TIDMBRAM
RNS Number : 0533J
Brammer PLC
31 March 2015
BRAMMER PLC
(the "Company")
Annual Financial Report and Notice of Annual General Meeting
The Company announces that the following documents have today
been posted shareholders:
1. Annual Report and Accounts for the year ended 31 December 2014 ("Annual Report");
2. Letter to shareholders;
3. Notice of Annual General Meeting; and
4. Form of Proxy.
In accordance with Listing Rule 9.6.1 and 9.6.3, copies of the
Annual Report and Notice of Annual General Meeting have also been
submitted to the National Storage Mechanism and will shortly be
available for inspection at http://www.morningstar.co.uk/uk/NSM
Copies of the Annual Report and Notice of Annual General Meeting
will also soon be made available on the Company's website at
http://investor.brammer.biz/download-centre/reports-releases-presentations/
The information below, headed as Appendix A, B and C, is
extracted from the Annual Report. It is included solely for the
purposes of complying with Disclosure and Transparency Rule 6.3.5
and should be read in conjunction with the Company's preliminary
announcement of financial results for the year ended 31 December
2014 which was issued on 17 February 2015. Together these
constitute the material required by Disclosure and Transparency
Rule 6.3.5 to be communicated to the media in unedited full text
through a Regulatory Information Service. Reading this announcement
and / or the preliminary results announcement is not a substitute
for reading the full Annual Report. Page and note references in the
text below refer to page and note numbers in the Annual Report.
APPENDIX A - Principal risks & uncertainties
Corporate risks
The management of the business and the execution of the strategy
are subject to a number of risks and uncertainties. Operational
risks are assessed by Brammer subsidiaries. These are reviewed with
appropriate mitigation considered by Brammer management. The Board
reviews these assessments on a regular basis.
A formal group-wide review of strategic risks is performed by
the Board and appropriate processes and controls are also put in
place to monitor and mitigate these risks within the risk
management structure set out opposite.
Risk management structure
-----------------------------------------------------------------------------------------
Statutory Operational Internal functions
------------------------------------- ---------- --------------- ---------------------
Risk management External Management and Internal audit
audit peer review and central support
------------------------------------- ---------- --------------- ---------------------
Business Developed businesses(1) X X X
functions
----------- ------------------------ ---------- --------------- ---------------------
Regional businesses(2) X X X
----------- ------------------------ ---------- --------------- ---------------------
Central functions X X X
------------------------ ---------- --------------- ---------------------
IT and infrastructure X X
------------------------ ---------- --------------- ---------------------
Secretarial, legal X X X
and human resources
----------- ------------------------ ---------- --------------- ---------------------
1. Developed businesses comprise the larger, more mature
business segments - UK, Germany and France.
2. Regional businesses comprise Spain, Benelux, Eastern Europe and other businesses.
The principal risks affecting the Group are considered
below:
Slowdown of industrial activity
The Group's activities are almost entirely within the UK and the
Euro-zone which are geographical markets currently subject to
economic uncertainty. A continued deterioration in current economic
conditions may lead to a decline in demand within the industrial
base of these markets with an associated decline in demand in the
maintenance and original equipment markets which Brammer
supplies.
The Group has a well spread market and geographic presence and
has concentrated growth activities in defensive sectors such as
food and drink, utilities and fast moving consumer goods. The Group
has also focused growth activities in larger Key Account customers
who have a wider global presence and are therefore likely to prove
more resilient during any economic downturns in Europe and
surrounding areas. Economic conditions vary throughout the
Euro-zone and accordingly a slowdown will have a different level of
impact on each country.
The sales and purchasing activity for each business unit is
largely confined to its own geographical area which means each
business can react to variations in demand without encountering
issues associated with cross border sales and purchase management.
Also, in the extreme case of a breakup of the Euro, currency issues
would be minimised because purchases and sales would be largely in
the same currency. The Group has also demonstrated the capability
to reduce costs and to align the cost base in response to market
conditions.
Withdrawal of a major supplier
Brammer is dependent on its key suppliers which it represents in
a multi-brand environment to Brammer's existing customer base. The
relationship with strategic suppliers is mutually dependant and
enhanced by our partnership approach to Key Accounts. Brammer is
continuing to secure additional support for its efforts to increase
market share and is confident any withdrawal could be sourced from
another supplier.
Loss of major customers
A core part of the growth strategy for the Group is a focus on
winning and maintaining those significant customers it views as Key
Accounts. The loss of significant numbers of Key Accounts would
have an adverse effect on turnover growth and an impact on other
strategic focus areas of cross-selling opportunities and Insite
development.
As a distributor in a fragmented market Brammer derives great
benefits from its first class reputation as an industry leader in
its service offering to Key Accounts, which could be potentially
damaged with significant loss of major customers. However, Brammer
does not have dependency on any single customer.
Key Account customers are carefully monitored by the senior
management team, who also document the acknowledged cost savings
achieved. Further growth in Key Accounts in the current year
suggests the template offering is proving attractive to a profit
conscious customer base.
The Group is not subject to material exposure from fixed price
contracts and has a track record of maintaining gross margin
irrespective of sales volumes thereby successfully pushing back
market pricing pressure to its suppliers.
Customers relocating to lower cost countries
Brammer continues its strategy to grow its business successfully
by expanding in a fragmented market. We will evaluate suitable
opportunities in lower cost countries as they arise.
Loss of infrastructure/systems
As with most large organisations that depend on Information
Technology (IT) for their day-to-day operations, there are disaster
recovery plans in place for the major countries where Brammer
operates. In these territories, there are overnight back up systems
in place which can be expected to mitigate the worst effects of
such disruption. Integration teams continually work to develop
group-wide solutions to business critical processes which provide
improved resilience against failure in the event that issues occur
in our operations.
For Brammer, a quoted company which is a distributor of product,
these key processes are in the area of stock and order management,
sales and delivery management and transactional record keeping,
including financial books and records.
Loss of key employees
The Group regularly reviews its remuneration and succession plan
arrangements to ensure that key managers are recognised and
developed. To ensure continuity and maximise our competitive
advantage the Group remains committed to a number of incentive
schemes linked to the group's results, which have been designed to
retain key managers.
Where appropriate, employment contracts also contain relevant
provisions concerning interaction with competitors and customers.
Industry benchmarking and the use of external assessments and
advisors form part of the recruitment process for key managers to
ensure high calibre recruits to key roles.
The Board's nominations committee reviews the structure, size,
diversity and composition of the board and advises on succession
planning matters. This committee also retains external search and
selection consultants as appropriate.
Adverse Euro exchange rates
Brammer reports its results in sterling however the Group trades
significantly in euros. The current economic conditions create
uncertainty over the exchange rate between sterling and the euro.
Whilst there is a natural hedge between buying and selling for the
majority of our business the ultimate profitability is expressed at
the year's average exchange rate.
Financial and capital risks
The Group's principal financing facility is in place until 2016.
This facility is supplemented with additional long-term funding
obtained through the issue of EUR85 million of private placement
notes, with maturity dates between 2023 and 2025, under a private
shelf facility. Brammer has sufficient available resources to meet
its foreseeable requirements.
The 10% share placing during the year raised funds to partly
fund our acquisition activity, ensuring that our debt to equity
ratio remains within acceptable parameters to minimise financial
and capital risks.
The closed defined benefit scheme in the UK continues to be
subject to various financial risks, principally based around the
value of the current deficit in the scheme. The Company may be
required to make exceptional additional contributions outside the
scope of its current funding plan by The Pensions Regulator. During
2010 the Group agreed a deficit funding plan with the trustees of
the scheme which provides for the Group to make annual payments of
GBP2.8 million, indexed for inflation, in the years 2011 to 2023
inclusive.
The company has limited dealings in derivative instruments.
Derivatives used in hedging activities are considered risk
management tools and are not used for trading purposes. The company
uses derivative instruments to manage exposure to fluctuations in
foreign currency exchange rates and to reduce volatility in the
interest charge. The company uses foreign currency forward exchange
contracts to minimise currency exposure from expected future cash
flows. These contracts have not been designated as hedging
instruments.
Expected benefits from acquisitions may not be realised
Part of the Brammer strategy is growth through selective
acquisitions. Acquisitions involve a number of risks related to the
performance of the acquired business and challenges arising from
integration. Potential acquisitions are carefully researched prior
to any purchase and closely monitored by Brammer's management
subsequent to acquisition. Brammer has a track record of
successfully integrating acquired businesses with an established
integration plan and an experienced management team.
Expected benefits from strategic growth initiatives may not be
realised
Part of the Brammer strategy is growth through targeted product
and service initiatives. These initiatives include the formation of
new teams and infrastructure, including software development, and
involve a number of risks related to their successful development
and implementation. The risks include effective project management
and the delivery of effective IT solutions and services. Potential
projects and initiatives are carefully researched prior to any
investment in capital expenditure and personnel. Projects are
developed in line with detailed business plans which are aligned to
central IT and project management functions. Investment and
progress is reviewed against these business plans which are
reviewed at senior levels on a regular basis. Brammer has a track
record of successfully introducing new service offerings to
customers and markets across Europe.
APPENDIX B - Related party transactions
Within the definition of IAS 24 'Related party disclosure', the
Board and key management personnel are related parties. Detailed
disclosure of the remuneration of the Board is given in the
Directors' remuneration report on pages 57 to 62. A summary of
remuneration provided to key management personnel is provided in
note 24.
In addition, during the year the group made sales totalling
GBP0.1 million (2013: GBP0.1 million) to various European
subsidiaries within the Armstrong World Industries group of
companies, a company in which Charles Irving-Swift is an Executive
Director within the European Flooring operations.
APPENDIX C - Statement of directors' responsibility
The following responsibility statement is repeated here solely
for the purpose of complying with Disclosure and Transparency Rule
6.3.5. This statement relates to and is extracted from page 65 of
the Annual Report. Responsibility is for the full Annual Report not
the extracted information presented in this announcement and the
preliminary results announcement.
Statement of directors' responsibilities in respect of the
Annual Report, the Directors' Remuneration Report and the financial
statements
"Each of the directors whose names and functions are listed on
pages 28 and 29 confirm that, to the best of their knowledge:
> the group financial statements, which have been prepared in
accordance with IFRSs as adopted by the European Union, give a true
and fair view of the assets, liabilities, financial position and
profit of the group; and
> the strategic report and the directors' report contained in
pages 2 to 42 include a fair review of the development and
performance of the business and the position of the group, together
with a description of the principal risks and uncertainties that it
faces.
In addition, each of the directors considers that the Annual
Report, taken as a whole, is fair, balanced and understandable and
provides the information necessary for shareholders to assess the
company's performance, business model and strategy."
Enquiries:
Steven Hodkinson
Company Secretary
Brammer plc
31 March 2015
Tel: +44 (0)1565 756 800
This information is provided by RNS
The company news service from the London Stock Exchange
END
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