Chemring Group PLC |Annual Report and Accounts 2012

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52 Corporate governance Statement on corporate governance continued and prior years is reviewed on a monthly basis at both operational level and by the Board. Achievement of strategic business objectives and the associated risks are monitored by the Board on an ongoing basis. • All businesses hold monthly operating meetings, which are attended by the respective Divisional Managing Directors. In addition, the Chief Executive and the Finance Director attend operational and strategic review meetings with each of the businesses on a quarterly basis. In the case of the US businesses, formal Board meetings are held quarterly, and these are attended by main Board directors and external non-executive directors appointed in the US. The US non-executive directors are available to provide guidance and monitor governance in the US businesses throughout the year. External non-executive directors are also appointed to the Boards of the Group’s Italian, Norwegian and Australian subsidiaries. • Each business is required to comply with the Group Accounting Policy Manual, which sets out formal procedures for incurring certain types of expenditure and making contractual commitments. Compliance with the accounting policy manual is audited by the internal auditors, who report regularly to the Audit Committee on their findings. • The Board retains primary responsibility for acquisitions and disposals, and financing arrangements for the Group. Treasury management, IT strategy, insurance and significant legal matters are dealt with centrally from the Group head office, and the Board receives regular reports on each of these items. Reviews of the Group’s pensions, insurance and risk management arrangements are carried out by external advisors on a regular basis. • The Group Director of Safety, supported by divisional Health and Safety Management Committees, co-ordinates and controls the activities of each business in relation to health and safety and environmental matters, which are a key focus for the Board in view of the nature of the Group’s operations. The Chief Executive is the Board member nominated with specific responsibility for health and safety. The Chief Executive meets formally with health and safety professionals from each business on an annual basis. • The Group has implemented a Bribery Act Compliance Manual incorporating its anti-bribery policies and procedures. The Group’s Risk Management Committee meets on a quarterly basis. All members of the Executive Committee also serve on the Risk Management Committee. The Committee reviews the key risks associated with the achievement of the annual budget and the five year plan for each business, and the risk control procedures implemented. It also considers the top five health and safety risks which have been identified at each site and agrees the action plan to address these. The Risk Management Committee reports biannually to the Audit Committee and the Board on the top ten risks from a Group perspective, and monitors the actions being taken to mitigate these. The Board confirms that it has reviewed the effectiveness of the Group’s systems of internal control and risk management which were in place during the financial year ended 31 October 2012, and it confirms that systems of internal control and risk management compliant with the Code and the Turnbull Guidance were in place throughout the year and have remained in place up to the date of approval of these financial statements. Notwithstanding this, the Board will continue to take steps to embed internal control and risk management further into the operations of the Group and to deal with any areas of improvement which come to the attention of management and the Board. Procedures to deal with directors’ conflicts of interest All directors have a duty under the Companies Act 2006 (the “2006 Act”) to avoid a situation in which he or she has or can have a direct or indirect interest that conflicts or possibly may conflict with the interests of the Company. The Company’s Articles of Association include provisions for dealing with directors’ conflicts of interest in accordance with the 2006 Act. The Company has procedures in place to deal with situations where directors may have any such conflicts, which require the Board to: • consider each conflict situation separately on its particular facts; • consider the conflict situation in conjunction with the rest of their duties under the 2006 Act; • keep records and Board minutes as to authorisations granted by directors and the scope of any approvals given; and • regularly review conflict authorisation. Going concern The directors have acknowledged the latest guidance on going concern. They have made appropriate enquiries and taken into account factors, which are further detailed in the business review, such as: • the order book of £760.9 million as at the year end, despite more challenging market conditions and government spending cuts in the US and Europe; • the Group’s underlying continuing operating cash flow of £114.9 million during the year; • the balance sheet net assets at the year end of £433.5 million; and • the Group’s available banking facilities, which amount to £230 million, with maturities through to April 2015 (see note 24 of the financial statements). The Group’s banking and loan note covenants were all met during the year, and the expectation is that this will continue. As a consequence, the directors believe that the Company is well-placed to manage its risks. Further details on the covenants are set out in the business review on page 19 and note 21 of the financial statements. Details of how the Group manages its liquidity risk can be found in note 24 of the financial statements. The long term nature of the Group’s business, taken together with the Group’s forward order book, provide a satisfactory level of confidence to the Board in respect of trading in the year ahead. The directors have a reasonable expectation that the Group has adequate resources to continue in operational existence for the foreseeable future. Thus, they continue to adopt the going concern basis in preparing the financial statements. Approved by the Board of Directors on 24 January 2013. Signed on behalf of the Board S L Ellard Group Legal Director & Company Secretary Chemring Group PLC Report and Accounts 2012
53 Independent auditors’ report to the members of Chemring Group PLC We have audited the group financial statements of Chemring Group PLC for the year ended 31 October 2012 which comprise the consolidated income statement, the consolidated statement of comprehensive income, the consolidated statement of changes in equity, the consolidated balance sheet, the consolidated cash flow statement, the notes to the consolidated cash flow statement, and the related notes 1 to 36. The financial reporting framework that has been applied in their preparation is applicable law and International Financial Reporting Standards (IFRSs) as adopted by the European Union. This report is made solely to the Company’s members, as a body, in accordance with Chapter 3 of Part 16 of the Companies Act 2006. Our audit work has been undertaken so that we might state to the Company’s members those matters we are required to state to them in an auditors’ report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the Company and the Company’s members as a body, for our audit work, for this report, or for the opinions we have formed. Respective responsibilities of directors and auditors As explained more fully in the directors’ responsibilities statement, the directors are responsible for the preparation of the group financial statements and for being satisfied that they give a true and fair view. Our responsibility is to audit and express an opinion on the group financial statements in accordance with applicable law and International Standards on Auditing (UK and Ireland). Those standards require us to comply with the Auditing Practices Board’s (APB’s) Ethical Standards for Auditors. Scope of the audit of the financial statements An audit involves obtaining evidence about the amounts and disclosures in the financial statements sufficient to give reasonable assurance that the financial statements are free from material misstatement, whether caused by fraud or error. This includes an assessment of: whether the accounting policies are appropriate to the Group’s circumstances and have been consistently applied and adequately disclosed; the reasonableness of significant accounting estimates made by the directors; and the overall presentation of the financial statements. In addition, we read all the financial and non-financial information in the annual report to identify material inconsistencies with the audited financial statements. If we become aware of any material misstatements or inconsistencies we consider the implications for our report. Opinion on financial statements In our opinion the group financial statements: • give a true and fair view of the state of the Group’s affairs as at 31 October 2012 and of its profit for the year then ended; • have been properly prepared in accordance with IFRSs as adopted by the European Union; and • have been prepared in accordance with the requirements of the Companies Act 2006 and Article 4 of the IAS Regulation. Opinion on other matters prescribed by the Companies Act 2006 In our opinion the information given in the directors’ report for the financial year for which the financial statements are prepared is consistent with the group financial statements. Matters on which we are required to report by exception We have nothing to report in respect of the following: Under the Companies Act 2006 we are required to report to you if, in our opinion: • adequate accounting records have not been kept by the parent company, or returns adequate for our audit have not been received from branches not visited by us; or • the parent company financial statements and the part of the directors’ remuneration report to be audited are not in agreement with the accounting records and returns; or • certain disclosures of directors’ remuneration specified by law are not made; or • we have not received all the information and explanations we require for our audit. Under the Listing Rules we are required to review: • the directors’ statement contained within the statement on corporate governance in relation to going concern; • the part of the statement on corporate governance relating to the Company’s compliance with the nine provisions of the UK Corporate Governance Code specified for our review; and • certain elements of the report to shareholders by the Board on directors’ remuneration. Other matters We have reported separately on the parent company financial statements of Chemring Group PLC for the year ended 31 October 2012 and on the information in the directors’ remuneration report that is described as having been audited. Nigel Mercer ACA (Senior Statutory Auditor) for and on behalf of Deloitte LLP Chartered Accountants and Statutory Auditor London, United Kingdom 24 January 2013 Business review Corporate governance Financial statements Other information Chemring Group PLC Report and Accounts 2012
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Chemring Group PLC | Annual Report
Page 3 and 4: 1 Financial performance Revenue - c
Page 5 and 6: 3 Business review Corporate governa
Page 7 and 8: 5 Balance sheet, cash flow and debt
Page 9 and 10: 7 Secondly, we will maintain a stro
Page 11 and 12: 9 evaluation of its RVIS remote vis
Page 13 and 14: 11 for flight-tests on the Typhoon
Page 15 and 16: 13 A400 is a thermite incendiary gr
Page 17 and 18: 15 US Energetic Materials Qualifica
Page 19 and 20: 17 addition, profit at Alloy Surfac
Page 21 and 22: 19 Overall working capital decrease
Page 23 and 24: 21 Principal risks and uncertaintie
Page 25 and 26: 23 Risk description Competitive ris
Page 27 and 28: 25 to 0.80 this year. In absolute t
Page 29 and 30: 27 The Group is involved with a num
Page 31 and 32: 29 The Rt Hon Lord Freeman*~ Non-Ex
Page 33 and 34: 31 All holders of ordinary shares a
Page 35 and 36: 33 Directors’ remuneration report
Page 37 and 38: 35 The Committee aims to align the
Page 39 and 40: 37 Element Non-executive directors
Page 41 and 42: 39 Planned application of the polic
Page 43 and 44: 41 Service contracts and policy on
Page 45 and 46: 43 Implementation section (audited)
Page 47 and 48: 45 Long term incentives Details of
Page 49 and 50: 47 Directors’ shareholdings To re
Page 51 and 52: 49 The appointment and removal of t
Page 53: 51 Nomination Committee Mr P Hickso
Page 57 and 58: 55 Consolidated statement of compre
Page 59 and 60: 57 Consolidated balance sheet as at
Page 61 and 62: 59 Notes to the consolidated cash f
Page 63 and 64: 61 Accounting convention The financ
Page 65 and 66: 63 Deferred tax liabilities are rec
Page 67 and 68: 65 that no impairment has occurred
Page 69 and 70: 67 A segmental analysis of revenue
Page 71 and 72: 69 Operating profit is stated after
Page 73 and 74: 71 The total charge for the year ca
Page 75 and 76: 73 movements on derivatives, net of
Page 77 and 78: 75 14. Other intangible assets Deve
Page 79 and 80: 77 If stated under historical cost
Page 81 and 82: 79 The average credit period taken
Page 83 and 84: 81 22. Obligations under finance le
Page 85 and 86: 83 Liquidity risk The table below d
Page 87 and 88: 85 Analysed as: Included in current
Page 89 and 90: 87 26. Deferred tax The following a
Page 91 and 92: 89 The following awards were outsta
Page 93 and 94: 91 33. Discontinued operations The
Page 95 and 96: 93 Amounts recognised in the income
Page 97 and 98: 95 The principal assumptions used i
Page 99 and 100: 97 Independent auditors’ report o
Page 101 and 102: 99 Parent company statement of tota
Page 103 and 104: 101 2. Tangible assets Land and bui
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103 6. Creditors due within one yea
Page 107 and 108:
105 12. Staff costs 2012 Number 201
Page 109 and 110:
Notes 107 Business review Corporate
Page 111 and 112:
Business review Corporate governanc
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Chemring Group PLC |Annual Report and Accounts 2012

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