PR Newswire
London, April 9
Charles Taylor plc (�the Company�)
Annual Report and Accounts 2018 and Notice of 2019 Annual General Meeting
The Company has today published the following documents on its website at www.ctplc.com:
The Annual Report and Accounts for the year ended 31 December 2018; and
Notice of 2019 Annual General Meeting.
This follows the release of its unaudited results for the year ended 31 December 2018 on 13 March 2019.
The Company will hold its 2019 Annual General Meeting (AGM) at 10.00 am on Wednesday, 8 May 2019 at The Minster Building, 21 Mincing Lane, London EC3R 7AG.
In accordance with Listing Rule 9.6.1R, copies of these documents, together with a copy of the Proxy Form for the 2019 AGM, will shortly be available for inspection via the National Storage Mechanism at www.morningstar.co.uk/uk/NSM.
The Company's preliminary consolidated financial information and information on important events that occurred during the year, and their impact on the accounts were included in the Company's preliminary results announcement on 13 March 2019. That information, together with the information set out below, which is extracted from the Annual Report and Accounts 2018, constitute regulated information, which is to be communicated to the media in full unedited text through a Regulatory Information Service in accordance with the FCA's Disclosure Guidance and Transparency Rules ("DTR"), Rule 6.3.5R. This announcement is not a substitute for reading the full Annual Report and Accounts 2018. Page and note references in the text below refer to page numbers and note references in the Annual Report and Accounts 2018. To view the preliminary results announcement, visit the Company's website: www.ctplc.com.
For further information please contact:
Robert Davison � Group Company Secretary � 020 7680 5666
Chisom Onita � Group Deputy Company Secretary � 020 7522 7437
Charles Taylor plc
9 April 2019
Our Principal Risks
| What is the risk? | What is the potential impact if the risk is not managed? | How do we manage it? | |
|---|---|---|---|
| Business Risks | |||
| 1. Delivery of growth initiatives | Risk that the business does not deliver planned sustainable and profitable growth in its business plan. > There are external and internal drivers for the Group to achieve sustainable and profitable growth. The Group invests in a range of growth initiatives including the diversification of the Claims Services business and the growth of InsureTech. | > Any investment in growth has some risk of failure, and such a failure might lead to a loss of investment or reputational damage. > Potential consequences include negative changes to shareholder or client perceptions and challenges in recruiting or retaining high-quality staff. | > The Board sets the overall strategic direction for the Group, approves priorities for the year ahead, together with major initiatives, and regularly reviews progress against plans. > The Group�s business plan includes a broad range of growth initiatives that reduces the impact of failure of any one initiative. > Robust business plans for each business unit are developed and actively monitored and managed. A small number of the Group-wide organic growth initiatives are typically pursued at any one time and are subject to business case approval. > Thorough due diligence on a target or potential joint venture partner is conducted prior to commitment. Acquisitions and joint ventures are monitored against initial projections regularly during the year. > Group ExCo meetings include updates from key businesses on progress against Group priorities. The Group CEO and business leaders monitor progress on key initiatives and performance versus plan through the Quarterly Performance Review and monthly financial reporting processes. |
| 2. Business concentration | Risk of loss or diminution of business from any of the Group�s key clients responsible for a significant proportion of revenue. > A few key longstanding mutual clients are responsible for a significant proportion of Group revenues. In addition, across the Group�s other businesses there are a number of other important global clients who use multiple services. InsureTech, at this stage of its development, is also reliant on a small number of material projects and clients. > Where key clients are limited in number, they may react negatively where competitors are preferred by us or where we provide services to a competitor. | > The loss of any major client would have a negative financial impact on the Group that may include direct loss of revenue and potential knock-on cost efficiency implications for the remaining business. | > Management of our mutual clients involves long-term relationships with deep connections between the manager and the mutual, mainly through the mutual�s board. We invest significant senior time and resource to ensure that we maintain the standards of service that these important clients expect. Our multiple interactions with the client boards and with the mutuals� members provide opportunities to identify and address satisfactorily any potential issues, whether of service, conflict or otherwise, at an early stage. > Diversification of the business and the client base is a key strategic objective of the Group. This has been achieved through various acquisitions over the past few years and the expansion of the Claims Services business. We have completed, and will continue to consider, organic growth initiatives and targeted acquisitions to further diversify our sources of revenue. > A structured client relationship programme is in place for our most important non-mutual clients with nominated Charles Taylor senior executives leading on each one. Senior management of the relevant Charles Taylor businesses continue to build relationships with senior executives of our non-mutual clients and progress is reviewed regularly at the Group ExCo. > Senior management takes responsibility for ensuring that high standards of service can be set for new clients and ventures without reducing the quality of existing commitments. |
| 3. Failure to provide committed service | Risk that staff may be unable to provide the work product agreed with clients or the agreed level of service to them. > The Group has many business units and locations. The needs of business development can make additional demands on key staff outside their day-to-day job specification. > As a result, there is a risk that we could fail to provide the service product that we are committed to provide or to properly manage all parts of our business. | > Failing to meet the high standards our clients demand in the delivery of our services could expose us to the loss of clients or claims for damages. It could also expose the Group and our clients to reputational damage which could adversely affect our competitive position. | > Business unit CEOs are responsible for service delivery in their business and report to the Group CEO. Reporting lines in each key business help ensure accountability for service delivery and timely escalation of issues. > Our Management Services clients monitor service levels through their boards and corporate governance processes. The long-term relationships and deep connections we have with them enable any potential issues to be identified and addressed in a timely manner. The Group�s key clients are supported by dedicated teams focused on client service, performance and prompt action to address issues as required. > Contracts are in place with our major clients and standard terms and conditions, and disclaimers where appropriate, are used across our businesses. > Periodic client surveys provide important feedback to senior management and careful business planning, performance management and peer review reduce this risk further. > The Group constitutes incident response teams to deal with emergency situations with participants dependent on the nature of the incident. Crisis management and business continuity plans are in the process of being enhanced. > We maintain professional indemnity insurance to mitigate the financial impact should we suffer a claim against the Group. |
| 4. Material errors | Risk of material mistakes from process, HR, IT, Compliance, Legal or other areas leading to costs to the Group; and the risk of incurring extra costs to mitigate the risk of mistakes. > Our business is complex, operates in many countries and offers a diverse range of services. > As a result, we are reliant on strong processes and highly competent staff across the business. > As the business grows, the costs of controlling our business units to avoid errors increase. | > There is the potential for an ongoing extra cost burden across the Group to control our operations. > In the event of a serious error, there is the risk of directly incurring costs to address the situation or of our clients or other third parties seeking to recover their costs from the Group. | > Business leaders are responsible for service, compliance with policies and avoidance of errors. Monthly Group ExCo and senior business management meetings review client, operational and financial performance. > The Group�s processes require that all material client contracts are reviewed by the Group�s lawyers or senior managers and standard terms and conditions and appropriate protections are incorporated where possible. > A number of business areas have formal peer review processes. Major businesses have Risk Officers and regularly review their risks and issues. Internal Audit has a programme of planned reviews covering a number of business areas. > The Group has a comprehensive insurance programme to cover its main insurable risks. |
| 5. Staff-related risks | The risk that issues relating to staff impact our ability to operate one or more of our businesses, or to execute one or more growth initiatives. > As a predominantly professional services business which relies on the skill and expertise of its people, the Group faces various staff-related risks. These include the failure to attract and retain suitable personnel and risks that they do not perform their duties as required. | > Such risks could damage our ability to manage the business effectively. Loss of key staff could impact service levels and might lead to loss of revenue or clients. | > We aim to attract and retain high-quality staff by providing competitive remuneration and benefits packages and offering training and career development. > Our working conditions and recruitment processes are carefully planned and implemented, and our procedures are reviewed regularly. > The implementation of the Group HR strategy continues to improve the control environment through enhancements to compensation, talent management, learning and development and succession planning. > Resourcing levels are monitored on an ongoing basis by line management, business unit leadership and HR business partners. > Our annual employee engagement survey of all staff is used to identify issues and understand drivers of satisfaction and dissatisfaction. Business unit level results are made available to the leadership team of each business unit, which then formulates an action plan based on the findings. |
| Financial Risks | |||
| 6. High fixed cost/operational leverage | Risk of a material fall in revenues not being matched by a reduction in costs resulting in a negative impact on earnings, or that revenue growth lags investment in new or additional resources. | > There is a risk that the Group�s underlying profitability is negatively impacted, resulting in negative investor sentiment. The nature of the Group�s cost base makes this risk inherent to some extent in doing business. | > We have clearly defined procedures for the management and monitoring of financial risks. We have relevant performance indicators in place which are monitored regularly at business unit, Executive Committee and Board level. > Senior management continues to focus on containing/reducing costs and making the cost base more flexible. For example, this is achieved through its purchasing of services and remuneration structures, without adversely affecting the delivery of services or opportunities for growth. > A detailed annual budgeting and monthly performance review process is in place covering revenues and expenses. Quarterly performance reviews are held with businesses, which includes monitoring of investment in resources relative to revenue generated for major growth activities. > Investments that result in increased costs are subject to business case approval. Where investments are not generating the revenues anticipated in the business case, action is taken to reduce costs where appropriate. > Programmes of work are being implemented to centralise and standardise financial control processes. > Team utilisation is managed and, where possible, people are reallocated to more productive areas as required. |
| 7. Breach of banking obligations | The risk of a breach of banking obligations resulting in the Group�s access to required loan facilities being restricted in some way. > The Group maintains banking facilities on market standard terms to maintain an efficient capital structure and access working capital funds. > Our banking facility agreements contain a range of standard covenants and other obligations. | > In the event of a breach of covenant or conduct restrictions, the banking facilities might be withdrawn, not renewed, or renegotiated on disadvantageous terms. > If the Group�s financing performance deteriorates, financing may not be secured for amounts outstanding when a facility expires. | > The funding position has been maintained at appropriate levels as the Group has grown, providing financial flexibility and covenant headroom. We manage working capital and monitor relevant performance indicators to identify and take appropriate steps to mitigate the risk. Covenant compliance is reviewed and monitored by the Finance Committee and reported to the Board. > When considering acquisitions, our typical approach is to offer a proportion of the consideration on completion, with a proportion deferred and contingent on performance. This mitigates the cash flow impact of the acquisition and reduces the risk of the overall transaction being less financially advantageous than originally assessed. The risk reward profile of new investments and other uses of cash are considered carefully by management. > Cash flow forecasts are updated quarterly to project the future funding requirements and headroom against banking facilities and covenants. Monthly reports covering financial performance versus plans include analysis of financial covenant compliance. > External auditors review the Group�s compliance with financial covenants on a six-monthly basis. |
| 8. Significant increase in liability to fund defined benefit pension schemes | The risk that outstanding pension scheme deficits need to be funded within a short timescale, requiring an increase in Charles Taylor�s contributions, and thus weakening our balance sheet. | > The Company has four defined benefit pension schemes and of these the two largest ones have funding deficits. In the event that this risk crystallises it is likely to negatively impact the Group�s financial resources. | > Each of the defined benefit pension schemes are closed to new members. The largest scheme has been closed to future accruals. > There is regular dialogue between the trustees, their investment managers and senior management covering investment policy and assessment of asset and liability risks. > The financial position of the Group�s defined benefit pension schemes is regularly monitored. The size of any deficit is not a direct indicator of risk to the Group, which is driven primarily by its ability to meet future pension payment obligations as and when they become due. > We maintain close working relationships with trustees with at least twice-yearly presentations/meetings. We have strengthened the control environment in relation to this risk and we monitor pension regulations to ensure compliance with the latest requirements. |
| Legal and Regulatory Risks | |||
| 9. Material breach of legal and regulatory obligations | Risk of non-compliance with national or international legal and regulatory requirements. > The Group has to comply with a wide range of legal and regulatory requirements across its various businesses. It also has an indirect obligation to ensure its mutual clients comply with their legal and regulatory requirements. > Legal and regulatory frameworks are continually evolving in various areas which impacts our own and our clients� regulated businesses. | > Breach of these requirements could affect adversely the Group�s relationships with regulators and clients and expose us to additional risks, including reputational damage, financial penalties or the withdrawal of the regulatory approvals we require to conduct our business. | > The ARCC and the GAC monitor compliance activities and provide challenge and recommendations where appropriate. This includes ensuring that the Group�s regulated entities continue to meet relevant regulatory requirements. > The Group regularly reviews its policies and procedures in relation to regulatory matters and to ensure that appropriate training is in place. > Where there are specific regulatory changes, Group-wide projects and working groups are set up to identify and implement internal changes required. > The Legal, Compliance and Risk functions across the Group have been further enhanced in 2018. Minimum set risk management requirements are in place with which key business areas need to comply. > Internal Audit and our external auditor test compliance with the controls put in place to protect against legal and regulatory risks. These efforts are supplemented by additional external advisory resources where appropriate. > The Group�s processes require that all material client contracts are reviewed by the Group�s lawyers or senior managers. Client teams have service-level agreements to set expectations and reduce the risk of contractual dispute. |
| Externally-driven Risks | |||
| 10. External events impacting the Group�s business model | The risk that external events which are unanticipated have an adverse effect on the businesses of Charles Taylor. > This risk could crystallise suddenly or gradually. Examples include: consolidation of clients, new entrants/competitors in key markets, tax changes, and geo-political and macro-economic events. > The Group�s exposure to political and economic risk has increased with its growing presence in LatAm � there are mitigating controls and structures in place, and this overall exposure is manageable in the context of the overall Group. | > In the event that this risk crystallises it may negatively impact the markets in which the Group operates. It may also impact the Group�s key clients which in turn could have a knock-on impact on our financial performance. | > The Group has a diversified business model spanning a broad range of services, geographies and sectors. This allows it to spread the risk of the impact of an external event on one area of the business. > The Group actively monitors market changes, trends and potential risks to its various businesses. Each business carries out a review of potential internal and external risks annually, and this is reflected within its business plan. The Audit, Risk and Compliance Committee reviews current and emerging risks across the Group, and the controls for each, annually. > The Group, on its own behalf and on behalf of its managed clients, has assessed the impact of the UK�s exit from the EU and key business areas are executing plans to deal with potential Brexit outcomes. A Brexit Working Group spanning all relevant businesses and Group functions has been in place throughout 2018 and reports to the Group Assurance Committee and Audit, Risk and Compliance Committee. Businesses have plans in place for potential Brexit outcomes. > The Group constitutes incident response teams to deal with emergency situations with participants dependent on the nature of the incident. However, although the risk of external events occurring is generally inevitable, in many scenarios there is likely to be warning and time to plan. |
| 11. Cyber risk | Risk of financial loss or other detrimental impact due to an attack by an external agent on Charles Taylor�s technology systems. > Three broad types of external attack are: � An attack which disrupts service and access to systems; � A �phishing� attack that may be aimed at committing fraud; and � A hacking attack to obtain and/or modify the underlying data. | > Cyber-attacks that result in a loss have the potential for financial, regulatory and reputational impacts. | > The Group�s main business areas have various controls in place to mitigate its exposure to cyber risk. These include: � Information security controls covering email, system access, external compromise, security testing, data, technology resilience and external accreditation. � Operational controls include refining of business continuity plans, disaster recovery and incident response teams convened to respond to major incidents including cyber breaches. � Finance payments processes controls covering set-up, review and approval of payments. � Staff-related controls including education, awareness and behavioural elements of cyber risk and phishing attacks. � Compliance and risk controls covering the application of the Group risk management model, cyber insurance and cyber incident notification and risk review. |
| Preparing for Brexit In common with all UK businesses, Charles Taylor has had to prepare for the potential outcomes of the Brexit negotiations. We are a global provider of professional services and technology solutions to the global insurance market, and our business model interacts with all stages in the insurance value chain. Brexit is a challenge that is faced by every sector in the UK and, as insurance specialists, with substantial experience responding to regulatory, political and economic change, we are well positioned to support both our own businesses and those of our clients in reacting to the potential outcomes of the government negotiations. In 2017, we established a Brexit Working Group with representatives of each business and our central support functions such as HR, Legal, Compliance, Finance and IT. The purpose of the Group is to identify and plan for potential exposures to a negotiated settlement and transition period or to a �no-deal� scenario. This has required constant reassessment as varied outcomes have been considered during the UK/EU negotiations. As a result of this process, we are confident that we have the information and plans to respond appropriately to any outcome. Potential impact on Charles Taylor As a global business, the majority of our operations will not be affected. While the ultimate outcome of the Brexit negotiations is still far from clear, following extensive planning work by the Company, we believe we are well placed to meet the demands of Brexit. We do not believe that our revenues or potential for profits will suffer any material negative impact due to Brexit. Moreover, our clients are seeking solutions for their Brexit plans and will rely on specialists with technical and specialist knowledge together with a global network to support them through this. We see this as a potential opportunity as the outcome of the Brexit negotiations becomes clear. Charles Taylor Claims Services Charles Taylor already operates Claims Services businesses in several EU jurisdictions other than the UK, including France, Italy, Greece and Spain. To supplement this, we have established a new legal entity in Ireland. Our network of entities and Claims Services teams will enable us to continue to support client business that migrates from the UK to other EU jurisdictions due to a loss of passporting rights. We believe that any such loss of client passporting rights would have a very limited negative effect on our Claims Services business. Charles Taylor Insurance Management One of our major insurance management clients with a UK-regulated insurance entity has decided to write some of this business from an EU carrier in another jurisdiction. On behalf of our client, we have established a regulated insurer in Ireland (as well as a Charles Taylor service company) to support this move and enable continuity of business for our client and for Charles Taylor. This included obtaining the required regulatory approvals, recruiting the local team and establishing the required operational procedures. There is minimal impact on our investment management, captive management and life insurance management businesses as the vast majority of this business does not relate to the EU. Charles Taylor InsureTech Current and future non-UK EU clients can be served via our existing EU entities. All software solutions are compatible with EU requirements. Data held on cloud-based servers in the EU should be easily migrated to alternative jurisdictions where required and a plan to do so is in place if required. By functional area Legal: Our material contracts have been reviewed; any potential issues have been identified and assessed for the potential for cancellation, reduction of revenue and income together with data protection issues. People: A detailed assessment has been carried out to identify EU nationals working in the UK and UK nationals working in the EU. We identified fewer than 100 such individuals and are supporting them through their settlement/pre-settlement status applications, should this be necessary. We have agreed arrangements to limit travel to and from the UK at the end of March in order that staff are not hampered on their travels due to a �no-deal� outcome. IT/data: We have a plan and timetable in place to ensure there is no loss of service or access to data in the event of a �no-deal� outcome. Charles Taylor is GDPR compliant and has identified options for EU-UK transfer post-Brexit if required. | |||
Related Party Transactions
Balances and transactions between the Company and its subsidiaries, which are related parties, have been eliminated on consolidation and are not disclosed in this note 33.
Transactions with the associate undertaking including amounts due from and owed to the undertaking are disclosed in notes 18, 21 and 22.
Transactions and balances with the Charles Taylor Employee Share Ownership Trust are shown in the note below the Consolidated Statement of Changes in Equity.
The remuneration of Directors is disclosed in the Directors� Remuneration Report. The remuneration of key management personnel is disclosed in note 7. Certain employees of the Group are members of one of the four defined benefit schemes operated by the Group, of which details are given in note 32.
Directors� Responsibilities Statement
The Directors are responsible for preparing the Annual Report and the financial statements in accordance with applicable law and regulation.
Company law requires the Directors to prepare financial statements for each financial year. Under that law, the Directors have prepared the Group and the Company�s financial statements in accordance with International Financial Reporting Standards (IFRSs) as adopted by the European Union. Under company law, the Directors must not approve the financial statements unless they are satisfied that they give a true and fair view of the state of affairs of the Group and the Company and of the profit or loss of the Group and the Company for that period. In preparing the financial statements, the Directors are required to:
> select suitable accounting policies and then apply them consistently;
> state whether applicable IFRSs as adopted by the European Union have been followed for the Group�s and the Company�s financial statements, subject to any material departures that are disclosed and explained in those financial statements;
> make judgements and accounting estimates that are reasonable and prudent; and
> prepare the financial statements 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 Company�s transactions and disclose with reasonable accuracy at any time the financial position of the Group and Company and enable them to ensure that the financial statements and the Directors� Remuneration Report comply with the Companies Act 2006 and, as regards the Group financial statements, Article 4 of the
IAS Regulation.
The Directors are also responsible for safeguarding the assets of the Group and the Company and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities.
The Directors are responsible for the maintenance and integrity of the Group�s and the Company�s website. Legislation in the United Kingdom governing the preparation and dissemination of financial statements may differ from legislation in other jurisdictions.
The Directors consider that the Annual Report and Accounts, taken as a whole, is fair, balanced and understandable and provides the information necessary for shareholders to assess the Group�s and the Company�s performance, business model and strategy.
Each of the Directors, whose names and functions are listed in the Directors� Report on page 104, confirm that, to the best of their knowledge:
> the Company�s financial statements, which have been prepared in accordance with IFRSs as adopted by the European Union, give a true and fair view of the assets, liabilities, financial position and loss of the Company;
> the Group financial statements, which have been prepared in accordance with IFRSs as adopted by the European Union, give a true and fair view of the assets, liabilities, financial position and profit of the Group; and
> the Directors� Report includes a fair review of the development and performance of the business and the position of the Group and Company, together with a description of the principal risks and uncertainties that it faces.
In the case of each Director in office at the date the Directors� Report
is approved:
> so far as the Director is aware, there is no relevant audit information of which the Group�s and Company�s auditors are unaware; and
> they have taken all the steps that they ought to have taken as a Director in order to make themselves aware of any relevant audit information and to establish that the Group�s and the Company�s auditors are aware of that information.
