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| Share Name | Share Symbol | Market | Type | Share ISIN | Share Description |
|---|---|---|---|---|---|
| Smiths Group Plc | LSE:SMIN | London | Ordinary Share | GB00B1WY2338 | ORD 37.5P |
| Price Change | % Change | Share Price | Bid Price | Offer Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
|---|---|---|---|---|---|---|---|---|---|---|
| -8.00 | -0.49% | 1,627.00 | 1,625.00 | 1,627.00 | 1,640.00 | 1,626.00 | 1,639.00 | 39,886 | 09:41:56 |
| Industry Sector | Turnover | Profit | EPS - Basic | PE Ratio | Market Cap |
|---|---|---|---|---|---|
| Srch,det,nav,guid,aero Sys | 3.04B | 231M | 0.6613 | 24.62 | 5.69B |
From Apr 2019 to Apr 2024
TIDMSMIN
RNS Number : 2146T
Smiths Group PLC
10 October 2017
10 OCTOBER 2017
SMITHS GROUP PLC
ANNUAL FINANCIAL REPORT 2017
LISTING RULE LR 9.6.3 R
Smiths Group plc (the 'Company') is submitting today copies of the documents listed below to the UK Listing Authority, in compliance with Listing Rule LR 9.6.1 R.
1. Annual Report 2017 (for the financial year ended 31 July 2017);
2. Notice of Annual General Meeting; and
3. Annual General Meeting Proxy Form.
The above-mentioned documents will be uploaded to the National Storage Mechanism website, in pdf file format, and will shortly be available for viewing by visiting http://www.morningstar.co.uk/uk/NSM.
Copies of the documents referred to above have been posted to some shareholders and made available online to the other shareholders today, in accordance with their respective elections for Company communications.
The Annual Report 2017 and the Notice of Annual General Meeting are now available online at the Company's website, www.smiths.com. Printed copies may be obtained by writing to The Company Secretary, Smiths Group plc, 4th Floor, 11-12 St James's Square, London SW1Y 4LB, UK or sending an e-mail request to secretary@smiths.com.
DISCLOSURE GUIDANCE & TRANSPARENCY RULE DTR 6.3.5(2)
A condensed set of the Company's consolidated financial statements and information on important events that occurred during the financial year ended 31 July 2017 and their impact on the financial statements were contained in the Final Results announcement issued by the Company, through the Regulated News Service of the London Stock Exchange, at 07:00 on 22 September 2017 (RNS No. 5010R) (the 'Results announcement').
Other than the information set out below (which is extracted from the Annual Report 2017), the regulated information in the Annual Report 2017 that is of a type that would be required to be disseminated in a half-yearly report has already been released in unedited full text via the Results announcement. Together, the regulated information set out below and the regulated information contained in the Results announcement constitute the material required by Disclosure Guidance & Transparency Rule DTR 6.3.5 to be communicated to the media in full unedited text through a Regulatory Information Service. Page and note references in the text extracts below refer to page numbers and to notes to the financial statements in the Annual Report 2017 (available online from www.smiths.com and www.morningstar.co.uk/uk/NSM). The statutory accounts of the Company for the financial year ended 31 July 2017 will be delivered to the Registrar of Companies in due course.
This announcement is not a substitute for reading the full Annual Report 2017.
An extract comprising the unedited full text on pages 62 to 67 in the Annual Report 2017 is set out below. Certain non-reproducible graphics contained in the Annual Report are not reproduced. The graphic version of pages 62 to 67 of the Report is attached as a pdf file.
http://www.rns-pdf.londonstockexchange.com/rns/2146T_-2017-10-10.pdf
PRINCIPAL RISKS AND UNCERTAINTIES
We maintain a register of principal risks and uncertainties covering the strategic, operational, financial and compliance risks faced by the Group. We rate them according to likelihood of occurrence, potential impact and the likely 'velocity' of each risk. This measure reflects the expected time we would have to react were a risk to materialise. The 'trend' metric reflects the net position of a risk-taking into consideration both external factors and internal risk mitigation activities, when compared to the same time last year. We consider our current and target exposure to each risk, which defines our risk appetite.
We updated our register of principal risks and uncertainties following our Executive Committee workshop held during FY2017 and made the following adjustments to the principal risks disclosed in the 2016 Annual Report:
-- 'Financial' risk has been removed. We consider the diversified nature of our global operations and the financial strength of the Group provide appropriate mitigation such that this risk does not require a standalone disclosure.
-- 'Pension Funding' risk has been removed. We consider the increased strength of the funding level of the Group's defined benefit pension arrangements and the actions agreed on 17 November 2015 and 1 March 2016 in order to address potential funding shortfalls in the Smiths Industries Pension Scheme and TI Group Pension Scheme.
While we continue to monitor and manage a wider range of risks, the table below summarises those we feel most likely to have the greatest impact on the business if they were to materialise and the key mitigating actions taken to address them.
Hot Features
Premium
Risk and Key mitigating factors
Potential
impact
Technology Developing differentiated
disruption new products and services * Our diversified technology portfolio serves a range
by existing is critical to our success. of sectors and geographies, mitigating our exposure
or future We may be unable to to any one sector or area
competitor maintain technological
differentiation or meet
customers' needs, and * We are actively repositioning the portfolio around
face more effective our most attractive markets, where we consider we can
or disruptive innovation sustainably hold a top three position based on
by a competitor. technology leadership
Potential impact
* Loss of market share and competitive advantage
* Increased and smarter investment in R&D (2017: 4.6%
of revenue, 2016: 4.0%), focused on our most
* Materially adverse effect on profitable growth attractive markets
* Erosion of our reputation as a leader in our markets * New Group-wide innovation framework - i3 - focused on
and ability to attract and retain talent building a culture of innovation. Focus areas include
process enhancements to improve innovation
effectiveness, horizon-scanning to develop long-range
* Increased speed of innovation in certain markets may technology roadmaps for each division and driving
lead to shorter product lifecycles, which would digitisation
increase the level of R&D spend needed to maintain
sales growth
* New central Innovation Fund to leverage our critical
mass and accelerate key areas - first projects
approved and underway
* New Head of Innovation and Group Digital Director
appointed in FY2017 to spearhead the agenda
* Aligned New Product Introduction (NPI) process rolled
out across divisions to accelerate time to market
People People are our only
truly sustainable source * Building a learning organisation is a key part of our
of competitive advantage, growth strategy, with a focus on culture, reward and
and competition for recognition, HR infrastructure, and learning and
key skills is intense, development
especially around science,
technology, engineering
and mathematics (STEM). * Talent and succession plan reviews are held at least
We may not be successful annually to balance internal management continuity
in attracting, retaining, with external recruitment
developing, engaging
and inspiring the right
people with the right * Remuneration packages are evaluated regularly against
skills to ensure organisational market trends
effectiveness and achieve
our growth ambitions.
Potential impact * The Chief Executive annually assesses the top
* The inability to attract key talent could lead to a leadership team and presents development and
loss of competitive advantage and materially affect succession plans to the Board
our growth prospects
* Annual performance management reviews are carried out
* In acquisitions, losing key personnel from the for the majority of employees, using best practice
newly-acquired business or making the wrong processes such as 360 degree feedback surveys
leadership appointments could significantly impact
performance and value
* A clearly defined people integration plan for
acquisitions ensures an effective approach to
appointments and organisation design
* Launched a new leadership development programme in
partnership with UCLA Anderson Executive Education in
FY2017
Wrong We are focusing the
acquisitions portfolio around the * Detailed due diligence and integration work is
and poor most attractive markets undertaken and reviewed in accordance with Group
integration where we can sustainably policy
achieve a top three
leadership position.
The success of our acquisition * A new Acquisition and Disposals Policy has been
strategy depends on developed for the entire transaction cycle
identifying suitable
targets, obtaining necessary
authorisations and financing, * Due diligence includes an assessment of the
and successfully integrating acquisition target's talent and competencies.
newly-acquired businesses.
Potential impact
* Newly-acquired products and solutions may deliver * Monthly reviews of the acquisition pipeline and a
less value, fewer synergies, or require more stage-gated M&A process ensure strong focus on and
investment than anticipated oversight of the pipeline
* The Group's return on capital employed may fall if * The Acquisitions & Divestments sub-Committee of the
acquisition hurdle rates are not met Board has authority to approve smaller acquisitions
and divestments, whereas larger transactions can only
be approval by the full Board
* The Group's financial performance may suffer from
goodwill or other acquisition-related impairment
charges * The Board reviews post-acquisition performance and
integration
* Insufficient allowance for potential claims arising
from indemnities and warranties given on a business
disposal may detrimentally affect our financial
position
* Changes to disposal provisions will affect the income
statement and settlement will utilise Group funds
Not operating We are repositioning
in the right the portfolio around * A diversified portfolio of businesses mitigates
markets our most attractive exposure to any one country, sector or customer
markets where we can
deliver above-market
growth on a sustainable * The Group's Government Relations function works to
basis. A significant inform policy and collaborate with colleagues across
proportion of the Group's the business to advise on developments
revenue comes from the
US and other mature
western markets, with * Some of our government-related businesses have a
a notable proportion services or consumables component, which can be more
coming from western resilient during an economic downturn, when
governments. Failure customers' capital expenditures on original equipment
to select the right may be more constrained
markets and geographies
could impact our strategic
progress and financial * Appointment of a Group President of Asia Pacific - a
performance. new role - to help accelerate our growth in the
Potential impact region
* Smiths Detection, Smiths Medical and Smiths
Interconnect frequently tender for government
contracts both directly and indirectly. Any
significant disruption in government budgets could
result in fewer contracts being awarded and lower
revenues for Smiths
* Our growth strategy places emphasis on expanding our
operations in higher-growth end markets and regions
that are currently underserved, including Asia, and
China in particular
Economic Global economic and
outlook financial market conditions * The Group has a diversified portfolio of businesses
and have stabilised after that mitigates exposure to any one country or sector
geopolitical the turmoil following
environment the 2008 financial crisis,
in large part due to * The divisions monitor their order flows and other
the various impacts leading indicators, where available, so that they may
of quantitative easing respond quickly to deteriorating trading conditions
and austerity measures.
However, there remains
continued uncertainty * The Group monitors the ongoing negotiations between
arising from a range the UK and the EU in order to assess the potential
of geopolitical and impact of Brexit and any transitional arrangements
economic issues across that may be agreed
the world. Smiths operates
in more than 50 countries
and is affected by global * Maintaining our competitiveness and continually
economic and political improving our product offering for our customers
conditions. The business ensures we remain resilient and well placed to take
is affected by government advantage of commercial opportunities
spending priorities,
in particular in the
US and UK, and the willingness
of governments to commit
substantial resources
to homeland security
and defence.
The impact of the UK's
decision to withdraw
from the EU (Brexit)
remains uncertain. Potential
effects of Brexit applicable
to many businesses include
economic and operational
uncertainty, volatility
of currency exchange,
regulatory changes and
the imposition of tariffs
on trade between the
UK and the Eurozone.
Global security concerns
continue to drive uncertainty.
These include the continuing
situation in Syria and
the Middle East, and
recent events in North
Korea.
The global oil price
continues to trade at
levels below the average
of the past few years,
which impacts the medium-term
capital expenditure
plans of a number of
our customers, predominantly
within the John Crane
division.
Interruption Timely, efficient supply
to of raw materials and * Supply Excellence is one of the six pillars of our
supply chain purchased components SES operating model, providing an increased focus on
- is critical to our ability efficient, resilient and cost-effective supply
manufacturing to deliver to our customers,
concentration and drive our growth.
Potential impact * Business continuity and disaster recovery plans are
* Our manufacturing continues to be exposed to the risk in place and tested for critical locations
of a number of external events which could have
significant adverse consequences. These include
natural catastrophes, disease pandemics and terrorist * We regularly evaluate our key sites for a range of
attacks. We are also affected by the social, economic risk factors using externally benchmarked assessments
,
regulatory and political conditions where we operate
* Business interruption and property damage insurance
is in place
* The concentration of manufacturing in lower-cost
countries, in particular in Mexico, increases the
length of the supply chain and means an adverse event
could have more significant consequences for our
ability to supply customers on time
Interruption We rely on sole source
to supply component suppliers * We identify sole-source supplier risks and dual
chain - to provide raw materials source where possible
sole source or purchased components
of supply for some of our products.
Any failure on their * The Procurement Leadership Team (PLT) continues to
part or unforeseen adverse identify and monitor high-risk sole-source suppliers
consequences in the and puts in place mitigation plans, including
region or market in qualification of alternative sources of supply where
which they operate would appropriate
impact our ability to
deliver solutions to
customers and drive * Our PLT is also developing a risk management system
growth. based on Failure Modes Effect Analysis in order to
Potential impact understand the risk of occurrence and mitigation
* Disruption to a sole-source supplier could impact our solutions
ability to deliver solutions to customers, impacting
our financial performance and reputation
Product In the ordinary course
quality of business we are subject * We have insurance cover for product liability.
issue - to litigation such as
recall product liability claims
/litigation and lawsuits, including * The US SAFETY Act provides legislative protection for
/catastrophic potential class actions, certain Smiths Detection products in the US; and we
event alleging that our products support efforts to implement similar legislation in
have resulted or could other markets (eg ongoing 'third party limitation'
result in an unsafe lobbying seeks mirror legislation in the EU)
condition or injury.
The mission-critical
nature of many of our * Quality assurance processes embedded in manufacturing
solutions makes the locations for critical equipment, supporting
potential consequences compliance with industry regulations (eg FAA, FDA,
of failure worse than API, etc.)
would otherwise be the
case.
Potential impact * Material litigation is managed under the oversight of
* Manufacturing flaws, component failures and/or design the Group General Counsel
defects could require us to recall products, many of
which are used in critical applications where the
consequences of a failure could be extremely serious * Our Group-wide Quality Council drives standard
and, in some cases, potentially catastrophic definitions, identifies and shares best practice, and
reduces the cost of poor quality
* The Group, in particular Smiths Detection and Smiths
Medical, may potentially be exposed to losses in the * Risk analysis and mitigation processes relating to
event of a cyber security breach relating to the product cyber resilience are embedded in the product
Group's products. These include not only customers' lifecycle process. Proactive steps are taken to
losses, but also those of a potentially large class ensure product cyber-related risks are continually
of third parties monitored and managed
* Our businesses are active in markets and product
areas that are known to be of interest to cyber
criminals
Failing There is a risk that
to meet we may fail to deliver, * Contracts are managed and delivered by programme
contractual in a timely fashion, management teams that regularly review risks and take
obligations or at all, the products appropriate action
and services that we
are obliged to deliver,
or fail in our contractual * A review and approval process for significant and
execution due to delays higher-risk contracts is in place at Group and
or breaches by our suppliers divisional levels
or other counterparties.
Potential impact
* There may be differences between the estimated costs * The diversified nature of the Group mitigates the
in our medium and long-term contracts and actual exposure to any single contract
costs, due to factors such as production delays and
cost overruns
* We are working to enhance the contract review process
across the business to increase the uniformity of
* Some of our contracts, particularly those with process, risk tolerance (where appropriate),
governments, may include terms that provide for personnel, and contract management
unlimited liabilities on our part or allow the
government body or counterparty to terminate
unilaterally, reduce or modify the relevant contracts * In relation to government contracting in particular,
or seek alternative sources of supply at our expense legal functional policy deployment improvement
targets include a specific action to determine and
roll out best practice
Significant We operate in highly
ethical regulated markets, as * We have a network of trade compliance officers across
or compliance well as in countries the Group to oversee import and export activities
breach where the risks of bribery,
corruption and modern
slavery are high. There * Medical has dedicated staff who maintain close
is a risk that a significant contact with the FDA and other key regulators
ethical or compliance
breach may occur.
Potential impact * The Group General Counsel and divisional General
* A failure to comply with export regulations could Counsels monitor legislative changes and report and
lead to significant fines and a loss of export monitor actions as necessary
privileges
* We have adopted a set of shared values across Smiths
* A significant proportion of revenue stems from and have a comprehensive ethics and compliance
government contracts with strict conditions attached. programme that supports our Ethics Code. It is
Failure to meet those conditions, particularly in the overseen by a dedicated Ethics and Compliance
US, can have serious financial and reputational function and Business Ethics Council. We conduct
consequences Group-wide training programmes and regularly hold
ethics conferences around the world
* We operate in a number of relatively consolidated
markets, which increases the risk of illegal * We operate an Alertline for reporting concerns, and
anti-competitive activity such as collusion with have strong reporting and investigation mechanisms
competitors. US fines and penalties imposed for price
fixing, bid rigging and other cartel type activities
can exceed $100m per violation * A new Anti-Modern Slavery Policy and procedures are
being rolled out to reduce the risk of modern slavery
in Smiths and our supply chain
* Any breach could seriously harm our reputation and
impact our financial performance, customer
relationships and ability to attract and retain * Competition law training programmes have been
talent developed to educate employees
* We regularly review our Ethics and Compliance
programme to address evolving risks
Cyber Cyber-crime levels continue
Security to rise around the world * The Board provides oversight of our approach to cyber
and we operate in markets risks. We have a proactive ongoing focus on
and product areas that information and cybersecurity risks and have a
are known to be of interest sophisticated information security programme, which
to cyber criminals. is supported by a strong governance framework
Our information assets
and the systems we depend
on are exposed to risks * Group-wide assessment of our most critical
that could result in information assets and protection to enhance
theft, corruption or security. This follows a risk-based approach and
breach of confidentiality. includes information classification and handling
Potential impact rules
* Cyber attacks could compromise the confidentiality,
integrity and availability of our assets, impacting
our ability to deliver to customers and ultimately, * Information Security Awareness programme, including
financial performance and reputation online e-compliance training to educate employees
* The Group, and especially Smiths Detection and Smit * Management of user privileges to ensure that users
hs only have access to appropriate information and
Medical, is exposed to significant losses in the programmes
event of a cyber security breach relating to the
Group's security or medical products. These include
not only customers' losses, but also those of a * Security monitoring to provide early detection of
potentially large class of third parties hostile activity on Smiths networks and an incident
management process
* Partnership and monitoring arrangements are in place
with critical third parties, including our
communications service provider
* Risk analysis and mitigation processes relating to
product cyber resilience are embedded in the product
lifecycle process. Proactive steps are taken to
ensure product cyber-related risks are continually
monitored and managed
STATEMENT OF DIRECTORS' RESPONSIBILITIES
The directors are responsible for preparing the Annual Report and the Group and Parent Company financial statements in accordance with applicable law and regulations.
Company law requires the directors to prepare accounts for each financial year. Under company law the directors must not approve the accounts 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 these accounts, 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 the consolidated accounts comply with International Financial Reporting Standards ("IFRS"), and the Parent Company accounts comply with applicable UK Accounting Standards, subject to any material departures disclosed and explained in the accounts; and
--prepare the accounts on the going concern basis unless it is inappropriate to presume that the Group and the Company will continue in business.
The directors are responsible for keeping adequate accounting records that are sufficient to show and explain the Group's and the 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 accounts 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.
Directors' responsibility statement
The directors consider that the Annual Report, 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.
Each of the directors (who are listed on pages 78 to 81) confirms that to the best of his or her knowledge:
--the Group's financial statements have been prepared in accordance with IFRS as adopted by the European Union and give a true and fair view of the Group's assets, liabilities and financial position as at 31 July 2017 and of its profit for the financial year then ended; and
--the Group directors' report and Strategic report include a fair review of the development and performance of the business and the position and performance of the Group, together with a description of the principal risks and uncertainties that the Group faces.
Signed on behalf of the Board of directors:
Andy Reynolds Smith Bill Seeger Chief Executive Chief Financial Officer
21 September 2017
Legal Entity Identifier (LEI): 213800MJL6IPZS3ASA11
This document contains certain statements that are forward-looking statements. They appear in a number of places throughout this document and include statements regarding our intentions, beliefs or current expectations and those of our officers, directors and employees concerning, amongst other things, our results of operations, financial condition, liquidity, prospects, growth, strategies and the business we operate. By their nature, these statements involve uncertainty since future events and circumstances can cause results and developments to differ materially from those anticipated. The forward-looking statements reflect knowledge and information available at the date of preparation of this document and, unless otherwise required by applicable law, the Company undertakes no obligation to update or revise these forward-looking statements. Nothing in this document should be construed as a profit forecast. The Company and its directors accept no liability to third parties in respect of this document save as would arise under English law. This press release contains brands that are trademarks and are registered and/or otherwise protected in accordance with applicable law.
This information is provided by RNS
The company news service from the London Stock Exchange
END
ACSEAFEEFLKXFFF
(END) Dow Jones Newswires
October 10, 2017 09:30 ET (13:30 GMT)
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