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Share Name | Share Symbol | Market | Type | Share ISIN | Share Description |
---|---|---|---|---|---|
Melrose Industries Plc | LSE:MRO | London | Ordinary Share | GB00BNGDN821 | ORD 160/7P |
Price Change | % Change | Share Price | Bid Price | Offer Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
---|---|---|---|---|---|---|---|---|---|---|
0.00 | 0.00% | 612.20 | 615.60 | 616.00 | 618.80 | 609.40 | 609.40 | 8,880,192 | 16:35:14 |
Industry Sector | Turnover | Profit | EPS - Basic | PE Ratio | Market Cap |
---|---|---|---|---|---|
Engineering Services | 4.93B | -1.02B | -0.7540 | -8.17 | 8.33B |
TIDMMRO
RNS Number : 1760U
Melrose Industries PLC
31 March 2021
The 2020 Annual Report and Notice of Annual General Meeting
Melrose Industries PLC (the "Company") announces that its Annual Report and financial statements for the year ended 31 December 2020 (the "Annual Report"), Notice of Annual General Meeting (the "AGM"), and Form of Proxy for the AGM have each been sent to or otherwise made available to shareholders and are available to view or download from the Company's website at https://www.melroseplc.net/investors/ .
The Company's AGM will be held at 11.00 a.m. on 6 May 2021 at Leconfield House, Curzon Street, London W1J 5JA.
PLEASE NOTE OUR GUIDANCE SET OUT IN THE NOTICE OF AGM REGARDING SHAREHOLDER ATTANCE AT THE AGM, IN LINE WITH UK GOVERNMENT GUIDANCE AT THE TIME OF PUBLICATION, WHICH DOES NOT ALLOW US TO ALLOW SHAREHOLDERS TO ATT THE AGM IN PERSON. WE RECOMM THAT ALL SHAREHOLDERS COMPLETE AND RETURN A FORM OF PROXY, APPOINTING THE CHAIRMAN OF THE AGM AS THEIR PROXY, AND TO SUBMIT ANY QUESTIONS PRIOR TO THE MEETING USING THE SERVICE WE HAVE SET UP FOR THESE PURPOSES.
The Company's preliminary results announcement on 4 March 2021 included, in addition to the preliminary financial results, the text of the Chairman's statement, Chief Executive's review (including the Divisional review) and Finance Director's review, in each case as contained in the Annual Report.
The appendix to this announcement sets out the required disclosures with regard to the Directors' responsibility statement, the principal risks and uncertainties and related party transactions, in each case as contained in the Annual Report. Together, this information is provided in accordance with Disclosure & Transparency Rule 6.3.5(2). This information is not a substitute for reading the full Annual Report for the year ended 31 December 2020.
The Company confirms that, in compliance with Listing Rule 9.6.1, an electronic copy of each of the Company's Annual Report for the year ended 31 December 2020, Notice of AGM and Form of Proxy for the AGM have been submitted to the National Storage Mechanism, appointed by the Financial Conduct Authority, and will be available shortly for inspection at www.morningstar.co.uk/uk/NSM .
Enquiries:
Montfort Communications:
Nick Miles, +44 (0) 20 3514 0897
Charlotte McMullen, +44 (0) 7973 130 669 / +44 (0) 7921 881 800
APPIX
Directors' Responsibility Statement
We confirm that to the best of our knowledge:
-- the financial statements, prepared in accordance with the relevant financial reporting framework, 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;
-- the Strategic Report includes a fair review of the development and performance of the business and the position of the Company and the undertakings included in the consolidation taken as a whole, together with a description of the principal risks and uncertainties that they face; and
-- the Annual Report and financial statements, taken as a whole, are fair, balanced and understandable and provide the information necessary for shareholders to assess the Company's performance, business model and strategy.
Principal Risks and Uncertainties
This section outlines the principal risks and uncertainties that may affect the Group and highlights the mitigating actions that are being taken. This section is not intended to be an exhaustive list of all the risks and uncertainties that may arise, nor is the order of the content intended to be any indication of priority.
A risk management and internal controls framework is in place within the Group, which is continually reviewed and adapted where necessary to reflect the risk profile of the Group and to continue to ensure that such risks and uncertainties can be identified and, where possible, managed suitably. Each Group business unit maintains a risk register which is aggregated into an interactive data-driven dashboard reporting tool, to facilitate review by the Melrose senior management team, the Audit Committee and the Board.
Key risk Description Mitigation Responsibility Risk Trend commentary Strategic and impact trend priorities Strategic risks Acquisition The success Structured Executive Following Buy of new of the Group's and appropriate management the acquisition Improve businesses acquisition due diligence of GKN in and strategy depends undertaken 2018, the improvement on identifying on potential Group remains strategies available new targets focused and suitable where permitted principally targets, obtaining and practicable. on improvement. any consents Focus on The impact or authorisations acquisition of COVID-19 required to targets that has interrupted carry out have strong the timing an acquisition, headline of some and procuring fundamentals, improvement the necessary high-quality plans, but financing, products, these are be this from and leading continuing equity, debt market share at pace. or a combination but which Although of the two. are no large In making underperforming acquisitions acquisitions, their potential were made there is a and ability in 2020, the risk of unforeseen to generate Group liabilities sustainable remains open being later cash flows to potential discovered and profit new which were growth. opportunities. not uncovered Hands-on role or known at taken by the time of executive the due diligence Directors process, particularly and other in the context senior of limited employees access in of the Group. public bids. Development Further, as of strategic per the Group's plans, strategy to restructuring buy and improve opportunities, good but capital underperforming expenditure, manufacturing procurement businesses, and working once an acquisition capital is completed, management. there are Proper risks that incentivisation the Group of operational will not succeed management in driving teams to align strategic with Melrose operational strategy. improvements to achieve the expected post acquisition trading results or value which were originally anticipated, that the acquired products and technologies may not be successful, or that the business may require significantly greater resources and investment than anticipated. If anticipated benefits are not realised or trading by acquired businesses falls below expectations, it may be necessary to impair the carrying value of these assets. The Group's return on shareholder investment may fall if acquisition hurdle rates are not met. The Group's financial performance may suffer from goodwill
or other acquisition-related impairment charges, or from the identification of additional liabilities not known at the time of the acquisition. ------------------------ ----------------- --------------- -------- ----------------- ----------- Timing of In line with Directors Executive Although global Sell disposals our strategy are experienced management M&A markets and depending in judging continue to where the and regularly experience Group is within reviewing uncertainty, the "Buy, the appropriate there remain Improve, Sell" time in a opportunities cycle, the business cycle for value expected timing for a disposal realisation, of any disposal to realise and a formal of businesses maximum value sale process is considered for has recently as a principal shareholders. been commenced risk which Each disposal for the Nortek could have is assessed Air Management a material on its merits, division. impact on with a key The process the Group focus on a remains highly strategy and clean disposal. uncertain, performance. but the Further, due division's to the Group's outstanding global operations, recent there may performance be a significant will translate impact on into a good the timings outcome for of disposals the businesses due to political and our and macro-economic shareholders. factors. Some non-core Depending businesses on the timings were sold of disposals or placed and the nature under strategic of the businesses' review during operations, 2020. However, there may management be long-term continues liabilities to remain which could disciplined be retained and there by the Group is no obligation following to sell before a disposal. it is Insufficient appropriate allowance to do so. for such retained liabilities may affect the Group's financial position. ------------------------ ----------------- --------------- -------- ----------------- ----------- Operational risks Economic and The Group Regular Board Executive There were Buy political operates, meetings and management unprecedented Improve through manufacturing business review levels of Sell and/or sales meetings were volatility facilities, supplemented and uncertainty in numerous by weekly during 2020 countries meetings of primarily and is affected the Board as a result by global and weekly of COVID-19. economic conditions. cash management The Melrose Businesses meetings during senior are also affected the initial management by government height of team continues actions and the COVID-19 to actively the willingness pandemic during engage with of governments the second the business to commit and third unit executive substantial quarters of teams to track resources. 2020. As the the potential Current global initial impacts of economic and disruption further financial subsided in lockdowns market conditions the third or tiered have recently quarter, these restrictions been characterised additional aimed at curbing by high levels meetings moved the impact of volatility to fortnightly, of COVID-19, and uncertainty. whilst the as well as There has Board continued the potential been widespread to receive impacts of disruption key financial Brexit and to production information the possibility and trading on a weekly of future environments basis. The tariffs. The caused by increased Melrose senior the COVID-19 frequency management pandemic, of meetings team engages in particular at Board level actively with a sharp market enabled the those who decline in Board to discuss are working the aerospace and increase on the relevant sector due their monitoring impact to global and oversight assessments travel restrictions. of the impact and mitigation
Fluctuation of actions, and in commodity macro-political reports the prices, the events on material potential the Group findings for a significant on a regular to the Board. and prolonged basis, including The Melrose global downturn national and senior and uncertainty regional management in the political lockdowns, team monitors environment, material working key issues may materially pattern changes, with the and adversely PPE supplies divisional affect the and management Group's operational distribution, teams including performance and the business the impact and financial units' ongoing of geopolitical condition, assessment uncertainty and could of and/or on order books, have a significant use of and cash generation, impact on paying back legal and the timing of national regulatory of acquisitions support schemes threats and and disposals. where deemed other key These factors appropriate. operational may also materially Regular and commercial affect customers, monitoring indicators, suppliers of order books, to ensure and other cash the Group parties with performance, and each of which the cost control its businesses Group does and other can respond business. leading appropriately Adverse economic indicators, to adverse and financial to ensure trading market conditions the Group conditions. may cause and each of Tactics for customers its businesses mitigating to terminate could respond the potential existing orders, quickly to impact of to reduce adverse trading geopolitical their purchases conditions. uncertainty from the Group, This included include or to be unable the identifying to meet their identification cost reduction obligations of cost and operational to pay outstanding reduction efficiency debts to the and efficiency measures. Group. These measures. The Board market conditions Bank financing notes that may also cause is readily economic our suppliers available uncertainty to be unable to the Group can depress to meet their from its business commitments supportive valuations to the Group banking and this may or to change syndicate. increase the the credit This support number of terms they has proven potential extend to to be available acquisition the Group's to the Group opportunities businesses. even during for Melrose. Since the periods of UK left the unprecedented EU on 31 January turmoil that 2020, uncertainty was experienced has continued in 2020 due in the UK to the global regarding pandemic. the nature Assessment and impact of and/or of the UK's use of national future trading support schemes relationship where deemed with the EU appropriate and other in the context international of COVID-19 trading partners disruption. with which Short-term the UK intends inventory to establish buffers are new terms regularly on which to reviewed and trade, and assessed to what this minimise the will mean impact of for business further lockdown and the UK restrictions economy. The due to COVID-19, impact of and the initial the COVID-19 impact of pandemic is Brexit on a significant import costs risk to the and tariffs global economy. and border Each of the disruption. Group's businesses Sales from and their the EU to respective the UK within production the GKN and market Aerospace geographies and GKN are impacted Automotive by the COVID-19 divisions pandemic to are frequently various extents, on ex-works with the most terms and common impacts therefore across the a cost to Group during customers. 2020 being This continued the temporary to be reviewed reduction during 2020 of manufacturing in light of capacity and the then ongoing reduced requirements Brexit due to lockdown negotiations measures and and the international subsequent travel restrictions. ongoing trading The Board terms between and the Melrose the UK and senior management the EU. team continue Strong customer to regularly relationships monitor the built on impact of long-term the pandemic partnerships on the Group often with with particular plants in focus on the close proximity, potential technical for staff excellence
shortages, and quality. production Planning for delays and potential supply chain discussions disruption. in respect A significant of increased amount of tariff costs the Group's that materialise revenue is following generated the final from operations Brexit deal located in between the North America, UK and the which during EU. 2020 continued The Group to experience remains agile, challenging diversified tariffs relating and well to the US/China positioned trade war to deal with and uncertainty any short-term related to uncertainty the US presidential in the UK. election. The US has also required close monitoring related to the expected short to medium-term impact of potential changes to international trading relationships following the conclusion of a definitive future trade deal between the UK and the EU. The Group's exposure to such US trade risk factors is inherently mitigated by its manufacturing footprint across the UK and European-based GKN Aerospace and GKN Automotive divisions. Further, the Group's businesses operating in North America continue to take regular specific actions to mitigate the impact of new relevant North American tariffs and changes to international trading regulations by engaging with the relevant authorities prior to and after any such changes are implemented. Whilst the long-term impact of Brexit, COVID-19, and tariff wars are not isolated as principal risks to the Group as a whole, they present potential risks that the business units continue to monitor and assess closely, particularly in the context of potential changes to travel and working restrictions, and the cross-border trade and regulatory environments in which the business units operate. The Board continues to assess and review the potential impact of these evolving risks. ------------------------ ----------------- --------------- -------- ----------------- ----------- Commercial The Group The Group Executive The Melrose Improve operates in continued management senior competitive to actively management markets throughout invest in team actively the world research and engages with and is diversified development the divisional across a variety activities executive of industries in 2020 to management and production augment its teams to track, and sales platforms monitor and geographies. for future support This provides product strategic a degree of expansion, planning Group-level quality activities impact mitigation improvements, and impact from the potential customer mitigation commercial alignment assessments challenges and achieving in respect and market further of ongoing disruptions production commercial that face efficiencies. risks. each of the Details about Particular divisions. some of the focus is placed However, the Group's research on certain widespread and development GKN Aerospace disruption activities and GKN caused by are provided Automotive COVID-19 has in the end markets heightened Sustainability where the Group's report on customer and/or exposure to pages 58 to competitor supply chain 87 of the concentration and end-market 2020 Annual is high and commercial Report. heavier reliance risk. Health and is placed Each division safety awareness on supply is exposed initiatives chain efficiency to particular and performance and programme commercial enhancements partner and market continued management. risks, which to be The divisional are primarily implemented CEOs report accentuated in alignment material updates where with directly to customer/competitor regulation, members of concentration market practice the Melrose is high within and site-based senior their respective risk assessments management market segments. and team which Melrose operates requirements. maintains a decentralised In addition, a control and in light of number of management the COVID-19 contact points structure pandemic, throughout which empowers the the Group divisional Group has to increase management followed awareness.
teams to take government full responsibility guidance on for planning, hygiene and mitigating, social navigating distancing and responding protocols, to the specific and coordinated commercial the sourcing risks and of PPE globally challenges to ensure facing their no disruptions. respective Since acquiring businesses. GKN, the Melrose The Melrose senior senior management management team monitors team has the aggregated actively impact of engaged with such risks and supported and provides the GKN active support businesses' and challenge divisional to the divisional management management executive teams in fulfilling teams in their responsibilities. identifying Common commercial embedded risk areas contractual that potentially and business affect a large conduct risks proportion relating to of the Group's key supply businesses chain and include those production related to programme production partners. quality assurance, Those management health and teams have safety performance, continued customer concentration to implement and uncertainties and direct related to a series of future customer operational demand, onerous change customer and management supplier contracts, programmes the impact to mitigate of increased the risks competitive they have pressures identified. on the The Melrose maintenance/improvement senior of market management share, potential team, in disruptions collaboration to supply with Ernst chains and & Young, increases continues to the price to enhance of raw materials, the Board technological and Audit innovation Committee's and market visibility disruption, of the Group's and the performance Common and management Commercial of programme Risks through partners ("Common the use of Commercial the Group Risks"). reporting In 2020, Common dashboard Commercial to aggregate Risks increased and report due to the numerous Common impact of Commercial the global Risks across pandemic, each of the which affected Group's a number of divisions. areas including Throughout supply chains, the COVID-19 production pandemic, scheduling, the rate and factory closures, intensity customer demand of business rates, and unit reporting freight. was substantially increased. This ensured business unit management and the Melrose senior management team had timely access to detailed and accurate information on the trading performance of the Group, which enabled informed and quick decision-making. ------------------------ ----------------- --------------- -------- ----------------- ----------- Loss of key The success Succession Executive Succession Buy management of the Group planning within management planning remains Improve and is built upon the Group a core focus Sell capabilities strong management is coordinated for the teams. As via the Nomination a result, Nomination Committee the loss of Committee and the Board. key personnel in conjunction Reviewing could have with the Board the succession a significant and includes planning impact on all Directors arrangements performance, and senior of the Board at least for Melrose as a whole, a time. The employees. together with loss of key In line with a review of personnel the Group's the Melrose or the failure decentralised senior to plan adequately structure, management for succession each divisional team, will or develop CEO, in remain an new talent consultation area of may impact with the Chief particular the reputation Executive, focus in 2021, of the Group is responsible as well as or lead to for the maintaining a disruption appointment oversight in the leadership of their of business of the business. respective unit succession Competition executive planning. for personnel team members, is intense with and the Group disclosure may not be to the successful Nomination in attracting Committee or retaining via the Melrose qualified senior personnel, management particularly team. engineering The Company professionals. recognises that, as with most businesses, particularly those operating within a technical field, appointments
are dependent on Directors and employees with particular managerial, engineering or technical skills. Appropriate remuneration packages and long-term incentive arrangements are offered in an effort to attract and retain such individuals. ------------------------ ----------------- --------------- -------- ----------------- ----------- Compliance and ethical risks Legal, Considering Regular Executive Each business Improve regulatory the breadth, monitoring management has a fully and scale and of legal and developed environmental complexity regulatory legal function, of the Group, matters at headed by there is a both a Group their respective risk that and business General Counsel the Group unit level. reporting may not always Consultation to their be in complete with external executive compliance advisors where management with laws, necessary. team, and regulations Group-wide are properly or permits. standard and staffed and The Group enhanced supported could be held application by external responsible to trade advisors where for liabilities authorisation necessary and consequences procedures or helpful arising from are in place to ensure (i) past or and regularly ongoing future environmental reviewed against compliance damage, including the in the potentially ever-changing jurisdictions significant global trade in which they remedial costs; compliance operate across (ii) employee landscape, the globe. matters including supported This is liability by access augmented for employee to external by central accidents trade compliance oversight in the workplace legal and from the Melrose or regulatory legal team consequences specialists and robust of environmental and electronic annual reviews. liabilities, counterparty The Board which may screening reviews its be susceptible systems. assessment to class action Our businesses of the Group's law suits, are validated material particularly and certified sustainability but not exclusively in respect issues annually, with respect of quality and is currently to Group businesses management, establishing operating environmental a Group internal in North America; management sustainability (iii) restrictions and health reporting arising from and safety and performance economic sanctions, with the function to export controls appropriate support the and customs, bodies including business units. which can ISO and BS During the result in OHSAS, where coming year, fines, criminal relevant to the Board penalties, their with the support adverse publicity, operations. of the Melrose payment of The Group's senior back duties businesses management and suspension are either team will or revocation already publish an of the Group's compliant assessment import or with or working of how Melrose export towards timely and its privileges; compliance businesses and (iv) product with new and are mitigating liability upcoming climate change claims, which standards. risks aligned can result This includes with the in significant Group businesses recommendations total liability that are of the Task or remedial currently Force on costs, particularly certified Climate-related for products to BS OHSAS Financial supplied to 18001 and Disclosures large are actively (TCFD), and volume global driving towards setting targets production full transition in line with programmes to ISO the UN spanning multiple 45001:2018. Sustainable years, for With Melrose Development example in support, each Goals. the aerospace business invests and automotive in and industries, implements or to consumer appropriate end markets, systems and for example processes in the air to manage management their impact industry. on the There can environment,
also be no and continually assurance reviews these that any provisions in line with for expected evolving environmental expected liabilities practices. and remediation The executive costs will management adequately team of each cover these business liabilities regularly or costs. reviews any The Group significant operates in climate-related highly regulated issues, risks sectors, which and has been accentuated opportunities by the GKN related to acquisition. the business. In addition, These reviews new legislation, consider the regulations level of or certification climate-related requirements risk that may require the business additional is prepared expense, restrict to take in commercial pursuit of flexibility its business and business strategy and strategies the or effectiveness introduce of management additional controls in liabilities place to for the Group mitigate or the Directors. climate-related For example, risk. Any the Group's identified operations risks are are subject discussed to anti-bribery with the Melrose and anti-corruption, senior anti-money management laundering, team and competition, escalated anti-trust to the Board and where necessary. trade compliance In line with laws and regulations. our Failure to decentralised comply with model, our certain regulations businesses may result have frameworks in significant in place for financial identifying penalties, principal debarment risks and from opportunities government appropriate contracts to their and/or reputational business damage, and and may impact stakeholders, our business which include strategy. climate-related We purchase risks. Each businesses business takes that are an appropriately underperforming tailored their potential approach with respect to to their financial, climate-related operational initiatives and sustainability that suits performance. their Inherent in requirements, the nature and operational of the manufacturing and market businesses environments, we acquire as well as is that they reflecting often operate their maturity in industries in this area that are the at the time hardest to of becoming decarbonise. part of the Group sustainability Group. performance The Board and ratings sets a leading will fluctuate example in during our sustainability, investment and holds cycle as we each business acquire new and their businesses management in need of teams improvement, accountable and sell businesses for their that we have progress, improved. and provides them with a platform to absorb the Group's best practices, to accelerate their and others' progress. The Melrose senior management team works with the businesses' executive teams, to set meaningful sustainability targets, alongside financial metrics, and Melrose provides the investment to achieve them. The businesses subsequently identify, monitor, and manage the specific environmental risks that affect their operating and market environments. The Board with the support of the Melrose senior management team reviews the annual reports on energy usage and greenhouse gas emissions within each business, and provides support and investment to drive improvements within their operations through more efficient use of electricity, fuel and heat, including by increasing the proportion of renewable energy where commercially viable, and by implementing other climate-positive actions such as sustainable transport initiatives for employees. The Board with the support
of the Melrose senior management team spends time listening to the Group's key stakeholders to enable informed strategic decisions and to deliver on their needs. A robust control framework is in place, underpinned by comprehensive corporate governance and compliance procedures at both a Group and business unit level, including utilisation of third party verification providers. Where possible and practicable, due diligence processes during the acquisition stage seek to identify legal, regulatory and environmental risks. At the business unit level, controls are in place to prevent such risks from crystallising. Any environmental risks that crystallise are subject to mitigation by specialist consultants engaged for this purpose. External consultants assist the Group in complying with new and emerging environmental regulations. Insurance cover mitigates certain levels of risk and the Group's insurers are instructed to carry out external audits of specified areas of legal and compliance risk including health and safety. ------------------------ ----------------- --------------- -------- ----------------- ----------- Information Information Management Executive Information Improve security and security and work with management security and cyber threats cyber threats the leaders cyber threats to our systems of each business are an are an and external increasing increasing security priority across priority across consultants all industries. all industries to assess The COVID-19 and remain the Group's pandemic has a key increased increased UK Government exposure to online traffic, agenda item. cyber security reduced physical Like many risk and to contact, and businesses, ensure created Melrose recognises appropriate additional that the Group mitigation new threats may have a measures are to all of potential in place for our businesses exposure in the Group. requiring this area. During 2020, increased Potential Melrose attention. exposure to continued Cyber security such risks to monitor breaches of remains high and enhance the Group's due to the its IT systems scale, complexity information could result and public-facing security in the nature of strategy misappropriation the Group. and risk-based of confidential In addition, governance information Melrose recognises framework belonging that the inherent with all to it or its security threat businesses customers, is considered within the suppliers highest in Group. The or employees. GKN Aerospace framework In response where data follows the to the increased is held in UK Government's sophistication relation to recommended of information civil aerospace steps on cyber security and technology security. cyber threats, and controlled This strategic the Group military contracts. management has worked, approach has and continues delivered to work, with risk profiling external capabilities security by business companies and the to monitor, enablement improve and of mitigation refine its plans to be Group-wide
developed strategy to for each aid the business prevention, to reduce identification their exposure and mitigation to cyber risk. of any present The progress and future of each business threats. is measured against the information security strategy and is monitored on a quarterly basis. Data is also externally reviewed quarterly by Ernst & Young, who will be augmenting their review in 2021 with a mix of virtual and onsite assurance visits. ------------------------ ----------------- --------------- -------- ----------------- ----------- Financial risks Foreign Due to the The Group Executive Group results Buy exchange global nature policy is management are reported Improve of operations to protect in Sterling Sell and volatility against the but a large in the foreign majority of proportion exchange market, foreign of its revenues exchange rate exchange risk are denominated fluctuations which affects in currencies have, and cash, by hedging other than could continue such risks Sterling, to have, a with primarily material impact financial US Dollar on the reported instruments. and Euro. results of The businesses Sensitivity the Group. are protected to the key The Group against being currency pairs is exposed over-hedged, is shown in to three types due to short the Finance of currency to medium-term Director's risk: transaction reductions review on risk; translation in forecasts, pages 36 to risk; and as the 42 of the the risk that percentage 2020 Annual when a business of hedges Report. that is predominantly compared to based in a forecast foreign foreign currency exchange is sold, it exposures is sold in tapers over that foreign future periods. currency. Protection The Group's against specific reported results transaction will fluctuate risks is taken as average by the Board exchange rates on a change. The case-by-case Group's reported basis. net assets will fluctuate as the year-end exchange rate changes. ------------------------ ----------------- --------------- -------- ----------------- ----------- Pensions Any shortfall The Group's Executive Although the Buy in the Group's key funded management risks are Improve defined benefit UK defined well understood, Sell pension schemes benefit pension the deficit may require plans are significantly additional closed to reduced and funding. As new entrants funding plans at 31 December and future for the GKN 2020, the service accrual. Schemes having Group's pension Long-term already been schemes had funding agreed with an aggregate arrangements the Trustees, deficit, on are agreed the size of an accounting with the the gross basis, of Trustees liabilities GBP838 million and reviewed as a proportion (2019: GBP1,121 following of the Group's million). completion net assets Changes in of actuarial remains discount rates, valuations. significant. inflation, Active During the asset values engagement period, gross or mortality with the liabilities assumptions Trustees increased could lead on pension as a result to a materially plan asset of changes higher deficit. allocations in financial For example, and strategies. conditions. the cost of During the The increase a buy-out year the GKN was offset on a discontinued Schemes 1-4 by increases basis uses appointed in scheme more conservative a fiduciary assets arising assumptions manager which from the return and is likely will allow on investments to be significantly more timely and group higher than decisions contributions the accounting to be made of GBP111 deficit. Alternatively, on million. As if the plans changing a result of are managed investments the deficit on an ongoing as circumstances reduction basis, there require. Also, during the
is a risk investments period, the that the plans' can be spread Trustees took assets, such across more action to as investments asset classes better hedge in equity which will risks associated and debt securities, reduce risk. with movements will not be in inflation sufficient and interest to cover the rates, and value of the to reduce retirement investment benefits to risk. be provided Accordingly, under the the volatility plans. The risk to the implications Group is of a higher reduced. pension deficit include a direct impact on valuation, implied credit rating and potential additional funding requirements at subsequent triennial reviews. In the event of a major disposal that generates significant cash proceeds which are returned to the shareholders, the Group may be required to make additional cash payments to the plans or provide additional security. ------------------------ ----------------- --------------- -------- ----------------- ----------- Liquidity The ability To ensure Executive Whilst the Buy to raise debt it has management Group maintains Improve or to refinance comprehensive strong cash existing borrowings and timely controls and in the bank visibility forecasting or capital of the liquidity processes, markets is position, in light of dependent the Group the COVID-19 on market conducts monthly pandemic, conditions reviews of management and the proper its cash have functioning forecast, driven a of financial which are redoubling markets. As in turn revised of efforts set out in quarterly. throughout more detail The Group the Group in the Finance operates cash to increase Director's management visibility review on mechanisms, and certainty pages 36 to including of cash flow 42 of the cash pooling information, 2020 Annual across the robustness Report, the Group and of cash Group has maintenance controls, term loans of revolving and cash-saving of US$960 credit initiatives. million and facilities These have GBP100 million to mitigate been very and revolving the risk of successful credit facilities any liquidity and combined comprising issues. with the US$2.0 billion, The Group negotiation EUR0.5 billion gained agreement of covenant and GBP1.1 from its lenders waivers with billion. to a three-year our supportive In addition, extension, banking the GKN net at the Group's syndicate, debt at acquisition option to the Group included capital be built into is satisfied market borrowings its that it has across three multi-currency adequate unsecured term loan resources bonds that denominated available totalled GBP1.1 GBP100 million to meet its billion. Two and US$960 liabilities. of these bonds million, - totalling exercisable GBP750 million at any time - remain outstanding prior to 1 as at 31 December April 2021 2020 and further that would detail is extend the provided in maturity date the Finance of the loan Director's to 30 April review on 2024. Since pages 36 to the end of 42 of the the 2020 Annual current Report. reporting The sudden period, this and material option has impact of been exercised. COVID-19 in The Group 2020 has brought operates a cash management conservative into sharp level of focus. In headroom line with across its the Group's financing strategy, covenants investment which is is made in designed the businesses to avoid the (capital expenditure need for any and restructuring unplanned actions) and refinancing. there is a As a result requirement of COVID-19 to assess the Group's liquidity banking and headroom syndicate when new businesses agreed to are acquired. amend its financial covenants during the year, covering the periods up to and including 31 December 2022, which provides significant headroom over the existing
covenants. ------------------------ ----------------- --------------- -------- ----------------- -----------
Related party transactions
Except for transactions with associates (see Note 29 to the 2020 Annual Report on page 191), no other related party had material transactions or loans with the Company over the last two financial years.
-- END --
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