TIDMHILS

RNS Number : 0819W

Hill & Smith Hldgs PLC

21 April 2021

Hill & Smith Holdings PLC (the 'Company')

2020 Annual Report and Notice of 2021 Annual General Meeting ('AGM')

Hill & Smith Holdings PLC has posted, or otherwise notified as being available on its website www.hsholdings.com , the Notice of its 2021 AGM. The 2020 Annual Report was posted to shareholders, or otherwise

notified as being made available on its website  www.hsholdings.com   on 21 April 2021. 

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 2020 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 2020 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 2020 Annual Report

The information below, headed as Appendix A, B and C, and which is extracted from the 2020 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 10 March 2021 (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 2020 Annual Report. All page numbers and cross-references in the extracted information below refer to page numbers in the 2020 Annual Report.

Appendix A - Principal Risks and Uncertainties

 
  Economic 
 Risk: Reduction in Government spending plans 
 Trend                                         Description and potential impact      Mitigation 
  Slightly lower                               The Group generates the majority of   Our existing entity portfolio 
                                               its revenues from its operations      contains diverse products, 
  Link to strategy                             located in the UK and                 markets and territories and we 
   *    Portfolio management                   the USA and whilst it is possible     will 
                                               that Government spending plans will   continue with this approach. 
                                               be under increasing 
   *    Enhancing organic growth               scrutiny, it is likely that           Market and product development 
                                               infrastructure investment will        initiatives. 
                                               continue to be a key part of 
   *    Agile decision making                  national                              Co-operation between Group 
                                               spending plans, particularly in the   businesses, leveraging the 
                                               short to medium term.                 Group's size/ international 
                                                                                     footprint 
                                               In March 2020, the UK government      and exploiting synergies. 
                                               confirmed its commitment to the 
                                               next phase of road investment         Monitoring of UK businesses and 
                                               spend (RIS2) at GBP27.4bn. In the     the effects of Brexit. 
                                               US, there is optimism for a 
                                               Federal-funded road investment        Exposure to longer term 
                                               bill under the Biden                  infrastructure investment 
                                               administration. The Group is well     programmes. 
                                               placed to benefit from these 
                                               investments 
                                               and possible short term "shovel 
                                               ready" schemes to stimulate 
                                               economic growth, although a 
                                               reduction 
                                               in UK or US Government 
                                               infrastructure spending, could 
                                               reduce demand for our products and 
                                               services. 
                                              ------------------------------------  ---------------------------------- 
 Risk: Changes in global outlook and geopolitical environment 
 Trend                                         Description and potential impact      Mitigation 
  Slightly higher                              The Group operates in a range of      The Group has a diverse portfolio 
                                               end-user markets around the world     of businesses with exposure to a 
  Link to strategy                             and may be affected by                range of markets and geographies, 
   *    Portfolio management                   political, economic or regulatory     limiting exposure to any one 
                                               developments in any of these          country or market sector. 
                                               countries. 
   *    Enhancing organic growth                                                     Current and future financial 
                                               Material adverse changes in the       performance is continuously 
                                               political and economic environments   monitored, facilitating rapid 
   *    Agile decision making                  in the countries in which             response 
                                               we operate, have the potential to     to changes in market conditions. 
                                               put at risk our ability to execute 
                                               our strategy.                         The Group is closely monitoring 
                                                                                     on a business-by-business basis, 
                                               Whilst Brexit has not had a           the identified operational 
                                               material direct effect on the         and financial risks arising from 
                                               Group, it creates the potential       the UK's exit from the EU 
                                               for market disruption in the short 
                                               term. 
 
                                               The COVID-19 pandemic continues to 
                                               create uncertainty in the global 
                                               economic outlook. The 
                                               diverse portfolio of Group 
                                               businesses with exposure to a range 
                                               of markets and geographies, 
                                               continues to help mitigate this 
                                               exposure. 
                                              ------------------------------------  ---------------------------------- 
 Commercial & Financial 
 Risk: Increase in competitive pressure 
 Trend                                          Description and potential impact    Mitigation 
  No change                                     Increased volatility,               The holding of leading positions 
                                                uncertainty and slowdown in our     in niche markets of sustainable 
  Link to strategy                              markets could result in             infrastructure and transport 
   *    Operational Excellence                  increased prices                    safety with high barriers to 
                                                and the emergence of new            entry. 
                                                technologies, leading to a loss     In line with our entrepreneurial 
   *    Enhancing organic growth                of customers and/or pricing         model, our decisions are made 
                                                pressure                            close to our markets and our 
                                                and as a consequence a loss of      businesses are agile and 
   *    Agile decision making                   sales and reduced profits.          responsive to changes in their 
                                                                                    competitive landscape. 
                                                                                    Regular subsidiary Board meetings 
                                                                                    that review market and customer 
                                                                                    activity. 
                                                                                    Our subsidiary businesses aim to 
                                                                                    provide superior products and high 
                                                                                    service levels to customers, 
                                                                                    whilst aiming to ensure there is 
                                                                                    no dependency on any one 
                                                                                    particular customer. 
                                              ----------------------------------  ------------------------------------ 
 Risk: Product failure 
  Trend                                        Description and potential impact      Mitigation 
   No change                                   The Group operates in                 Products tested, approved and 
                                               infrastructure markets where it is    accredited by regulatory bodies. 
   Link to strategy                            critical that its products meet 
    *    Operational Excellence                customer                              Quality control protocols fully 
                                               and legislative requirements and      implemented and continuously 
                                               where the consequences of product     monitored. 
    *    Sustainability                        failure are potentially 
                                               serious.                              Contractual controls in place to 
                                                                                     minimise economic impacts. 
                                               Significant product failure arising 
                                               from component defects or warranty    Insurance cover maintained 
                                               issues may require                    globally with insurance partners. 
                                               remediation including the 
                                               replacement of defective components   Litigation supported/managed by 
                                               or complete products, resulting       external legal specialists. 
                                               in direct financial costs to the 
                                               Group and/or wider reputational       Thematic Internal Audit review 
                                               risk.                                 completed across the Group during 
                                                                                     2019 with recommendations 
                                                                                     implemented in 2019 and 2020. 
                                              ------------------------------------  ---------------------------------- 
 Risk: Contractual failure 
  Trend                                        Description and potential impact      Mitigation 
   No change                                   The Group delivers its commitments    Group material contract review 
                                               to its customers through a variety    process ensures specialist 
   Link to strategy                            of contractual arrangements           central oversight of key 
    *    Strong financial controls             of both a short and medium- term      contractual 
                                               nature.                               arrangements. 
 
    *    High cash conversion                  Weaknesses in the contract            Contracts training for key staff. 
                                               tendering process, inappropriate 
                                               pricing, misalignment of contract     Dedicated quantity surveyors and 
                                               terms, ineffective contract           contracts managers embedded in 
                                               management or failure to comply       subsidiary management structures 
                                               with contractual conditions could     to control projects. 
                                               result in loss of revenues, 
                                               pressure on operating margins and     Litigation supported/managed by 
                                               wider reputational damage to          external legal specialists. 
                                               the Group. 
                                                                                     Insurance cover maintained 
                                               The potential for credit default      globally with insurance partners. 
                                               risk due to the ongoing COVID-19 
                                               pandemic has been identified,         Trade credit insurance policies 
                                               although this has not yet             in place in the UK, France and 
                                               materialised. The Group continues     India which mitigate exposure. 
                                               to closely monitor the position. 
                                              ------------------------------------  ---------------------------------- 
 Operational 
 Risk: Supply chain failure 
 Trend                                         Description and potential impact      Mitigation 
  Slightly higher                              The Group's businesses depend on      Group procurement standards in 
                                               the availability and timely           place, including robust due 
  Link to strategy                             delivery of raw materials and         diligence of supply chain 
   *    Enhancing organic growth               purchased components, which could     partners 
                                               be affected by disruption in its      and requiring dual sourcing where 
                                               supply chain. Supply chain            available. 
   *    Agile decision making                  failures as a result of 
                                               performance, cost, quality and/or     Maintenance of relationships with 
                                               insolvency may have an adverse        key suppliers through regular 
                                               impact                                interaction and assessment 
                                               on the Group's production capacity    of performance/ financial status. 
                                               and lead to an inability to meet 
                                               customer requirements,                Oversight of material procurement 
                                               resulting in a reduction in           contracts ensuring robust 
                                               revenues, potential loss of market    contractual protections. 
                                               share and possible reputational 
                                               damage.                               Goods inwards and stock 
                                                                                     management processes in place to 
                                               During 2020 the supply of key raw     reduce the likelihood of defects 
                                               materials and components was not      in or shortage of raw materials. 
                                               impacted by the COVID-19 
                                               pandemic, helped in part by local     Contingency plans are in place 
                                               contingency planning around buffer    within the relevant businesses 
                                               stock levels and supplier             and throughout the supply chain 
                                               sourcing arrangements as first        to mitigate these risks, such as 
                                               developed in response to Brexit.      purchasing additional stock of 
                                                                                     key raw materials and securing 
                                               The Group is currently experiencing   additional supply chain capacity. 
                                               challenges relating to the global 
                                               increases in steel costs 
                                               and whilst we are managing 
                                               availability issues and are well 
                                               placed to pass price increases 
                                               to customers, we do recognise an 
                                               increase in the exposure from the 
                                               risk. 
                                              ------------------------------------  ---------------------------------- 
 Risk: IT systems failure 
 Trend                                         Description and potential impact      Mitigation 
  No change                                    The Group relies on the information   Business Continuity and Disaster 
                                               technology systems used in the        Recovery plans documented, tested 
  Link to strategy                             daily operations of its               and monitored by Group 
   *    Agile decision making                  subsidiaries.                         businesses. 
 
                                               A failure or impairment of those      The Group's Policy Manual 
   *    Operational excellence                 systems or any inability to           incorporates IT policies in 
                                               effectively implement new systems     respect of system back-up 
                                               could cause a loss of business        procedures 
   *    Strong financial controls              and/or damage to the reputation of    and hardware/software protection. 
                                               the Group, together with 
                                               significant remedial costs.           The Board maintains a watching 
                                                                                     brief on IT risks, particularly 
                                               Poor security controls and            cyber risk which is a focus 
                                               procedures could lead to our          area for improvement. 
                                               businesses being susceptible to 
                                               cyber-attack,                         Ongoing project for the 
                                               potentially resulting in              enhancement of IT security 
                                               significant IT failure and            controls and maturity across the 
                                               associated disruption.                Group. 
 
                                                                                     Separate IT systems within each 
                                                                                     subsidiary means that any illegal 
                                                                                     external activity is unlikely 
                                                                                     to jeopardise the Group as a 
                                                                                     whole. 
 
                                                                                     IT Director recruited to the 
                                                                                     Group in 2020, responsible for IT 
                                                                                     strategy and cyber security 
                                                                                     risk. 
 
                                                                                     Periodic guidance issued to 
                                                                                     subsidiaries on current and 
                                                                                     prevalent cyber-attack threats. 
                                              ------------------------------------  ---------------------------------- 
 Risk: Acquisition strategy failure 
 Trend                                         Description and potential impact      Mitigation 
  No change                                    The Group's growth strategies         Board approval required for Group 
                                               include the acquisition of            acquisitions, in line with the 
  Link to strategy                             businesses around the world that      Group Board's Schedule of 
   *    Targeted M&A                           complement or supplement its          Matters Reserved. 
                                               existing activities. Failure to 
                                               execute an effective acquisition      Due diligence protocols deployed 
   *    Portfolio Management                   and integration programme would       in relation to assessment of 
                                               have a significant impact on the      target businesses, including 
                                               Group's ability to generate           financial, commercial, legal and 
   *    Sustainability                         sustainable profitable growth for     others where appropriate. 
                                               shareholders. 
                                                                                     Contractual protections and 
                                                                                     assurances sought from sellers to 
                                                                                     mitigate subsequent 
                                                                                     identification 
                                                                                     of risks. 
 
                                                                                     Post-acquisition integration 
                                                                                     plans established for all 
                                                                                     material acquisitions with 
                                                                                     regular 
                                                                                     performance monitoring and 
                                                                                     reporting to the Board. 
                                              ------------------------------------  ---------------------------------- 
 Risk: Lack of investment in product development and innovation 
 Trend                                         Description and potential impact      Mitigation 
 No change                                     The Group operates in global          Entrepreneurial culture 
                                               infrastructure markets where          established through a 
 Link to strategy                              continuous innovation is integral     decentralised management 
  *    Enhancing organic growth                to the Group's product offering and   structure, ensuring 
                                               where a failure to innovate could     that Group businesses are agile 
                                               result in product obsolescence,       and responsive to changes in 
  *    Operational excellence and innovation   the entry of new competitors and/or   their competitive environments. 
                                               loss of market share. The             The Group actively 
                                               development of new products           encourages and supports research 
  *    Strong financial controls               and technologies carries risk         and development programmes at 
                                               including the failure to develop a    subsidiary level where knowledge 
                                               commercially viable offering          of the market and needs of our 
                                               within an acceptable timeframe.       customers is greatest. 
 
                                                                                     Executive Board approval of 
                                                                                     product development proposals 
                                                                                     within the Group's capital spend 
                                                                                     approval policies. 
 
                                                                                     Active Intellectual Property 
                                                                                     management, by individual 
                                                                                     business units overseen by Group. 
 
                                                                                     Dedicated quality compliance 
                                                                                     resources in place across Group 
                                                                                     businesses, ensuring 
                                                                                     responsiveness 
                                                                                     to regulator and/or customer 
                                                                                     approval requirements. 
 
                                                                                     Board monitoring of emerging 
                                                                                     risks alongside external 
                                                                                     specialist support, where both 
                                                                                     the risks 
                                                                                     identified and the potential 
                                                                                     opportunities arising are 
                                                                                     considered. 
                                              ------------------------------------  ---------------------------------- 
 Human Resources 
 Risk: Talent, development, diversity, recruitment and retention of key employees 
 Trend                                         Description and potential impact       Mitigation 
  Slightly higher                              The changing nature of the             Implementation of contractual 
                                               demographics from which we source      protections and retentions in 
  Link to strategy                             our employees                          employment contracts of senior 
   *    Management incentives aligned          and the ways in which they like to     management and other key 
                                               work can make it difficult to          employees. 
                                               attract and retain both skilled 
   *    Talent development                     and unskilled labour. We need to       Training and development of 
                                               ensure effective recruitment           employees, which includes a 
                                               channels and make the necessary        programme of IOD and ILM courses 
   *    Agile decision making                  investment to develop and retain       for 
                                               high-quality individuals in key        senior management and identified 
                                               positions to guarantee the             potential successors, and 
                                               long-term success of the business.     apprenticeship and other 
                                               We need to ensure the diversity of     vocational 
                                               our workforce reflects                 courses for specialist and 
                                               the communities in which we work.      technical roles. 
                                               Without talented employees we will 
                                               be unable to deliver                   Appropriate remuneration and 
                                               our strategic aims.                    benefits, together with bonus 
                                                                                      opportunities and incentive 
                                               During the year some of our            plans 
                                               subsidiaries have found it             offered to employees. 
                                               challenging to attract and retain 
                                               unskilled                              Recruitment process developed to 
                                               labour due to competitive labour       include competency requirements 
                                               local markets and hence a slight       and skills gap analysis. 
                                               increase in the risk has 
                                               been recognised. 
                                              ------------------------------------  ---------------------------------- 
 Legal & Regulatory 
 Risk: Prevention of harm or injury to people 
 Trend                                         Description and potential impact      Mitigation 
  No change                                    The Group operates a number of        Monthly health & safety reporting 
                                               manufacturing facilities around the   for all subsidiaries via online 
  Link to strategy                             world. A failure in the               tools. 
   *    Operational excellence                 Group's health & safety procedures 
                                               could lead to injury or to the        Regular audits of UK, US, Sweden 
                                               death of employees or third           and India including assessment of 
   *    Sustainability                         parties, with a consequential         our COVID secure arrangements. 
                                               impact on operations and the 
                                               increased risk of regulatory or       Local audits completed in France, 
   *    Agile decision making                  legal action being taken against      periodically overseen by Group. 
                                               the Group. Any such action could 
                                               result in both financial              Health & Safety Forums to monitor 
                                               damages and damage to reputation.     performance and share best 
                                                                                     practice. 
                                               During the year the Group has 
                                               followed all local guidelines to      Culture of zero tolerance in 
                                               ensure that our facilities            respect of health & safety 
                                               are COVID secure and our employees    violations promoted by the Board 
                                               are safe. Actions taken include       and 
                                               introducing enhanced cleaning         disseminated throughout Group 
                                               and hygiene procedures,               businesses. 
                                               implementing social distancing and 
                                               track and trace procedures,           External health & safety 
                                               provision                             accreditations and relationships 
                                               of face masks and taking all          maintained with regulatory 
                                               reasonable steps to help people       bodies. 
                                               work from home where appropriate 
                                               to do so. In addition, we are         Health & safety as a priority 
                                               mindful of the mental wellbeing of    area of focus for new 
                                               our employees during this             acquisitions. 
                                               difficult time and have offered 
                                               appropriate support and assistance.   Monitoring of LTI rates 
                                                                                     Any LTI event is followed up and 
                                                                                     investigated thoroughly and 
                                                                                     improvement recommendations are 
                                                                                     implemented to minimise any 
                                                                                     reoccurrence. 
 
                                                                                     Reduction of the Group's LTI 
                                                                                     rates is a key focus for 
                                                                                     Management and the Board in 2021. 
                                              ------------------------------------  ---------------------------------- 
 Risk: Violation of applicable laws and regulations 
 Trend                                         Description and potential impact      Mitigation 
  No change                                    The Group's global operations must    Group Code of Conduct sets out 
                                               comply with a range of national and   required approach for all staff. 
  Link to strategy                             international laws 
   *    Operational excellence                 and regulations including those       Staff training provided on 
                                               related to anti-bribery and           Anti-Bribery and Corruption and 
                                               corruption, human rights and          Competition Compliance. 
   *    Sustainability                         employment,                           Programme of audits undertaken on 
                                               GDPR, trade/export compliance and     a cyclical basis to review 
                                               competition/anti-trust.               subsidiary compliance with 
   *    Strong financial controls                                                    regulatory 
                                               A failure to comply with any          requirements, including for 
                                               applicable laws and regulations       example simulated 'dawn raids'. 
                                               could result in civil or criminal 
                                               liabilities and/or individual or      Software solutions implemented 
                                               corporate fines and could also        globally to ensure compliance 
                                               result in debarment from              with trade and export 
                                               Government-related                    legislation. 
                                               contracts, restrictions on ability 
                                               to trade or rejection by financial    Externally hosted whistleblowing 
                                               counterparties as well                hotline available to all 
                                               as reputational damage.               employees to allow 
                                                                                     them to raise concerns in 
                                               There is no significant concern       confidence or anonymously, if 
                                               regarding legislative changes post    preferred. 
                                               Brexit, however the Group 
                                               will continue to keep a watching      Modern Slavery compliance 
                                               brief in this area and seek           programme continued through 2020. 
                                               external advice if necessary. 
                                                                                     Toolkits issued to all UK 
                                                                                     subsidiaries to aid compliance 
                                                                                     with local GDPR. 
                                              ------------------------------------  ---------------------------------- 
 
 

Appendix B - Responsibility Statement of the Directors pursuant to Disclosure and Transparency Rule 4

The following statement is extracted from page 103 of the 2020 Annual Report and is repeated here for the purposes of compliance with DTR 6.3.5. This statement relates solely to the 2020 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 that 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 83 to 93, and in the related party details on page 178 (note 13) of the 2020 Annual Report.

Alex Henderson

Company Secretary

Hill & Smith Holdings PLC

Tel: +44 (0) 121 704 7430

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