RNS Number : 1420Q
03 April 2009
3 April 2009
IMI plc Annual Financial Report
In compliance with paragraph 9.6.1 of the Listing Rules, IMI plc has today submitted to the UK Listing Authority two copies of each of the documents listed below:
(a) Annual Report and Accounts for the year ended 31 December 2008;
(b) Notice of Annual General Meeting for 2009;
(c) Chairman's letter regarding 'Shareholder Communications'; and
(d) Form of proxy for the 2009 Annual General Meeting.
Copies of the above documents will be available for inspection at the UK Listing Authority's Document Viewing Facility which is situated at:
Financial Services Authority
25 The North Colonnade
London E14 5HS
The documents are being despatched to shareholders today. The Annual Report and Accounts and the Notice of Annual General Meeting are also available on the IMI plc website at www.imi.plc.uk/investors (click on Annual Reports). Printed copies may be obtained by writing to The Company Secretary, IMI plc, Lakeside, Solihull Parkway, Birmingham Business Park, Birmingham, B37 7XZ.
In compliance with paragraph 6.3.5 of the Disclosure and Transparency Rules (DTR), a responsibility statement and a description of principal risks and uncertainties are set out below in full unedited text. A condensed set of financial statements were included in IMI plc's full year results announcement issued on 4 March 2009, which included an indication of important events that occurred during the year.
Page references below refer to page numbers in the Annual Report and Accounts. References to notes to the financial statements refer to notes in the Annual Report and Accounts.
DIRECTORS' RESPONSIBILITY STATEMENT
The Annual Report and Accounts contain a responsibility statement in compliance with paragraph 4.1.12 of the DTR signed by order of the Board by John O'Shea, Company Secretary. This states that on 4 March 2009, the date of approval of the Annual Report and Accounts, the Directors (whose names and functions are referred to on pages 34 to 35 of the Annual Report and Accounts) confirm that to the best of their knowledge:
the Group and parent company financial statements in this annual report, which have been prepared in accordance with applicable UK law and with the applicable set of accounting standards, give a true and fair view of the assets, liabilities, financial position and profit of the Company and the Group taken as a whole; and
the management report (which comprises the Directors' report and the business review) includes a fair review of the development and performance of the business and the position of the Company and the Group taken as a whole, together with a description of the principal risks and uncertainties that they face.
RISKS AND UNCERTAINTIES
In common with all businesses, there are a number of risks and uncertainties which could have a material impact on the Group's long-term performance. The Group has in place an established risk management structure and robust internal controls which together are designed to identify, manage and mitigate business risk. A summary of the Group's risk management structure is given on pages 44 to 45. The Group's financial risk management practices are also discussed in note 19 to the financial statements. In addition, the Group's approach to corporate social responsibility and associated risks is described on pages 28 to 33.
The principal risks faced by the Group, as identified by the Board, are summarised below:
Economic and market environment
The status of the global economy and the levels of activity in the markets in which the Group operates could adversely affect the Group's revenues. The Group's cost base includes many costs that cannot be reduced in the short term in line with reductions in revenue, which may result in sharper reductions in profitability. The Group may also be required to reassess the carrying value of acquired goodwill and other assets if certain end markets deteriorate further or for longer, which may result in impairment charges. The diverse nature of the Group's products, services, customers and markets served together with the development of aftermarket revenues and appropriate contingency planning helps to mitigate the impact of unfavourable economic conditions.
Certain of the Group's businesses benefit from close commercial relationships with key customers. The loss of certain of these key relationships whether through competition, consolidation or insolvency could have a material impact on the Group's results. The Group's top ten customers represent approximately 15% of total group revenues. The Group devotes resources to ensure that these good relationships are maintained and developed.
The Group has a significant number of contracts with a broad base of suppliers. In the current economic environment there is a risk that their access to credit or adverse trading conditions could lead to an inability to meet their contractual commitments to the Group. This could have a material impact on the Group's results. The Group monitors these risks and has contingency plans in place to mitigate the impact of any supplier failure.
The Group operates in highly competitive markets. Significant product innovations, technical advances or the intensification of price competition could all adversely affect the Group's results. The Group's continued success depends upon its ability to continue to develop and produce new and enhanced products and services on a cost effective and timely basis in accordance with customer demands.
The Group makes focused investment in research and development to sustain its competitive advantage and takes appropriate action to ensure that its cost base remains competitive.
Legal, regulatory and political risks
The Group's worldwide operations expose it to different legal and regulatory requirements and standards in each of the jurisdictions in which it operates including those for financial reporting, taxation, environmental, operational and competition matters.
The nature of the Group's operations exposes it to the potential for litigation from third parties which may arise in the ordinary course of business.
Further costs and actions potentially arising from the 2007/8 investigation into the Severe Service business are a possible risk in the near term. However, it is anticipated that any such actions and associated costs would not extend significantly beyond 2009.
The Group's worldwide operations also expose it to the effect of political risk which can include sudden changes in regulations, expropriation of assets, imposition of trade barriers and wage controls and limits on the export of currency.
Financial market risks
The Group is exposed to a number of financial market risks including credit risk, liquidity risk and fluctuations in foreign exchange rates, interest rates and commodity prices. A description of these risks and the Group's centralised approach to managing them is described in note 19 to the financial statements.
If the Group is unable to recruit and retain high calibre managers and engineering talent, it may not be able to effectively implement its business plans and strategy and could experience delays in the development of, or increased difficulty in developing and selling, its products and services.
Compliance and internal controls
The Company operates various corporate governance, compliance and internal control frameworks which are essential for the effective management of such geographically diverse businesses. Failures in these controls might have a material impact on the Group.
Products and technology
The Group is exposed to risks associated with the commercial failure of products, projects and technologies such as product liability and warranty claims. The quality and safety of our products is of the highest importance and there is an associated risk if they are below standard. The Group maintains insurance cover for product liability claims where possible and seeks to ensure that it is also protected so far as possible by the contract terms in place. For claims not covered by insurance, the costs that cannot otherwise be recovered may be material to the Group.
Health, safety and environmental
The Group recognises that it has a duty of care to all of its employees and to others that the Group interacts with through its products and operations. The Group has established systems in place to ensure that health, safety and environmental matters are appropriately addressed and any such risks are minimised. These procedures are being further enhanced during 2009. In the event of any failure in these procedures there is a potential risk of injury or death to IMI's employees or others; or environmental damage, with the consequential impact on the operations and the risk of regulatory action against the Group. The Group maintains insurance for the costs associated with any employers' liability, workers compensation or equivalent claims and also maintains insurance covering environmental incidents. In common with all classes of insurance, the policies do not cover fines or penalties which could, in the event of a significant failure, be material to the Group.
M & A activity
IMI's growth strategy is in part dependent on acquisitions. The execution and integration of acquisitions involves a number of risks, including diversion of management's attention, failure to retain key personnel of the acquired business and risks associated with unanticipated events or liabilities. The Group may also be subject to liabilities as a result of past or future disposals. To mitigate against this, the Group has a vigorous due diligence process and ensures clear financial targets are in place. Any potential acquisition is also subject to a formal approval process. The Group also puts in place appropriate business integration processes to ensure that the Group's policies, values, ethical code, compliance and control framework are adopted and embedded as well as to ensure a smooth transition.
The Group's defined benefit pension arrangements are exposed to the risk of changes in interest rates and the market values of investments as well as inflation, increased longevity of members and statutory requirements. This may result in the cost of funding defined benefit pension arrangements becoming an increasingly significant burden on the Group's financial resources. The Group continually reviews these risks and takes action to mitigate them where possible.
Helen Afford Corporate Counsel Tel: 0121 717 3700
Will Shaw Investor Relations Tel: 0121 717 3700
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