10th Apr 2015 09:46
10 April 2015
EXOVA GROUP PLC (the "Company")
Annual Report & Accounts 2014 and Notice of 2015 Annual General Meeting
Following release by the Company on 4 March 2015 of its preliminary results for the financial year ended 31 December 2014, the Company announces that it has today posted to shareholders the documents listed below:
· the Annual Report & Accounts for the financial year ended 31 December 2014 (the "2014 Annual Report & Accounts");
· the Notice of 2015 Annual General Meeting; and
· the Form of Proxy for the 2015 Annual General Meeting.
These documents are publicly available on the Company website at www.exova.com.
In accordance with Listing Rule 9.6.1, the Company has submitted copies of these documents to the Financial Conduct Authority via the National Storage Mechanism and they will shortly be available for inspection at www.morningstar.co.uk/uk/nsm.
Additional information required by Disclosure and Transparency Rule 6.3.5
The Company's preliminary results announcement on 4 March 2015 contained a management report as well as a condensed set of financial statements which were prepared in accordance with applicable accounting standards. In compliance with DTR 6.3.5, the following information is extracted from the 2014 Annual Report & Accounts and should be read in conjunction with the Company's preliminary results announcement for the year ended 31 December 2014 issued on 4 March 2015. Both documents are available at www.exova.com and together constitute the material required by DTR 6.3.5 to be communicated to the media in unedited full text through a Regulatory Information Service. This material is not a substitute for reading the 2014 Annual Report & Accounts in full. Where used, the term "Group" means the Company and its subsidiaries.
1. Principal risks and uncertainties
The principal risks and uncertainties that affect the Group are outlined below.
Operational risks | ||||
Risk | Description | Strategic priorities | Possible impact | Mitigation |
Health and safety | The Group's work environment presents various potential risks within our laboratories and when operating on customers' premises. | Focusing on the provision of technically demanding services. Managing our laboratories efficiently. | Failure to operate safely could adversely impact the Group's employees or visitors, lead to legal action from regulators, reputational damage or loss of customer confidence.
| Health and safety is always the first item on Board and Executive Committee agendas. Overall strategy and compliance is monitored by the Group Health and Safety Director who reports to the Group Technical Director. Clear guidance is given on appropriate procedures and maintenance of equipment, supported by regular training, supervision and compliance audits. Bulletins are issued in response to any significant incidents which might have group-wide implications.
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Loss of accreditation or customer approvals | The Group relies on being awarded and retaining a wide range of accreditations and customer specific approvals in order to provide its services. | Focusing on the provision of technically demanding services. Building long-term client relationships. Generating organic revenue growth.
| Loss of ability to service customer requirements in affected laboratories and overall reputational damage to the Group. | As a service business where customers rely on the quality and integrity of our results, our reputation and the value of our brand is critical to our success. A comprehensive quality management system is in place which is regularly audited both internally and by external accreditation bodies and customer approval teams. Employee technical competence is maintained through mentoring and training programmes.
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People | The Group provides specialised technical services and is dependant on attracting and retaining appropriately qualified staff. | Focusing on the provision of technically demanding services. Building long-term client relationships. | Inability to meet customer demand. Failure to innovate and develop customer relationships. | There is a comprehensive recruitment and ongoing evaluation process supported by incentive plans based on personal and financial performance.
A Technical Career Development Programme is in place which is designed to develop and retain technical staff and support succession planning. |
Global economic and market conditions | The strength of our end markets is an important driver for growth. | Generating organic revenue growth. Extending our service range and the global reach of our business. | A prolonged economic downturn would limit our ability to grow the business in line with our strategic plan. | Our business is well diversified both geographically and by end user markets and our focus on technically demanding services gives us some resilience. We engage regularly with our customers to understand their plans and requirements which are recorded in our group-wide CRM system. This provides consolidated visibility of future revenues and allows us to plan capacity efficiently.
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Business infrastructure | The business depends on a stable operating environment incorporating our laboratory network and global IT systems.
| Managing our laboratories efficiently. | Lack of capacity or timely information could affect our ability to service customer requirements and make good business decisions. | Business continuity plans are in place across the Group and our substantial laboratory network often allows work to be transferred to alternative sites. Our IT strategy incorporates security and disaster recovery solutions across the network.
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Acquisitions | The process of identifying, acquiring and integrating new businesses is fundamental to our overall growth plan. | Extending our service range and the global reach of our business. Managing our laboratories efficiently. | Failure to deliver expected results due to poor acquisition selection. Unforeseen liabilities arising from failure to understand business risks fully during due diligence. Reduced financial performance arising from poor integration of acquired businesses. | We have a well developed screening process to ensure that potential acquisitions meet the criteria in our strategic plans for market penetration and geographical expansion and our target returns on investment. Thorough due diligence is carried out by our in-house experts supplemented by the use of specialist advisers. Appropriate legal protection is included in the purchase contract. Detailed integration plans are approved prior to completion and are closely monitored in line with an agreed timetable.
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Legal and regulatory risks | ||||
Risk | Description | Strategic priorities | Possible impact | Mitigation |
Litigation | The Group's operations are subject to wide-ranging laws and regulations including business conduct, employment, environmental and health and safety legislation. There is also exposure to contractual risk. | Building long- term client relationships. Managing our laboratories efficiently. | Reputational damage leading to customer loss and brand damage. Diversion of management time away from the operation of the business. Penalties for breaching contracts, laws or regulations. | We have a process for monitoring compliance with laws and regulations and internal Group procedures and reporting any significant deviations to the Board. We also monitor changes in regulations and communicate these as appropriate. We have clear delegation of authority for business decisions and detailed training is provided on key areas of risk e.g. contract negotiation. We carry insurance against all standard risk categories.
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Business integrity and ethics | The activities of the business are governed by various ethical requirements including anti-corruption and bribery laws, competition laws and trade sanctions. | Building long- term client relationships. Generating organic revenue growth. Extending our service range and the global reach of our business. | Reputational damage leading to customer loss and brand damage. Diversion of management time away from the operation of the business. Penalties for breaching laws or regulations. | Our business activities are conducted in multiple jurisdictions and are exposed to a wide range of business practices. We have a strong Group culture of integrity and ethical behaviour to ensure a consistent approach regardless of local custom. We have group-wide policies covering ethical conduct and regular training is provided backed up by external legal and professional support where required.
We encourage reporting of any concerns about wrongdoing or impropriety and have a whistleblowing service managed by a third party.
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Financial risks | ||||
Risk | Description | Strategic priorities | Possible impact | Mitigation |
Financial irregularity | The Group could suffer financial loss either through misappropriation of assets or the misrepresentation of financial results. | Managing our laboratories efficiently. | Significant financial irregularity could lead to loss of confidence by key stakeholders and reputational damage to the business. This might impact our financial position and ability to raise funds and could affect the share price.
| The Group has a well established system of operational and financial controls including documented procedures and delegation of authorities supported by an outsourced internal audit function. |
Treasury | The Group is exposed to currency, liquidity and credit risks. | Generating organic revenue growth. Managing our laboratories efficiently. | Volatile financial performance arising from translation of overseas profits. Financial penalties and reputational damage arising from breach of banking covenants. Financial loss from inappropriate use of financial instruments or failure to collect amounts owed. | Borrowings are maintained in appropriate currencies to partially hedge foreign exchange risk on overseas earnings. We are exposed to limited transactional risk as most costs and revenues are matched in the same currencies.
Forecast cashflows are regularly reviewed to ensure that sufficient committed borrowing facilities are in place.
Credit risk is actively monitored and is mitigated by the wide spread of our customer base. |
2. Related party transactions
The following statements regarding related party transactions are set out on pages 118 to 119 of the 2014 Annual Report & Accounts. The following is extracted in full and unedited form from the 2014 Annual Report & Accounts.
During the year the Group entered into certain transactions with related parties. Details of these transactions are as follows:
Group | Company | |||
2014 | 2013 | 2014 | ||
Notes | £m | £m | £m | |
Income statement | ||||
Management fee to private equity investor | 0.2 | 0.7 | - | |
Termination of consultancy agreement fee to private equity investor | 1.0 | - | - | |
Finance costs on loan due to parent undertaking | 8 | 8.1 | 26.8 | - |
Preference share dividend | 8 | 1.0 | 3.2 | - |
Balances at 31 December | ||||
Assets | ||||
Amounts due from subsidiary undertakings | 16 | - | - | 101.1 |
Liabilities | ||||
Termination of consultancy agreement fee to private equity investor | 1.0 | - | 1.0 | |
Loan due to parent undertaking | 18 | - | 270.1 | - |
Preference shares | 18 | - | 34.2 | - |
Preference share dividends payable | 18 | - | 8.9 | - |
The majority of the amounts due from subsidiary undertakings relates to the transfer of the cash received from the IPO.
Group | Company | |||
2014 | 2013 | 2014 | ||
Notes | £m | £m | £m | |
Key management compensation | ||||
Salaries and short-term benefits | 2.7 | 3.8 | 0.8 | |
Post employment benefits | 0.3 | 0.2 | 0.1 | |
Termination benefits | 0.2 | 0.3 | - | |
Share-based payments | 2.9 | - | 1.7 | |
6.1 | 4.3 | 2.6 | ||
Key management comprises members of the executive team. The executive team is responsible for the day to day running of the Group, comprising the CEO, CFO, managing directors and group functional directors.
% shareholding | |
The Group holds equity interests of less than 51% in the following companies | |
Exova (Qatar) LLC | 24.5% |
Al Futtaim Exova LLC | 49.0% |
Exova Warringtonfire Middle East LLC | 49.0% |
Exova (Saudi Arabia) Limited | 50.0% |
Exova Warringtonfire LLC | 49.0% |
Exova (Qatar) LLC approved and paid a dividend of £1.1m (QAR 6,000,000) to its shareholders (2013: £Nil approved).
The Group is exposed, or has rights, to variable returns from its involvement with the equity interests and has the ability to affect those returns through its power over the equity interests. Based on this, the Directors have determined that the Group has control over these equity interests and therefore consolidates them within the financial statements.
3. Directors statement of responsibilities
The following statement is repeated here solely for the purpose of complying with DTR 6.3.5. This statement relates to and is extracted from page 76 of the 2014 Annual Report & Accounts and is signed on behalf of the Board of Directors by Ian El-Mokadem, Chief Executive Officer and Anne Thorburn, Chief Financial Officer. Responsibility is for the full 2014 Annual Report & Accounts and not the extracted information presented in this announcement or the preliminary results announcement.
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 that law, the Directors have prepared the Group and Company financial statements in accordance with International Financial Reporting Standards (IFRS) as adopted by the European Union and applicable law.
In preparing these financial statements, the Directors are required to:
• select suitable accounting policies and then apply them consistently;
• make judgements and estimates that are reasonable and prudent; and
• state that the Group and Company financial statements have complied with IFRS as adopted by the European Union, subject to any material departures being disclosed and explained.
The Directors are responsible for keeping proper accounting records which disclose with reasonable accuracy at any time the financial position of the Group and enable them to ensure that the Group financial statements comply with the Companies Act 2006 and Article 4 of the IAS Regulation. They are also responsible for safeguarding the assets of the Group and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities.
The Directors are responsible for the maintenance and integrity of the Company's website. Legislation in the United Kingdom governing the preparation and dissemination of accounts may differ from legislation in other jurisdictions.
The Directors confirm that they have complied with the above requirements in preparing the financial statements.
The Directors consider that the Annual Report & Accounts, taken as a whole, is fair, balanced and understandable and provides the information necessary for shareholders to assess the Group's performance, business model and strategy.
Directors' responsibility statement
Each of the Directors, as at the date of this report, confirms to the best of their knowledge that:
• the financial statements, prepared in accordance with the applicable set of accounting standards, give a true and fair view of the assets, liabilities, financial position and profit or loss of the Company and the Group; and
• the Strategic Report and the Report of Directors include a fair review of the development and performance of the business and the position of the Group, together with a description of the principal risks and uncertainties that it faces.
The Strategic Report contains certain forward-looking statements providing additional information to shareholders to assess the potential for the Group strategies to succeed. Such statements are made by the Directors in good faith, based on the information available to them up to the date of their approval of this report, and should be treated with caution due to the inherent uncertainties underlying forward-looking information.
Neither the Company nor the Directors accept any liability to any person in relation to the Annual Report & Accounts except to the extent that such liability could arise under English law. Accordingly, any liability to a person who has demonstrated reliance on any untrue or misleading statement or omission shall be determined in accordance with Section 90A and Schedule 10A of the Financial Services and Markets Act 2000.
4. Substantial shareholding
As at 25 March 2015, being the latest practicable date prior to release of this announcement, the Company had been notified, in accordance with DTR 5, of the following major shareholdings in the ordinary share capital of the Company:
Name | Ordinary share holdings at 25 March 2015 | % of capital |
TABASCO B.V. | 135,045,958 | 53.94 |
Fidelity Management & Research | 24,053,995 | 9.61 |
Mubadala Development Company PJSC | 16,166,725 | 6.46 |
T.Rowe Price | 9,542,243 | 3.81 |
First Pacific Advisors | 7,754,045 | 3.10 |
For further information please contact:
Neil MacLennan
Company Secretary
Exova Group plc
Telephone: +44 (0) 131 333 8053
Related Shares:
EXO.L