Galliford Try PLC Annual Financial Report (4987N)

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RNS Number : 4987N

Galliford Try PLC

26 October 2016

GALLIFORD TRY PLC

PUBLICATION OF ANNUAL REPORT AND FINANCIAL STATEMENTS 2016 & NOTICE OF 2016 ANNUAL GENERAL MEETING

Galliford Try plc has today, in accordance with LR 9.6.1 R of the Listing Rules, submitted to the Financial Conduct Authority's National Storage Mechanism copies of the following:

   --      The Annual Report and Financial Statements 2016 
   --      Notice of 2016 Annual General Meeting 
   --      Form of Proxy for the 2016 Annual General Meeting 

The documents will shortly be available for inspection at www.morningstar.co.uk/uk/NSM.

The Annual Report and Financial Statements and Notice of Annual General Meeting are also available on the Galliford Try plc website at www.gallifordtry.co.uk/investors.

A condensed set of the Group's financial statements and information on important events that have occurred during the financial year and their impact on the financial statements were included in Galliford Try plc's Final Results Announcement on 14 September 2016. That information together with the information set out below which is extracted from the Annual Report and Financial Statements 2016 constitute the material required by DTR 6.3.5 of the Disclosure Guidance and Transparency Rules which is required to be communicated to the media in full unedited text through a Regulatory Information Service. This announcement is not a substitute for reading the full Annual Report and Financial Statements 2016. Page and note references in the text below refer to page numbers in the Annual Report and Financial Statements 2016. To view the results announcement, slides of the results presentation and the results webcast please visit www.gallifordtry.co.uk/investors.

Principal risks

Identifying, evaluating and managing our principal risks and uncertainties is integral to the way we do business and to achieving our strategy.

Roles and responsibilities

The Board has overall responsibility for the Group's systems of risk management and internal control, which are subject to ongoing monitoring processes alongside a formal and robust annual review. It is also responsible for determining the overall level of risk which it is willing to accept in pursuing the Group's strategy. The Board has delegated implementation of risk management and internal control, together with their day-to-day operation, to the Group's executive management. The process is overseen by the Risk Committee, which is chaired by the Group Finance Director and managed on a day-to-day basis by the Director of Risk and Internal Audit. The Risk Committee is also attended by the Chairman. Although they are not absolute assurance against the risk of material misstatement or loss, the Group's systems of risk management and internal control are designed to identify, manage, mitigate, monitor and report on risks to which the Group is exposed.

Risk identification, assessment and mitigation

We develop and maintain risk registers at business unit, divisional and Group level, which identify key operational, financial and strategic risks applicable to that level within the organisation, and which are assessed and consolidated into a Group-wide register using a standardised methodology. The methodology requires each identified risk to be assessed and measured using a risk matrix which quantifies the likelihood and impact of each risk (the inherent risk), the effect of the mitigating actions (to determine the residual risk) and the desirable risk profile (the target risk), as aligned to the Group's risk appetite. The methodology evaluates the impact of each risk on the Group's profitability and reputation.

Risk management, risk reporting, internal controls and internal audit

The material components of the Group's established framework of internal controls comprise the following:

> organisational structure: each business has its own management board and each business unit is led by a managing director and management team;

> contractual review and commitments: the Group has clearly defined policies and procedures for entering into contractual commitments which apply across its business units and operations and are enforced through the Group's legal authorities matrix;

> investment in land and development: land expenditure approval is subject to clearly defined policies and procedures, with significant investments approved at Executive and main Board levels under Group policies and procedures;

> operational activity: there are established frameworks to manage and control all site operations including health, safety and environmental procedures, regular performance monitoring, quality and external accountability to stakeholders;

> financial planning framework: the Group reviews and refines its business plan on an annual basis, following specific Board meetings held to consider strategy. A detailed annual budget is prepared for each financial year which is approved by the Board;

> operational and financial reporting: we continue to improve the Group's reporting and financial systems as a result of implementing both Oracle and Hyperion systems. An exacting profit and cash reporting and forecasting regime is in place across the Group. As well as the emphasis placed on cash flow, income and balance sheet reporting, health, safety and environmental matters are prioritised within monthly operational reports;

> Code of Conduct: the Group requires its employees to operate ethically and with demonstrable integrity. Group standards are set out in a Code of Conduct issued to all employees, and supported by specific training modules in key areas;

> pension plan administration: the administration of the Group's fully closed final salary and ongoing defined contribution pension plans is outsourced to professional service providers. Each of the final salary schemes has an independent scheme secretary and a proportion of independent trustees to provide additional layers of external scrutiny; and

> assurance provided by non-audit functions: a number of other Group functions provide assurance in areas including, but not limited to, health, safety and environment; legal contract review and compliance; and construction industry regulation.

The Group's governance reporting structure shown on page 57 clarifies the effective Group, business and operational board structures upon which the delegated authorities matrices and corporate and finance manuals are overlaid.

The Risk Committee and the Board review the risk registers and associated mitigating actions on a regular basis. For example, during the last year the ongoing review included consideration of the impact of possible outcomes of June's EU referendum and the Group's exposure to the London market. In addition to this process, which has been in place throughout the past year, we undertake an annual review of our risk management processes in the context of market developments, projects secured and Group strategy to ensure that they remain up-to-date and relevant. This also encompasses a review of the internal controls framework, together with the findings of the internal audit function over the past year, which may indicate weaknesses that have had, could have had, or may have in the future, a material impact on results, and any remedial actions taken. Based on these assessments, the Board is satisfied with the effectiveness of the Group's systems of risk management and internal control.

Viability statement

In accordance with provision C.2.2 of the UK Corporate Governance Code, the Board has assessed the prospects of the Group over a period longer than the 12 months as required under provision C.1.3 of the Code in relation to the adoption of the going concern basis. The Board conducted this review for a period of three years in line with its typical business planning and risk management review period.

The Group's business plan includes information in relation to the Group's revenues, profits, cash flows, dividends, net debt, and other key financial and non-financial metrics. The plan considers the potential impact of the principal risks to the business as described below and overleaf, and the cyclical nature of the markets in which the Group operates, and incorporates an appropriate level of flexibility to provide against these risks. This is achieved through the preparation of sensitivity analyses on a range of scenarios including variations in revenue, house prices, sales rates, build costs, cash generation and access to financing.

Based on the results of this analysis, the Board has a reasonable expectation that the Group will be able to continue in operation and meet its liabilities as they fall due over the three-year period of its assessment.

Risk heat map - effects of mitigation on inherent risks and residual risks

The heat map shows the principal risks the Group faces by impact and likelihood, before and after mitigating actions are taken into account, illustrating the effects of the Group's risk management process in mitigating the identified risks.

To view the Risk Heat Map please see page 19 of the Annual Report and Financial Statement 2016, which can be found at:

http://www.gallifordtry.co.uk//media/Files/G/GallifordTry/reports/2016/ara-2016.pdf

Principal risks continued

Principal risks

The directors have carried out a robust assessment of the principal risks facing the Group, including those that would threaten its business model, future performance, solvency or liquidity. Our consideration of the key risks and uncertainties relating to the Group's operations, along with their potential impact and the mitigations in place, is set out below and on the previous page. There may be other risks and uncertainties besides those listed below which may also adversely affect the Group and its performance. More detail can be found in the Audit Committee Report on pages 58 and 59.

 
Category          Description of inherent risk                Inherent      Mitigation 
                                                               risk trend 
                                                               in the year 
----------------  ------------------------------------------  ------------  -------------------------------------- 
a. Economic       The biggest risk is the macro-economic          ^         We manage the impact of macro-economic 
                   environment and the possibility                           risks, including by building 
                   of an economic downturn. The result                       a strong order book and maintaining 
                   of the recent EU referendum has                           an appropriately sized landbank. 
                   the potential to distort some of                          We have been doing that successfully 
                   our markets. While this is certainly                      and had a Construction order 
                   not an inevitable outcome, we must                        book of GBP3.5 billion and 
                   be mindful of the potential risks                         sales carried forward position 
                   and plan for the Group's future                           in Linden of GBP380 million 
                   accordingly. The Construction and                         at the year end. We monitor 
                   Partnerships businesses are very                          closely political and economic 
                   well placed to deal with any uncertainty                  developments: we have modelled 
                   due to the nature of their businesses                     a range of macro-economic scenarios 
                   and their late cycle and hybrid                           and planned measures which 
                   nature respectively. Linden Homes,                        can be implemented should the 
                   while more exposed to a potential                         macro-economic environment 
                   slowdown and changes in consumer                          improve or deteriorate as against 
                   confidence, has a great brand,                            our internal models. 
                   and is solidly positioned, with                           We also regularly monitor actual 
                   an appropriate landbank, good locations                   supply chain costs against 
                   and well-designed homes.                                  costs assumed at tender, with 
                   Improvement in the construction                           regular reforecasting of the 
                   market increases the workload in                          likely effect on margin, and 
                   our supply chain, enabling it to                          with realistic increased supply 
                   seek increased prices which could                         chain costs fed back into tenders 
                   impact our margins. House price                           going forward. We also regularly 
                   inflation can mitigate this effect                        review fixed price assumptions 
                   but the effect can be amplified                           in bids. Land purchases at 
                   by a house price fall. The input                          appropriate margins are reviewed 
                   costs to our business can also                            in the context of three-year 
                   be affected by fluctuations in                            market forecasts, and we monitor 
                   foreign exchange rates.                                   sales rates on an ongoing basis. 
----------------  ------------------------------------------  ------------  -------------------------------------- 
b. Government     A reduction in Government spending              < >       The Group regularly engages 
                   on infrastructure projects or affordable                  with Government and the Homes 
                   housing development, including                            & Communities Agency (HCA), 
                   schemes such as Help to Buy, would                        both directly and via our membership 
                   directly affect our business. Other                       of industry bodies. Prudent 
                   initiatives relating to project                           pricing models, increased hurdle 
                   bank accounts or payment terms                            rates and other contingencies 
                   may impact the cost of doing business.                    are built into our land appraisal 
                   Government may also impose future                         process, including removal 
                   taxes or levies that are not incorporated                 of any Government support. 
                   into our plans.                                           Support for Help to Buy appears 
                                                                             to be in place until 2020. 
                                                                             The Group monitors on an ongoing 
                                                                             basis economic and political 
                                                                             conditions and developments; 
                                                                             and it plans for different 
                                                                             economic scenarios. 
----------------  ------------------------------------------  ------------  -------------------------------------- 
c. Health         A catastrophic incident with fatalities         ^         We have operational controls 
 and Safety        and/or significant injuries can,                          in place, including a H&S site 
 (H&S)             in addition to its impact on victims                      risk assessment for every site. 
                   and corporate reputation, lead                            We have processes in place 
                   to fines or prosecutions for individual                   which allow us to respond promptly 
                   members of staff or directors.                            and appropriately to incidents. 
                   A high cumulative level of H&S                            During the year, we implemented 
                   prosecutions would reduce our ability                     the 'Golden Rules', a new H&S 
                   to win work.                                              database, and reinvigorated 
                                                                             our award-winning 'Challenging 
                                                                             Beliefs, Affecting Behaviour' 
                                                                             safety programme. 
----------------  ------------------------------------------  ------------  -------------------------------------- 
d. Over-reliance  Direct or indirect over-reliance                          We carefully monitor and maintain 
                   on a single customer or vendor,                           relationships at every level 
                   such as the HCA in Housebuilding,                         of the organisation up to Executive 
                   may leave us exposed, especially                          Board level. Where customers 
                   if there is a large degree of regulation                  or suppliers have regulated 
                   surrounding this customer or vendor.                      contractual commitments, we 
                                                                             undertake annual (and, as necessary, 
                                                                             independent) audits, to ensure 
                                                                             we are meeting our requirements. 
----------------  ------------------------------------------  ------------  -------------------------------------- 
 
 
Category             Description of inherent risk                 Inherent      Mitigation 
                                                                   risk trend 
                                                                   in the year 
-------------------  -------------------------------------------  ------------  ------------------------------------ 
e. Legal             Legal and regulatory failure, for                < >       The Group has comprehensive 
 and regulatory       example involvement in blacklisting,                       policies and guidance in place 
 compliance           cover pricing, bribery or other                            at every level, including the 
                      fraudulent activity, or non-compliance                     recently reinvigorated Code 
                      with law (including for example                            of Conduct, mandatory e-learning 
                      the Bribery Act, Fraud Act, Competition                    for all employees, regular 
                      Act, Money Laundering Regulations,                         Board legal updates and briefings, 

                      and Proceeds of Crime Act) could                           six-monthly compliance declarations 
                      lead to disbarment from bidding                            and conflicts of interest registers 
                      for certain public or regulated                            and authorisations. In addition, 
                      sector work, fines, jail, and reputational                 an anonymous and independent 
                      damage.                                                    whistleblowing helpline is 
                                                                                 available to all staff, with 
                                                                                 strict policies to ensure anonymity 
                                                                                 and regular reporting of helpline 
                                                                                 use provided to the Board. 
-------------------  -------------------------------------------  ------------  ------------------------------------ 
f. Land acquisition  If the assumptions used in the                   < >       There are comprehensive land 
                      land acquisition process are wrong,                        acquisition policies and procedures 
                      subsequent financial results may                           in place. The Group monitors 
                      be affected                                                on an ongoing basis economic 
                                                                                 and political conditions and 
                                                                                 developments; and it plans 
                                                                                 for different economic scenarios. 
-------------------  -------------------------------------------  ------------  ------------------------------------ 
g. People            The ability to attract, develop,                           The Group has an established 
 and supply           retain and build relationships                             HR strategy based on best practice, 
 chain                with diverse and high-quality employees                    Investors in People principles 
                      and supply chain impacts every                             and relevant legislation which, 
                      level of the Group, from developing                        among other things, includes 
                      and building our products to succession                    the regular review of remuneration 
                      planning to the Board.                                     and benefits packages to ensure 
                                                                                 we remain competitive. Our 
                                                                                 succession planning and talent 
                                                                                 management processes enable 
                                                                                 continuity and identify future 
                                                                                 leaders. 
                                                                                 The Group aims to develop long-term 
                                                                                 relationships with subcontractors 
                                                                                 to ensure we are a preferred 
                                                                                 customer in the supply of people 
                                                                                 and skills, as well as materials. 
                                                                                 Key initiatives this year include 
                                                                                 rolling out the 'Advantage 
                                                                                 through Alignment' initiative 
                                                                                 throughout our Construction 
                                                                                 business supply chain. The 
                                                                                 Group monitors on an ongoing 
                                                                                 basis economic and political 
                                                                                 conditions and developments; 
                                                                                 and it plans for different 
                                                                                 economic scenarios. 
-------------------  -------------------------------------------  ------------  ------------------------------------ 
h. Business          The stability, performance and                   < >       Our IT governance structure 
 management           successful operation of current                            prioritises resources on the 
 systems              and legacy third party business                            most critical and added value 
                      management systems, such as our                            improvements. Specific improvement 
                      Oracle finance system and electronic                       forums, for example the Procurement 
                      document management systems, are                           Improvement Group, further 
                      critical to the successful operation                       refine and optimise core processes. 
                      of the business, both in Group                             Relationships with third parties 
                      locations and on-site project offices                      are given the highest level 
                      and sales outlets.                                         of management attention, with 
                                                                                 contingency solutions reviewed 
                                                                                 as appropriate. 
-------------------  -------------------------------------------  ------------  ------------------------------------ 
i. Business          Loss of our Shared Service Centre                < >       Disaster recovery plans have 
 continuity           or IT infrastructure, especially                           remained in place throughout 
                      our financial system, including                            the year, and are tested on 
                      a natural disaster or malicious                            a regular basis, including 
                      attack, may affect our ability                             penetration tests in respect 
                      to carry on day-to-day business.                           of cybercrime. 
-------------------  -------------------------------------------  ------------  ------------------------------------ 
 

Statement of directors' responsibilities

The directors are responsible for preparing the Annual Report, the Directors' Remuneration Report and financial statements in accordance with applicable law and regulations.

Company law requires the directors to prepare financial statements for each financial year. Under company law the directors have prepared the Group and Parent Company financial statements in accordance with International Financial Reporting Standards (IFRS) as adopted by the European Union. Under company law, the directors must not approve the financial statements, unless they are satisfied that they give a true and fair view of the state of affairs of the Group and the Company and of the profit or loss of the Group for that period.

In preparing those financial statements, the directors are required to:

> select suitable accounting policies and then apply them consistently;

> make judgments and accounting estimates that are reasonable and prudent;

> state whether applicable IFRSs as adopted by the EU have been followed, subject to any material departures disclosed and explained in the financial statements; and

> prepare the financial statements on the going concern basis, unless it is inappropriate to presume that the Company will continue in business.

The directors are responsible for keeping adequate accounting records that are sufficient to show and explain the Company's transactions and disclose with reasonable accuracy at any time the financial position of the Company and the Group and enable them to ensure that the financial statements and the Directors' Remuneration Report comply with the Companies Act 2006 and, as regards the Group financial statements, Article 4 of the IAS Regulation. They are also responsible for safeguarding the assets of the Company and the Group and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities.

The directors are responsible for the maintenance and integrity of the Company's website. Legislation in the UK governing the preparation and dissemination of financial statements may differ from legislation in other jurisdictions.

Each of the directors whose names and functions are listed on pages 50 and 51, confirms that to the best of their knowledge:

> the Group financial statements, which have been prepared in accordance with IFRS as adopted by the EU, give a true and fair view of the assets, liabilities, financial position and profit of the Group; and

> the Strategic Report contained in pages 1 to 49 includes 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.

For further enquiries:

 
Galliford Try            Kevin Corbett, Company 
 plc                      Secretary                           01895 855001 
 
 Clara Melia, Investor 
  Relations                                                  07748 171 236 
 
Tulchan Communications   James Macey White                   0207 353 4200 
 Martin Pengelley 
 Matt Low 
 

Notes to Editors

Galliford Try plc is a leading UK housebuilding and construction group. It is listed on the London Stock Exchange and a member of the FTSE 250. Housebuilding - through our Linden Homes and Galliford Try Partnerships businesses - sells distinctive homes to the public and affordable homes to housing associations and local authority providers. The construction business carries out building and infrastructure work across the UK with clients ranging from major Government departments through to regulated utilities and private sector companies. At the end of the last financial year to 30 June 2016, the Group generated revenue of GBP2.5 billion.

This information is provided by RNS

The company news service from the London Stock Exchange

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October 26, 2016 07:00 ET (11:00 GMT)