TIDMIMI
RNS Number : 8133I
IMI PLC
23 March 2018
23 March 2018
Annual Financial Report of IMI plc (LEI:
2138002W9Q21PF751R30)
IMI plc (the "Company") announces that copies of the Annual
Report and Accounts for the year ended 31 December 2017 and the
Notice of Annual General Meeting for 2018 are available from today
on the Company's website www.imiplc.com and may be viewed and
downloaded online at www.imiplc.com/investors (click on Annual
Reports).
Hard copy documents are being posted to shareholders who have
elected to receive them and are also available from the Company
Secretary at the Company's registered office at Lakeside, Solihull
Parkway, Birmingham Business Park, Birmingham, B37 7XZ.
Copies of the above documents, together with the form of proxy
for the 2018 Annual General Meeting have been submitted to the
National Storage Mechanism and will shortly be available for
inspection at: www.hemscott.com/nsm.do.
The Company's 2018 Annual General Meeting will be held at the
Hilton Birmingham Metropole Hotel, National Exhibition Centre,
Birmingham on Thursday 3 May 2018, commencing at 10am.
The Company's preliminary results announcement of 2 March 2018
contained a management report as well as the audited financial
statements which were prepared in accordance with the applicable
accounting standards. The Annual Report and Accounts submitted to
the National Storage Mechanism today also contains information
regarding the Company's principal risks and uncertainties and a
responsibility statement relating to the content of the Annual
Report and Accounts (from the Directors in office as at 1 March
2018); an extract of this information is provided below as required
under paragraph 6.3.5 of the DTR, however this material should be
read in conjunction with and is not a substitute for reading the
preliminary results announcement of 2 March 2018.
This announcement should be read in conjunction with and is not
a substitute for reading the full Annual Report and Accounts.
There are no related party transactions requiring
disclosure.
Page and note references in the text below refer to page numbers
and notes in the Annual Report and Accounts.
Statement of Directors' Responsibilities
The following statement is repeated here solely for the purpose
of complying with DTR 6.3.5. This statement relates to and is
extracted from page 150 of the Annual Report and Accounts and is
signed by order of the Board by John O'Shea, Company Secretary.
Responsibility is for the full Annual Report and Accounts and not
the extracted information presented in this announcement or the
preliminary results announcement.
Directors' responsibility statement under the Disclosure and
Transparency Rules
Each of the directors, as at the date of this report, confirms
that:
-- the Group and parent company financial statements in this
Annual Report, which have been prepared in accordance with
applicable UK law and with the applicable set of accounting
standards, give a true and fair view of the assets, liabilities,
financial position and profit of the Group; and
-- the Annual Report (which includes the Directors' Report and
the Strategic 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.
Principal risks and uncertainties
Our risk management processes are embedded in all our
businesses. These processes identify, evaluate and manage the risks
which could impact our performance, our reputation or our ability
to successfully execute our growth strategy.
The Board determines our risk appetite monitors and reviews the
risk management processes we operate. Responsibility for
implementing and monitoring internal controls and other elements of
risk management is delegated to the Chief Executive and the
Executive Committee. The Executive Committee operates alongside the
Audit Committee, which has primary responsibility for oversight of
financial controls, the Nominations Committee, which has primary
responsibility for succession risk, and the Remuneration Committee
which has primary responsibility for remuneration and incentive
structure risk.
Risk appetite
The Board is responsible for determining the nature and extent
of risks which it feels are acceptable and appropriate for us to
achieve our strategic objectives. Specific risk exposures and
appetites vary according to the nature of the risk, including our
ability to mitigate their impact.
Risk management
We adopt a common, Group-wide approach to the identification,
assessment and quantification of risks and the way they are
managed, mitigated and monitored. We operate a bottom-up risk
management framework, which is described below. This approach
ensures that the Board and the senior leadership team are able to
actively assess risks and monitor the measures used to mitigate,
transfer or avoid such risks. It also ensures that risks are
managed at multiple levels throughout the Group and that feedback
is communicated to our operations to incorporate in their local
risk management processes.
Group strategic risk Operational risk management process
management process
----------------------------- ----------- -------------------------------------------
Strategic review of Board The Executive Committee's review,
the Group's principal which includes a detailed analysis
risks and constructive of the Group risk profile, the supporting
challenge in relation divisional summaries and actions
to the monitors and undertaken to ensure compliance with
measures implemented the UK Corporate Governance Code,
to manage such risks. is submitted to the Board twice a
year. The Board also undertakes an
annual review to assess the effectiveness
of internal controls used to manage
risk across the Group.
Delivery of Group-wide Divisional Bi-annually each manufacturing operation
strategic actions and and Group uploads its risk profile to the Group
monitoring of risks Executive intranet. Our three divisions review
and key performance and consolidate their most significant
indicators. site level and commercial risks and
mitigation strategies into a divisional
risk profile, which includes any
additional divisional level risks
as appropriate. The divisional risk
profiles are then consolidated into
a single Group risk profile and the
divisional and Group risk profiles
are presented and reviewed by the
Executive Committee twice a year.
Feedback and communications Operating All manufacturing operations maintain
provided to operating companies an up-to-date risk profile which
companies and manufacturing identifies the key risks facing the
operations on Group business, assesses the mitigating
and Divisional strategic processes and controls in place to
actions. manage the risk and monitors and
measures the effectiveness of those
controls. The risk profile enables
management to identify issues and
areas that require improvement and
efficiently develop remediation action
plans. The risk profile is incorporated
into each business' monthly management
reporting procedures which increases
management ownership and accountability,
both of which are crucial to ensuring
an effective risk management framework.
----------------------------- ----------- -------------------------------------------
Strategic growth priorities key
The key strategic, operational, financial and compliance risks
facing the Group, in order of priority, are shown in the table on
the following pages. This analysis includes why we think the risk
is important, how we are managing the risk, and the main changes
during 2017.
In addition to strategic, operational and compliance risks, the
Group is also exposed to broader financial market risks, in
particular, currency exchange rate volatility following the Brexit
referendum. A description of these risks and our centralised
approach to managing them is described in Section 4.4 of the
financial statements.
Risk Why we think this is How we are mitigating the risk
important
Global economic The Group operates in
or political global markets and demand * Maintain a balanced business portfolio operating
instability for our products is dependent across a range of markets.
impacting the on economic and market
group's ability conditions. A downturn
to achieve in the economy or political * Monitor key customers and respond quickly to changes
forecast and instability could impact in customer demand.
market expectations demand and the Group's
ability to achieve market
expectations. The Group * Utilise core forecasting processes that ensure
needs to be responsive operational output can be right-sized appropriately.
to market conditions
whether weak or buoyant.
* Undertake enhanced stress testing and sensitivity
analysis of business plans and regularly review key
market and sector metrics.
* Focus on enhancing competitiveness by increasing
investment in New Product Development, Value
Engineering and improving operational performance.
* Develop robust contingency plans to ensure agility if
realignment of cost base is required.
Changes during While IMI Critical Engineering has continued to face
2017 challenges in many of its key markets, Value Engineering
has enabled the division to win new orders in adjacent
segments. Both IMI Precision Engineering and IMI Hydronic
Engineering have experienced a stable or improving trading
environment. We have continued to execute our strategy
and our competitiveness is improving. Further information
about our strategic progress during the year is detailed
in the Chief Executive's review and Operational review
- see pages 12 & 28 respectively.
Failure to The Group is continually
deliver major evolving and changing, * Detailed plans with clear and measurable milestones
transformational both to respond to external reviewed by Divisional Managing Directors.
projects on pressures and conditions
time and on but also to ensure that
budget we are in a strong position * Regular review of major project progress by Executive
to achieve our strategic Committee.
goals. Change projects
include business reorganisations
and implementation of * Enhanced risk assessment process including full
new IT systems which mitigation action plans.
are complex and long-term.
Failure to deliver the
desired objectives on * Specialist IT and Group Assurance reviews of major IT
time and on budget and projects.
failure to react quickly
enough to changing market
conditions, could have * Detailed contingency plans.
an adverse financial
impact on the Group.
* Monthly operational meetings which rigorously review
progress of all projects.
* ERP steering committee meetings and post go-live
audits to review progress on implementation plans.
Changes during As outlined in the Operational review on page 28 each
2017 division has robust systems and procedures to manage
and monitor business critical projects. In addition,
our ERP investment programme continued to be delivered
on schedule and on budget. While the risk of failed ERP
implementations remains pertinent due to more of our
operations introducing new systems, the risk is mitigated
by greater experience from prior implementation, proficient
system implementation teams and a proven control environment.
There have been no major post-implementation ERP issues
in the year and this has contributed to a net reduction
in the risk for the Group.
Quality issues Developing innovative
leading to and technically advanced * Adherence to Group-wide standard for Advanced Product
product failure, products is at the heart Quality Planning process (APQP).
recall, warranty of what we do. The quality
issues, injury, and safety of our products
damage or disruption is of the highest importance * Weekly and monthly reporting on APQP process to
to customers' and failure to deliver identify improvements in the early phases of the
business the quality required development process.
would result in negative
financial and reputational
damage. * Continued focus on quality management systems and
audits.
* Testing of finished product and customer sign-off on
the most critical products.
* Targeted Lean events to improve quality, including
implementation of Obeya reviews for projects work.
* Upgrade of talent with a focus on both quality and
product development excellence.
Changes during During the year our operational performance continued
2017 to improve. Details of key developments are detailed
on page 22. New Product Development momentum increased
during the year and further details are included on page
24. Despite increased investment and a significant number
of new product launches the level of risk has remained
the same year-on-year due to improved processes and controls
and proven success in this New Product Development area.
Failure to An integral part of the
integrate acquisitions Group's strategy is to * Annual Strategic review process to identify potential
successfully make value enhancing target acquisitions that align with the Group
and deliver acquisitions that have Strategy
the required the potential to broaden
synergies our addressable markets,
leverage our position * Central M&A function, suitably resourced, working
in existing attractive with divisions to identify hard and soft synergies
end markets. Failure within targeted acquisition opportunities.
to deliver the
post-acquisition
strategy would reduce * Formalised acquisition approval, due diligence and
the value of acquired post-acquisition integration processes.
businesses.
* Documented process and toolkit to monitor and
effectively manage 100 days post-acquisition
integration.
Changes during Our post acquisition integration process, which deploys
2017 a mix of divisional and Group resources, ensures that
the right people across all disciplines are available
to successfully project manage acquisition integration.
Following a review of our M&A resource, we strengthened
certain functions and areas. These resources are in place
and already being deployed to support the integration
of Bimba Manufacturing.
Failure to The Group has an
comply with established * Commitment to good governance practices as embodied
legislation framework which instigates in the IMI Way.
or a breach the highest ethical
of our own standards
high standards and regulatory compliance * Continued enhancement of the internal controls
of ethical across our business. declaration process and continued, rigorous audits by
behaviour As we expand our operations our Group Assurance team.
it is important that
we maintain these
standards. * Policies, manuals, guidelines and standard operating
Legislative requirements procedures are available to all employees under the
around tax, antibribery, legal, compliance and financial sections of the IMI
fraud and competition global intranet.
law require rigorous
monitoring and training
to avoid financial and * Group, division and local resources dedicated to
reputational damage. compliance.
* Employee training focused on how to apply the IMI Way
in everyday situations and key risk areas such as
competition law, fraud and antibribery and
corruption.
* Confidential IMI hotline to report concerns.
* Divisional risk assessed compliance plans.
* Third party agent due diligence and approval
procedures and termination of non-compliant agents.
* Extensive control framework for dealings with higher
risk territories, including formal training for
relevant employees.
Changes during The challenging market and regulatory environment demands
2017 the very highest standards of conduct and further details
of the processes and procedures we operate to help ensure
this are detailed on page 36. We have stringent procedures
and processes that allow us to operate in high risk territories.
Since the lifting of non-US Iranian sanctions in 2016,
we have significantly enhanced our compliance procedures
within IMI Critical Engineering to ringfence our business
development activities in Iran to ensure no breach of
trade sanctions. Despite the more challenging territories,
we believe the enhancements made to our compliance framework
are sufficient to mitigate this increased risk.
Failure to The Group has a significant
manage the number of contracts with * Monitoring of risks and development of contingency
supply chain a broad base of suppliers. plans to mitigate the impact of a supplier failure or
Failure to meet customers' increased prices.
requirements in respect
of quality or delivery,
could have a material * Preferred supplier lists for all major materials and
impact on the Group's components in each of the divisions.
results.
* Escalation process and regular review meetings with
key suppliers.
* Adequate safety stock and/or dual supply for critical
components.
Changes during Following the initial introduction in 2016 of a supply
2017 scorecard, preferred supplier lists, a supplier risk
assessment selection tool and commodity experts, we have
focused on embedding these processes within our businesses.
During the year we have implemented procedures to ensure
compliance with the Modern Slavery Act including training
for over 300 procurement employees to spot, monitor and
deal with any concerns relating to forced labour in our
supply chain. We have a zero-risk appetite to engage
with suppliers who are not aligned with our own code
of conduct and strong ethical standards. Each of our
three divisions assesses supplier code of conduct risks
and audits any high-risk suppliers for all aspects of
supply chain risk. As such, we believe our risk profile
remained unchanged in 2017.
Unauthorised Unapproved access to
access to our IT systems could result * IT Security Improvement programme underway across the
IT systems in loss of intellectual Group.
property, fraudulent
activity, theft and
business * IT security steering group comprising representatives
interruption. from all divisions with corporate sponsorship and
oversight.
* Regular communication with employees to raise
awareness of cyber security.
* Disaster recovery plans instigated on all critical IT
assets.
* 24/7 monitoring from security operations centre.
Changes during Recognising the increased
2017 threat to both our IT systems
and data, we have
strengthened our Group-wide
Security
Improvement programme. Phase
1 of that programme was
completed in September and
included deployment of
security
software to all laptops and
factory control devices
at 147 locations in 44
countries together with 24/7
monitoring by our dedicated
Security Operations Centre.
Phase 2 of the programme is
well underway to deploy
robust server protection. In
addition, we have also
strengthened the data back-up
and re-installation testing
procedures at our business
units. We continue to
communicate
regularly with all our
employees to raise awareness
of cyber risks and mitigating
procedures and behaviours.
Increasingly Increased volatility
competitive and slowdown in major * Competitor tear-down and Value Engineering
markets leading economies could result procedures.
to pricing in increased competition
pressures or leading to loss of
loss of customers customers * Review of site capacity as part of the Lean
and/ or pricing pressures benchmarking to better utilise facilities and improve
leading to lost sales productivity.
and reduced profits.
* Standard costings to ensure thorough understanding of
product cost.
* Lean implementation to increase operational
performance, quality delivery and service standards.
* Customer feedback surveys on performance and actions
tracked to improve performance.
Changes during Improvements in operational capabilities, routine tear-down
2017 testing and competitive benchmarking of competitor products
continue to underpin New Product Development across all
our divisions. Value Engineering processes enabled IMI
Critical Engineering to win a number of new orders, further
details of which are provided on page 26. 2017 has also
seen greater volatility in input costs, particularly
around commodities. Internal reporting has been adapted
to track and ensure these cost increases are managed
appropriately.
New product The Group's strategy
development for sustainable long-term * Five-year technology and product roadmaps included in
growth will be achieved divisional strategies.
in part by delivering
a pipeline of innovative
new products. Failure * Continued investment in research and development to
to deliver market leading ensure we target the most profitable opportunities.
products will impact
our ability to grow.
* Centres of design and technological excellence
established with dedicated teams to monitor progress.
* Detailed project plans to track new product
introduction actions on both a weekly and monthly
basis.
* Tracking of key performance metrics including sales
from new products and research and development spend
against sales.
Changes during New product development is an integral component of the
2017 five-year strategic planning cycle and establishes commercial
priorities and development roadmaps for all the Group's
principal markets. Our end to end Advanced Product Quality
Planning (APQP) and New Product Development processes
cover design, prototyping, testing, costing and launch
to market and has successfully delivered competitively
priced new products to market. Further information about
our New Product Development activities are detailed on
page 24.
Enquiries to:
James Segal Corporate General Counsel Tel: 0121 717 3700
John Dean Investor Relations Tel: 0121 717 3700
End.
This information is provided by RNS
The company news service from the London Stock Exchange
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