Last checked at 26 Mar 2013 16:25
The Morgan Crucible Company plc
2012 Annual Report
The following documents have today been posted or otherwise made available to shareholders:
a. Annual Report and Financial Statements for the year ended 31 December 2012 (2012 Annual Report);
b. Notice of the 2013 Annual General Meeting; and
c. Form of Proxy for the 2013 Annual General Meeting.
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 at www.hemscott.com/nsm.do.
The documents are also available on the Company's website at www.morgancrucible.com in the 'Investors' section.
The Company's preliminary results announcement of 14 February 2013 contained a management report as well as audited financial statements which were prepared in accordance with the applicable accounting standards. The financial information set out in the Company's preliminary results announcement of 14 February 2013 does not constitute the Company's statutory accounts for the year ended 31 December 2012. Statutory accounts for 2012 are included in the 2012 Annual Report, which will be delivered to the registrar of companies following the Company's 2013 Annual General Meeting. The auditors have reported on those accounts; their report was (i) unqualified, (ii) did not include a reference to any matters to which the auditors drew attention by way of emphasis without qualifying their report and (iii) did not contain a statement under section 498(2) or (3) of the Companies Act 2006 in respect of the accounts for 2012.
The information below, which is extracted from the 2012 Annual Report, is included solely for the purpose of complying with DTR 6.3.5. This information should be read in conjunction with the Company's preliminary results announcement issued on 14 February 2013 (available at www.morgancrucible.com). This announcement is not a substitute for reading the full 2012 Annual Report. All page numbers and cross-references in the extracted information below refer to page numbers in the 2012 Annual Report. There are no related party transactions requiring disclosure.
Principal Risks and Uncertainties
The Group has an established risk management methodology in place which identifies, manages and mitigates risks, together with a comprehensive internal control framework and appropriate assurance processes.
During 2012, this approach to risk management was reviewed and further developed to adopt a holistic 'Risk Dashboard' approach to mapping identified risks in the context of the Groups controls, monitoring and assurance systems.
The Group's Risk Dashboard (populated with material risks identified from operating site level upwards) sets the agenda for a rolling review by the Board and Audit Committee of the Group's material strategic, operating, financial and compliance risks and the associated controls, monitoring and assurance processes.
The risk management processes seek to capture, manage and mitigate both existing and emerging risks that could impact the Group's immediate and long-term performance and value. Whilst they do not fully eliminate risks, they facilitate mitigation to an acceptable level within the context of the business environment in which the Group operates.
The following key risk areas are those that the Group feels could have the most serious adverse effect on achieving the Group's five strategic priorities, its performance and reputation. The relative importance of some of these risks has changed during 2012 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 Strategy and strategic planning risks | MITIGATION | |
Delivery of Group Strategy In pursuit of its strategic goals and priorities, the Group continues to seek out growth opportunities both organically and through acquisition.
Capital investments to drive organic growth carry inherent risks in execution and the delivery of anticipated benefits.
Acquisitions can be complex and challenging and there is a risk that significant or costly issues arise which have not been identified in pre-acquisition due diligence nor identified in commercial business planning. The Group could also be subject to 'inherited' liabilities as a result of an acquisition.
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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.
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 capital investment are managed through an established process with appropriate monitoring and reporting. | |
Technology Obsolescence One of the Group's strategic priorities is that it aims to 'be innovative, differentiated and high value-added'. The Group is frequently in competition with existing technology producers or other innovators.
Unforeseen/unmitigated technology obsolescence would impact the Group's business. |
The Group has a technology pipeline which is regularly reviewed by Divisional Executives, the Group Executive and the Board.
Each Division has a Chief Technical Officer who monitors technology, business developments and future regulations to ensure that the Business is 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.
Where Group products are designed for a specific customer, they are developed in tandem with the customer to maintain leading-edge solutions.
The Group seeks to secure IP protection, to the fullest extent possible, for the existing portfolio of products and external advisers manage this protection globally.
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Recruiting, maintaining and motivating high-quality staff One of the Group's strategic priorities is to 'find, keep and develop the right people'. The Group relies on the quality and commitment of its people, from those working at a site level, through site management to the Divisional and Group Executives. Many of the Group's processes require a high degree of skill and experience and loss of these employees to other markets or competitors would impact the business. |
The Group has a HR Director and a network of HR professionals within the business along with 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, skills assessment and development, performance management and employee consultation.
The Board and Executive hold annual talent management reviews.
In 2012 the Group launched a Graduate Leadership Programme. This Programme develops individuals and aims to create the business leaders of the future.
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Operational risks | ||
Treasury Risks The Group's global nature means that it is exposed to uncertainties in the financial markets and the banking sector which heightens the Group's foreign exchange, interest rate, credit and liquidity risks as well as the risk of bank failure impacting the Group's cash.
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The Group's Treasury function, Treasury Policy and guidelines provide strict controls on the selection of banks and cash management. Additional actions have been taken to respond to the Euro crisis.
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Quality of Contracts Ineffective contract risk management could result in significant liabilities for the Group and damage customer relationships and Group reputation.
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The Group Legal Policy requires review of high value or high risk contracts by Group Legal. This policy is supported by additional guidance documents and checklists.
Where the contracts do not fall under the Group Legal Policy, the Divisions are responsible for managing their contractual risk and do so, pulling from the knowledge they have obtained through the Group's contract risk management training under the Responsible Business Programme (further information available on page 18).
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IT Risks In order to meet the Group's strategic objectives the viability of its underlying IT infrastructure is essential. If a critical business system was to fail or the Group lost critical data and information, the Business would be impacted.
| The Group has established IT systems in place and Group and Divisional IT teams to manage the IT risks.
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Product quality, safety and liability Products used in applications for which they were not intended or inadequate quality control systems/overcommitting on specifications could result in products not meeting specifications, which could lead to significant liabilities.
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Many of the Group products are designed to customer specifications.
Over 90% of the Group's manufacturing output is accredited to ISO 9001 and the Group's quality management systems and training help ensure that Morgan Crucible's products meet or exceed customer requirements and national/international standards.
Contracts relating to products used in potential high-risk applications are subject to mandatory legal review.
The Group monitors legislation and regulation to manage future risks.
The Group insurance programme includes product liability insurance.
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Single Point Exposures The Group has a number of potential single point exposure risks, these include: Ø Single point supplier: - a significant interruption of a key internal or external supply could impact business continuity. Ø Single point profit: - a key site exposed to a strike, a natural catastrophe or serious incident such as fire could impact business continuity. Ø Single point customer: - the unmitigated loss of a major customer could have an impact on Group profit.
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The Group Executive and Divisional Executive teams are responsible for monitoring and managing these single point exposures. This involves monitoring and reviewing supply chains (internal and external), dual/multiple sourcing of materials or strategic stock, fire protection systems, creating and testing disaster recovery plans, maintaining product quality and customer relationships.
The Group insurance programme includes business interruption cover.
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Environment, health and safety (EHS) risks The Group operates a number of manufacturing facilities around the globe. A failure in the Group's EHS procedures could lead to environmental damage or lead to injury or death of individuals, with a consequential impact on operations and raising the risk of regulatory action being taken against the Group. Any such action could result in litigation, resultant damages and damage to reputation.
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Further detail of the EHS programme in place to manage these risks is available on pages 21 to 24.
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Compliance and ethics risks | ||
Changes to or non-compliance with laws and regulation The Group's global operations must comply with a range of national and international laws and regulations including those related to bribery and corruption, human rights, exports and competition/anti-trust.
A failure to comply with any applicable laws/regulations could result in civil or criminal liabilities, individual or corporate fines and could also result in debarment from government related contracts.
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The Group monitors changes in legislation and regulation, pro-actively modifying existing controls and compliance frameworks.
The Group is committed to the highest standards of corporate and individual behaviour and this commitment is set out in the Group's Core Values Statement and Ethics Policy. Global compliance training on a number of compliance subjects is provided through the Group's Responsible Business Programme, full information is available on pages 18 to 20.
The Group has an Ethics Hotline, operated by Expolink, which enables employees and other stakeholders who are aware of, or suspect, misconduct, illegal activities, fraud, abuse of Group assets or violations of any Group policy, to report these confidentially.
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External risks | ||
Changing political, economic and social environment The Group operates in a range of markets and geographies around the world and can be affected by political, economic, social or regulatory developments or instability such as the Euro crisis, Arab Spring and China's slowdown. Many of these events impact local markets and some have a worldwide impact.
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Key risks and events are regularly tracked at a Divisional and Group level, with contingency plans in place to manage the changing situations.
Financial and treasury controls limit exposure to foreign currency, interest rate, credit and liquidity risk.
The Group's broad market/geographic spread helps to mitigate the effects of political and economic crises.
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.
The Group maintains a carefully managed debt facility to ensure that its debt ratio is within acceptable market tolerances.
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Pension Funding The Group participates in defined pension arrangements which are exposed to fluctuating interest rates, investment values and inflation. This coupled with the increased longevity of members could result in funding burdens on the Group in the future.
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Active management of the pension scheme assets is the primary means of mitigation. This comprises management both internally within the Group but also externally through corporate actuaries and professional advisers.
There is regular Board review of the Group's pension position and strategy in the changing global environment.
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Directors' Responsibility Statement
The 2012 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 2012 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 36 and 37, confirms to the best of their 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
26 March 2013