RNS Number : 3359V
Hill & Smith Hldgs PLC
15 April 2016

Hill & Smith Holdings PLC (the 'Company')

2015 Annual Report and Notice of 2016 Annual General Meeting ('AGM')


Hill & Smith Holdings PLC has today posted, or otherwise notified as being available on its website www.hsholdings.com, the following documents:


1.     2015 Annual Report

2.     Notice of 2016 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 2015 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 2015 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 2015 Annual Report.

The information below, headed as Appendix A, B and C, and which is extracted from the 2015 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 9 March 2016 (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 2015 Annual Report. All page numbers and cross-references in the extracted information below refer to page numbers in the 2015 Annual Report.


Appendix A - Principal Risks and Uncertainties


Risk and potential impact


Link to Strategy


Managing the impact

of those risks which

we cannot eliminate

or mitigate at source;

e.g. global market



Competitive pressure puts downward

force on revenue growth, market

positioning and profitability.


› Implementation of procurement standards to help manage cost


› Ongoing subsidiary quality assurance improvement initiatives.

› Product differentiation through product quality, delivery

performance, reliability and professional customer service.

› Product development and geographical expansion initiatives are

used to surpass present competitor reach.


·    Portfolio management

·    Geographic diversification

·    Target returns and leverage

·          Entrepreneurial culture


Overall market or selective geographical

conditions deteriorate or there is a

reduction in demand leading to a

decline in Government and private

sector confidence and spending,

affecting Group financial performance.


› Diversification into new markets and territories.

› New product development.

› Close relationship between Group and subsidiary management.

› Expansion into new export markets.

› Intra-Group co-operation, leveraging the Group global footprint.

› Contracts negotiated with customers on a Group wide basis

leveraging Group size and synergies between Group companies.


Volatility in raw materials markets

reduce availability and increase cost of

raw materials putting Group margins

under pressure and impacting Group

financial performance.


› Use of Group procurement standards requiring dual sourcing and

robust due diligence of supply chain partners.

› Hedging against raw material price volatility where appropriate.

› Contractual protections sought against raw material fluctuation



Foreign exchange rates could impact

Group financial performance by

potentially eroding commercial margins


› At the inception of contracts involving foreign currency cash

flows, the Group uses derivative instruments including forward

currency contracts to mitigate the risk of subsequent movements

in foreign exchange rates.


**Global economic events, profound

social instability or failure of national

governance in any of the territories in

which we operate impacting our ability

to manufacture and ultimately our

financial performance.


› Diversification into new markets and territories.

› Pursuing opportunities in the private sector.

› Maintaining close relationships with Government agencies




Recognising the

importance of

recruitment, talent




and employee

management to our



A loss of key staff and a failure to

implement effective succession

planning could lead to a loss of

expertise, impacting technical and

financial performance.


› Development and implementation of a Group succession

planning model, driven by the Group Chief Executive.

› Implementation of contractual protections and retentions in

employment contracts.

› Group policy supporting the training and development of its



·    Geographic diversification

·          Entrepreneurial culture


A failure to recruit employees who

have the relevant skills, experience and

attributes could impact the Group's

ability to achieve its optimum growth



› Competitive remuneration, benefits and incentive plans offered

to employees and regularly benchmarked.

› Development of a recruitment process including competency

requirements and skills gap analysis.

› Value based culture.

The geographical spread of

management and the appointment

of new management teams could

compromise effective communication

and responsiveness impacting the

Group's strategic goals.


› Use of internal communications systems, e.g. Group intranet.

› Regular international conferences held at the subsidiary level.

› A formal delegation of authorities structure has enhanced

ownership and control, whilst encouraging entrepreneurial drive

and spirit.

› Entrepreneurship is encouraged as a key tenet of the Group's

business strategy and the adoption of a singular business culture

is, therefore, not always possible and flexibility in the Group's

management style is favoured instead.

› The Group Code of Business Conduct establishes core behaviours

expected of all staff.


Ensuring that we

take all necessary

steps to manage risk in our manufacturing

plants and our

installation activity

both in our facilities

and in the field.



A failure to manage our property

portfolio effectively, could lead to

production downtime and reduce

our potential for increased income

generation. Production capability and

capacity restrictions could reduce our

ability to meet demand. Downtime

caused by plant failure, loss of utilities

or natural catastrophe could suppress

performance on an extended basis.


› Ongoing subsidiary site assessment of future space and

efficiency requirements and related investment in additional

capacity or equipment.

› Subsidiary businesses are strengthening business continuity

plans to ensure that they are equipped to handle business

continuity events, including leveraging their proximity to other

Group subsidiaries and working with the IT Steering Committee

to mitigate systems downtime risks.

› Subsidiary businesses implement local health, safety and

environmental controls which are monitored by health and

safety committee meetings and an external specialist.


·    Portfolio management

·    Geographic diversification

·    Target returns and leverage

·          Entrepreneurial culture


Insufficient investment in research

and development and/or a failure to

innovate restricting organic growth and

geographical diversification ultimately

resulting in the longer term financial

goals being compromised. Regulatory

and customer approvals can delay the

introduction of products which are

developed by the Group, ultimately

resulting in the short to medium term

financial goals being compromised.


› Subsidiary discretion to engage in research and development

activities, subject to budgetary constraints.

› Robust quality controls in place.

› Dedicated quality compliance resources in most affected

subsidiaries who have conducted research and implemented

controls to ensure responsiveness to regulator and customer

approvals information requests and audits.

› Board consideration of emerging risks including seeking external

specialist support and internal identification of emerging risks at

both the subsidiary and Group level. Both the onset of the risk

and the potential opportunities it may generate for the Group

are being considered.

› Acquisition of new subsidiary businesses which have advanced

IT solutions and could be applied Group-wide.


Active portfolio management is a key

tenet of the Group's strategy and as

such, if the management of our merger

and acquisitions activity, integrations

and business restructuring is ineffective,

the Group may not meet its strategic

and business goals and financial

performance targets.


› Comprehensive and structured due diligence protocols are

deployed in respect of investigating target businesses and

contractual assurances are sought from sellers to mitigate any

identified issues or risks.

› Employment contract terms and conditions are aligned post integration

between Group employees and new employees,

facilitating smooth integration.

› Formal Board level approvals are required in accordance with

the Group's delegation of authority structure for any acquisitive


› A standardised and proven 100 Day Integration Plan is followed

post-acquisition to streamline the integration process

Inadequate and weak IT systems can

affect the Group's financial performance

and its ability to be responsive to its



› The Group's IT Steering Committee reviews IT systems capability,

suitability and integrity on a regular basis.

› The capital expenditure approval process is used to test the

suitability of proposed IT system enhancements.

› IT Policies are included in the Group policy manual.


Supply chain failures through

performance, cost and/or solvency

issues could destabilise production

capability and ultimately lead to a

reduction in sales performance.


› Implementation of Group procurement standards requiring dual

sourcing and robust due diligence of supply chain partners.

› Robust contractual protections sought.

› Dedicated procurement functions at subsidiary level.

› Regular interaction with key suppliers helps maintain

relationships and understand supplier capacity, performance

and financial status.


**Project delay or cancellation (internal

or external factors) including a

reduction in government spending,

inclement weather or a delay in the

new product approvals process.


› Diversification into new markets and territories.

› Pursuing opportunities in the private sector.

› Maintaining close relationships with customers.



& Financial

Mitigating internal

and external

commercial and

financial trading risks

in our day to day

business activities.


The cost of remediating product failures

or defects caused by production or

quality issues can lead to claims for

loss and damage, adverse customer

perceptions, reputational and financial

consequences for the Group.


› Regulatory approvals, testing and accreditations obtained.

› Rigorous quality control protocols are fully implemented and

enhanced whenever possible.

› Policies in respect of handling product failures have been


› Contractual controls help mitigate the economic impacts.

› Insurance cover is provided globally by insurers of repute.

› Litigation is managed by external legal specialists from reputable



·    Portfolio management

·    Geographic diversification

·    Target returns and leverage

·          Entrepreneurial culture


The size of the Group's available

customer base, together with the

risk of losing key customers, changes

in customer buying behaviours or

significant worsening of contractual

terms could result in Group financial

under performance.


› Products and geographical markets diversification.

› Ongoing monitoring of the timing and trends in government

funding for road and infrastructure spending.

› Generation of contractual guidance and precedent

documentation to preserve contractual terms.

› Contracts reviewed under the delegation of authorities structure.


An inability to collect cash in

accordance with customer payment

terms, obtain credit insurance or an

increase in anticipated bad debts would

result in an inability to plan financially

with any certainty and achieve the

Group's financial ambitions.


› Subsidiary cash management is monitored by the Group finance


› Standardisation of payment terms.

› The delegation of authorities process results in contractual

payment terms being centrally reviewed and approved.

› Credit ratings agencies continue to be used as a source of risk

assessment and credit insurance is effectively deployed.


The Group's ability to ensure it does

not accept unduly onerous contractual

commitments is central to its

commercial risk management and to

mitigate the risks of poor performance

due to factors within or outside of its

control. This, together with ineffective

contracts management post award,

could pressurise margins and increase

liabilities ultimately impacting the

Group's financial performance and



› Contract precedents and guidance have been produced and

new standard terms produced for certain subsidiary businesses.

Further work ongoing in this sphere during 2016.

› Advice in respect to contractual risk is available to the Group,

together with legal, commercial and financial support from the

central team.

› The operation of the delegation of authorities process requires

Group senior management and/or Executive Director approval

for the execution of material contracts.

› Roll out of contracts training in the UK and US during 2015,

further training to be held during 2016.

› Certain of the Group's subsidiaries have appointed dedicated

quantity surveyors and contracts managers to control their



Future investment projects and the

growth in foreign earnings for the Group

are adversely affected. The Group is

affected by the short term risk that its

earnings may be impacted by certain

financial risks e.g. credit and liquidity

risks and foreign exchange volatility. The

Group operates in a range of different

jurisdictions, political and fiscal regimes,

which present operating and cultural



› From a transactional perspective, Group companies operate

a common set of reporting policies and procedures. An

internal audit programme underpins compliance and further

requirements are communicated via the Group intranet and

directly to the financial professionals around the Group.

› The Group benefits from centralised cash and banking controls

and the Group Financial Controller acts to govern and monitor all

financial controls applicable across the Group.

› Regular monitoring of tax developments in relevant jurisdictions

assists to ensure that the Group utilises the most appropriate tax


› Specialist and/or local independent tax advice is sought as appropriate from reputable accounting practices.

Legal &


Ensuring compliance

with the laws

and regulations

which govern the

operations in the

territories in which

we operate.


The impact of regulatory changes

such as green initiatives (including

carbon footprint results) acts to create

additional process steps, enhanced

procurement requirements and

increases costs and administrative

effort, ultimately impacting margins.

This could also result in the non achievement

of Group environmental



› These requirements are managed by specialists through agreed


·    Target returns and leverage

·          Entrepreneurial culture


Group initiatives including: economies of bulk purchasing, site

usage monitoring and reporting, energy market intelligence and

carbon commitment management.

The dilution of the Group's valuable

intellectual property can result in lost

earnings, particularly via the copying

of product in the Asia-Pacific region.

Insufficient Intellectual Property Rights

('IPR') monitoring could lead to a loss of

brand protection, patent protection and

increase competitive pressures.


› Use of patent attorneys with global remit.

› Use of in-region IPR specialist legal advice.

› Central IPR register and management of renewals, authorised

uses and assignments.

› Contractual protections obtained to protect Group IPR where


› Monitoring of IP registrations to ensure consistent protection.


A violation of competition/anti-trust

laws could result in downtime, fines,

penalties and adverse reputational

consequences for the Group by both

customers and investors. There may

also be personal consequences for the

Group's Directors.


› The Group Code of Business Conduct ('CBC') requires that the

Group conducts its business in an open, vigorous and competitive


› Competition compliance manual implemented by each Group


› Online competition training and testing undertaken globally by

all key employees, including the Board.

› Simulated dawn raids are undertaken each year to audit

subsidiary compliance.

› Competition assessments are included in material contract


› The Group has a whistleblowing hotline and email to allow

employees to raise concerns in confidence, or anonymously if


› A direct reporting relationship between the Group Risk &

Compliance Counsel and the Chief Executive and Audit

Committee emphasises the commitment to further

strengthening the Group's compliance culture.


A violation of international import

and export non-compliance (including

trading, restricted parties and

sanctioned countries compliance) can

result in the denial of export privileges,

the imposition of fines and penalties,

diverted management time and

personal implications for the violators

together with adverse implications for

Group financial performance, facilities

and reputation.


› The Group CBC requires that the Group must trade in accordance

with all valid international economic sanctions and legal

requirements for the import and export of goods, technology

and services.

› Restricted party screening software and procedures have been

globally implemented by the Group.

› An International Trade Compliance Policy was issued in response

to the changing legislative and financing landscape surrounding


› Central analysis and advice is provided in respect to the

administration of trade with both routine and less routine

countries and territories.



A violation of health, safety and

environmental laws and regulations

or the impact of health, safety and

environmental accidents and incidents

affects employees, communities

and operations and impacts Group

reputation and financial performance.


› Robust health and safety policies and procedures are deployed.

› Use of the health and safety cloud monitoring and reporting

framework - see page 42.

› Retention of an external health, safety and environmental


› Open relationship with regulatory bodies.

› Health and safety committee monitoring.

› A culture of zero tolerance in respect of health and safety violations is promoted by the Board.


Were any member of the Group to

commit a violation of Anti-Bribery &

Corruption laws, (including breach by

a commercial intermediary appointed

by the Group, such as an agent or

distributor), the resultant consequences

could include fines, adverse publicity,

claims from customers, loss of

management time and personal

consequences for those found to be

in violation of the same, ultimately

impacting Group financial performance

and conformance with its strategic



› A direct reporting relationship between the Group Risk &

Compliance Counsel and the Chief Executive and Audit

Committee emphasises the commitment to further

strengthening the Group's compliance culture.


Non-compliance with employment




› Group policies on employees' rights in the workplace.

› The Group CBC requires that the Group comply with local laws

including employment laws and regulations.

› All subsidiary businesses have access to local, dedicated

employment law expertise.

› Whistleblowing hotline allows for reporting of potential noncompliance

with local employment laws.




** Fraudulent conduct by employees or

external parties.


› The Group CBC requires that the Group apply the Group's Anti-

Bribery & Corruption Policy and expressly prohibits improper

payments in all business dealings, in every country around the


› The Group Gifts & Entertainment policy tightly controls how we

give or receive business gifts, entertainment and hospitality.

› A rolling programme of online anti-bribery and corruption

training and testing is undertaken by new employees.

› A commercial intermediaries protocol operates in the context of

the appointment of third party representatives e.g. agents and


› The Group has a whistleblowing hotline and email to allow

employees to raise concerns in confidence, or anonymously if


› The Group CBC continues to be the central focus for setting out

ethical behaviours.

› Close monitoring by the Group finance team of monthly financial


› Whistleblowing hotline allows for reporting of potential

fraudulent conduct by employees.


** Identified, by the enhanced risk assessment process, as a new risk in 2015.



Board confirmation of principal risks and uncertainties

The Board is satisfied that the Group operates an effective risk management process and confirms that it has conducted a robust assessment of the principal risks facing the Group. It considers that the risks identified in the above table correctly summarise the principal risks and uncertainties facing the Group together with the remediation and mitigation activities that are being used to address such risks.

The Board has overall responsibility for the Group's risk management programme including implementing and monitoring the following:


› Operational, financial and compliance internal controls;

› Ensuring that the current risk management process remains a suitable means of establishing the correct risk culture;

› Ensuring that the Group's risk profile is managed and controlled; and

› Ensuring that there is consideration as to how much risk the Group is willing to take in pursuit of the strategic objectives and ensuring that such risks are managed appropriately and within acceptable parameters.


The principal risks and uncertainties facing the Group, set out above, include detail as to how these risks are being effectively managed to accord with the Group's risk appetite, as established by the Board. This appetite being the amount of risk that the Board is willing to take in pursuit of its strategic objectives as outlined on pages 18 to 27.


Appendix B - Directors Responsibilities Statement pursuant to Disclosure and Transparency Rule 4

The following statement is extracted from page 84 of the 2015 Annual Report and is repeated here for the purposes of compliance with DTR 6.3.5. This statement relates solely to the 2015 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 66 to 80, and in the related party details on page 129 (note 25) of the 2015 Annual Report.







Alex Henderson

Company Secretary

Hill & Smith Holdings PLC

Tel: 44 (0) 121 704 7430


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