 Annual Report contains the following statements regarding responsibility for the financial statements in compliance with DTR 4.1.12. Responsibility is for the full Annual Report and Financial Statements 2011 and not the condensed statements required to be set out in the Annual Financial Report announcement.
Each of the Directors, the names and roles of whom are set out on pages 52 and 53, confirms to the best of his knowledge:
·; The Group financial statements in this Report, which have been prepared in accordance with International Financial Reporting Standards as adopted by the EU (adopted IFRSs), including interpretations issued by the International Accounting Standards Board (IASB) and those sections of the Companies Act 2006 applicable to companies reporting under IFRSs as adopted in the EU, give a true and fair view of the assets, liabilities, financial position and profit of the Group taken as a whole.
·; The parent Company financial statements in this Report, which have been prepared in accordance with UK Accounting Standards (UK Generally Accepted Accounting Practice) and applicable law, give a true and fair view of the assets, liabilities, financial position and profit of the Company.
·; The Business review contained in this Report includes a fair review of the development and performance of the business and the position of the Company and the Group taken as a whole, together with a description of the principal risks and uncertainties that they face.
Enquiries: Jill Elliot
Telephone: 01753 837000
22nd March 2012