Galliford Try PLC Annual Financial Report (8042S)

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RNS Number : 8042S

Galliford Try PLC

05 October 2017

GALLIFORD TRY PLC

PUBLICATION OF ANNUAL REPORT AND FINANCIAL STATEMENTS 2017 AND NOTICE OF 2017 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 2017 
   --      Notice of 2017 Annual General Meeting 
   --      Form of Proxy for the 2017 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/reports-and-presentations/reports/2017.

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 13 September 2017. That information together with the information set out below which is extracted from the Annual Report and Financial Statements 2017 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 2017. Page and note references in the text below refer to page numbers in the Annual Report and Financial Statements 2017. 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 risks. The way in which we manage our principal risks and uncertainties is integral to the way we do business and to achieving our strategy of sustainable growth. The Group's approach to risk management has been enhanced during the year.

Approach to risk management

Risk is inherent in our operations and the decisions that we make in pursuit of our strategy. The Board has overall responsibility for determining both the nature and extent of the principal risks that the Group is willing to take and the Group's systems of risk management and internal control. In addition to the ongoing monitoring processes that the Board has in place, it has undertaken a formal and robust review of the Group's risk management and internal control systems during the year. The Board has also 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 on pages 20 and 21. There may be other risks and uncertainties besides those listed which may also adversely affect the Group and its performance. More detail can be found in the Audit Committee Report on pages 53 and 54.

The Audit Committee is responsible for keeping under review the adequacy and effectiveness of the Group's internal controls systems and for reviewing and approving statements included in the Annual Report concerning internal controls, risk management and the viability statement. The Board's assessment of the viability of the Group is set out on page 19 opposite.

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.

Operational responsibilities

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 Executive Risk Committee, which has been chaired by the General Counsel and Company Secretary since May 2017, and is managed on a day-to-day basis by the Director of Risk and Internal Audit. During the year the Executive Risk Committee was restructured and refreshed with additional processes introduced to monitor and manage the Group's risks.

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 appetite

Our risk management processes evaluate risk and initiate actions, where necessary, to bring identified risks down to an acceptable level. Our risk appetite is described as the total residual risk defined on the Group risk register.

Risk management, risk reporting, internal controls and internal audit

The material components of the Group's established framework of risk management and 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 Board and 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 we optimise both of the 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 high-level governance reporting structure shown on page 49 clarifies the effective Board structures upon which the delegated authorities matrices and corporate and finance manuals are overlaid.

The Executive Risk Committee, Executive Board and plc Board regularly review the risk registers and associated mitigating actions. During the last year the ongoing review included the impact of the EU referendum, the general election result and major contract pricing. In addition to this process 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 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 overleaf, and the cyclical nature of the markets in which the Group operates, and incorporates an appropriate level of flexibility to mitigate 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

The heat map shows the movement of the principal risks mitigating actions, illustrating the effects of the Group's risk management process.

Risk management governance structure

The Group's risk management governance structure, as set out above, highlights the way in which risks are identified, reported and managed within the framework set by the Board. The Risk and Internal Audit function plays an integral role in identifying, reporting and managing risk throughout the governance structure.

To view the risk heat map and risk management governance structure, please see page 19 of the Annual Report and Financial Statement 2017, which can be found at: http://www.gallifordtry.co.uk/investors/reports-and-presentations/reports/2017

Principal risks

 
Category         Description of inherent           Mitigation 
                  risks 
---------------  --------------------------------  ------------------------------------------ 
Economic         The biggest risk is               We manage the impact of macro-economic 
                  the macro-economic environment    risks, for example by building 
                  and the possibility               a strong order book and maintaining 
                  of an economic downturn.          an appropriately-sized landbank. 
                  The ongoing uncertainty           We have been doing that successfully 
                  following last year's             and had order books in Construction 
                  EU referendum and this            and Partnerships & Regeneration 
                  year's general election           of GBP3.6 billion and GBP1.0 million 
                  has the potential to              respectively at the year end. The 
                  distort some of our               sales carried forward position 
                  markets. The Construction         in Linden Homes at the year end 
                  and Partnerships & Regeneration   was GBP373 million. We monitor 
                  businesses are well               closely political and economic 
                  placed to deal with               developments: we have modelled 
                  any uncertainty due               a range of macro-economic scenarios 
                  to the nature of their            and planned measures which can 
                  businesses. Linden Homes,         be implemented should the macro-economic 
                  while more exposed to             environment improve or deteriorate 
                  a potential slowdown              as against our internal models. 
                  and changes in consumer 
                  confidence, has a great 
                  brand and is 
                  solidly positioned, 
                  with an appropriate 
                  landbank, good locations 
                  and well-designed homes. 
---------------  --------------------------------  ------------------------------------------ 
Government       A reduction in government         The Group regularly engages with 
                  spending on infrastructure        government and the Homes and Communities 
                  projects or affordable            Agency (HCA), both directly and 
                  housing development,              via our membership of industry 
                  including schemes such            bodies. Prudent pricing models, 
                  as Help to Buy, would             increased hurdle rates and other 
                  directly affect our               contingencies are built into our 
                  business. Other initiatives       land appraisal process, including 
                  relating to project               removal of any government support. 
                  bank accounts or payment          Support for Help to Buy appears 
                  terms may impact the              to be in place until 2021. 
                  cost of doing business. 
---------------  --------------------------------  ------------------------------------------ 
Health and       A failure of routine              We have operational controls in 
 Safety (H&S)     H&S processes leading             place, including an H&S site risk 
                  to a catastrophic incident        assessment for every site. We have 
                  with fatalities and/or            processes in place which allow 
                  significant injuries              us to respond promptly and appropriately 
                  can, in addition to               to incidents. Both the 'Golden 
                  its impact on victims             Rules' and H&S database implemented 
                  and corporate reputation,         in 2015/16 and the award-winning 
                  lead to fines or prosecutions     'Challenging Beliefs, Affecting 
                  for individual members            Behaviour' safety programme help 
                  of staff or directors.            to reduce risk in this area. 
                  A high cumulative level 
                  of H&S prosecutions 
                  would reduce our ability 
                  to win work. 
---------------  --------------------------------  ------------------------------------------ 
Commercial       A failure to agree appropriate    We are carefully managing our existing 
                  commercial terms or               fixed-price contracts and closely 
                  to manage fixed-price             review bids for contracts of this 
                  contracts correctly               kind. We enhanced our risk management 
                  can result in reduced             procedures, bringing greater rigour 
                  profits or, in some               around contract selection. 
                  cases, losses on projects. 
---------------  --------------------------------  ------------------------------------------ 
Legal and        Legal and regulatory              The Group has comprehensive policies 
 regulatory       failure, for example              and guidance in place at every 
 compliance       involvement in bribery            level, including the Group's Code 
                  or other fraudulent               of Conduct, mandatory e-learning 
                  activity, or non-compliance       for all employees, regular legal 
                  with law (including               updates and briefings, six-monthly 
                  for example the Bribery           compliance declarations and conflicts 
                  Act, Fraud Act, Competition       of interest registers and authorisations. 
                  Act, Money Laundering             In addition, an anonymous and independent 
                  Regulations and Proceeds          whistleblowing helpline is available 
                  of Crime Act) could               to all staff. 
                  lead to disbarment from 
                  bidding for certain 
                  public or regulated 
                  sector work, fines, 
                  jail and reputational 
                  damage. 
---------------  --------------------------------  ------------------------------------------ 
Customer         Poor customer satisfaction        There are rigorous quality control 
 satisfaction     may have a negative               procedures in place in all three 
 and quality      impact on reputation              of our businesses, including The 
 control          affecting revenue and             Linden Way, which defines our approach 
                  profit through sales              at each stage of the housebuilding 
                  rates and increased               process. 
                  costs. 
---------------  --------------------------------  ------------------------------------------ 
People           The ability to attract,           The Group has an established HR 
                  develop, retain and               strategy based 
                  build relationships               on best practice, Investors in 
                  with diverse and high-quality     People principles and relevant 
                  employees and members             legislation which, among other 
                  of the supply chain               things, includes the regular review 
                  impacts every level               of remuneration and benefits packages 
                  of the Group, from developing     to ensure we remain competitive. 
                  and building our products         Our succession planning and talent 
                  to succession planning            management processes enable continuity 
                  for the Board and is              and identify future leaders. 
                  particularly important 
                  during a period of growth. 
---------------  --------------------------------  ------------------------------------------ 
Supply chain     A shortage of trades              The Group aims to develop long-term 
                  people can create resourcing      relationships with subcontractors 
                  issues and increase               to ensure we are a preferred customer 
                  the cost of the supply            in the supply of resources and 
                  chain.                            skills, as well as materials. The 
                                                    'Advantage through Alignment' initiative 
                                                    in our Construction business is 
                                                    working well. 
---------------  --------------------------------  ------------------------------------------ 
Business         Loss of our Shared Service        Disaster recovery plans have remained 
 continuity       Centre or IT infrastructure,      in place throughout the year, and 

                  especially our financial          are tested on a regular basis, 
                  system, including a               including penetration tests in 
                  natural disaster or               respect of cybercrime. 
                  malicious attack, may 
                  affect our ability to 
                  carry on day-to-day 
                  business. 
---------------  --------------------------------  ------------------------------------------ 
Ambitious        Ambitious growth of               Strong management teams are in 
 growth targets   a business in terms               place within each business to ensure 
                  of revenue and footprint          that growth plans are well managed. 
                  may increase the risk             In addition, the Executive Board 
                  of its existing business          and plc Board regularly monitor 
                  suffering from quality            the financial performance of each 
                  issues, failure to achieve        business. 
                  budgeted growth and 
                  failure of new offices, 
                  all impacting Group 
                  results. 
---------------  --------------------------------  ------------------------------------------ 
Forecasting      Given the nature of               Each business unit reviews its 
                  the three businesses,             cash forecast monthly and the Group 
                  cash forecasting is               prepares a detailed daily cash 
                  the result of subjective          book for the following eight-week 
                  estimates which carry             period, to highlight any risk of 
                  an intrinsic risk of              intra-month fluctuations. These 
                  error. Poor cash forecasting      forecasts are reviewed at business 
                  can impact business               unit, division and Group. 
                  planning, investments 
                  and reporting of financial 
                  information. 
---------------  --------------------------------  ------------------------------------------ 
 

Statement of directors' responsibilities

The directors are responsible for preparing the Annual Report and the 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 (EU). 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 and Company for that period.

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

   --      select suitable accounting policies and then apply them consistently; 
   --      make judgements 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 Group and Company will continue in business.

The directors are responsible for keeping adequate accounting records that are sufficient to show and explain the Group and Company's transactions and disclose with reasonable accuracy at any time the financial position of the Group and the Company 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 Group and the Company 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.

The directors consider that 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 and Company's performance, business model and strategy.

Each of the directors, whose names and functions are listed on pages 46 and 47, confirms that to the best of their knowledge:

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

-- the Group financial statements, which have been prepared in accordance with IFRSs 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 45 includes a fair review of the development and performance of the business and the position of the Group and Company, 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, regeneration and construction group. It is listed on the London Stock Exchange and a member of the FTSE 250. Housebuilding - through our Linden Homes business - develops private and affordable homes in prime locations. Galliford Try Partnerships - our regeneration business - delivers mixed-tenure solutions working with housing association, local authority and private sector partners. Operating as Galliford Try and Morrison Construction, our Construction business carries out building and infrastructure with clients in the public, private and regulated sectors. At the end of the last financial year to 30 June 2017, the Group generated revenue of GBP2.7 billion.

This information is provided by RNS

The company news service from the London Stock Exchange

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October 05, 2017 05:15 ET (09:15 GMT)