Principal risks and uncertainties continued
Viability Statement The context for assessment
The Directors have produced a budget for FY22 which reflects the anticipated trading levels in the current environment and years two to three of the strategic plan represent the expected trading growth over this period factoring in the initial planned growth in the budget. The Directors have also assessed the viability of the Group taking into account the current financial position, including the recent acquisition of the Intellectual Property Management division of Iron Mountain and the associated new equity issue and additional debt taken on to fund that acquisition. The Directors have also modelled the impact of certain severe but plausible scenarios, which have the greatest potential impact on viability in the period under review, as set out in the table below. In particular, the Directors have considered the potential impact of additional Covid-19 related economic disruption on both the short and long-term growth prospects for the Group in a number of different scenarios, the potential impact of Covid-19 on customers and the associated impact on the Group’s performance, as well as the Group’s ability to execute its strategy. The impact of these sensitivities has been reviewed against the Group’s projected cash flow position, available bank facilities and compliance with financial covenants over the three year viability period. Should these occur, mitigating actions would be required to ensure that the Group remains liquid and financially viable, which include a reduction of planned capital expenditure, freezing pay and recruitment and not paying a dividend to shareholders, all of which are within the Directors’ control. Conclusions Based on these severe but possible scenarios, the Directors have a reasonable expectation that the Group and Company will be able to continue in operation and remain commercially viable over the three year period of assessment.
In accordance with the requirements of the UK Corporate Governance Code, the aim of the Viability Statement is for the Directors to report on the assessment of the prospects of the Group meeting its liabilities over the assessment period, taking into account the current financial position, outlook, principal risks and uncertainties and key judgements and estimates in preparing the Financial Statements. The Directors have based their assessment of viability on the Group’s current business model and strategic plan, which is updated and approved annually by the Board, in line with our objectives to deliver sustainable and profitable growth, increase shareholder value and offer an improved service and product offering to our customers. This is underpinned by the strategic priorities outlined on pages 20 and 21 of the Strategic Report. The effective management of principal risks and uncertainties is outlined within pages 40 to 48 and this assessment emphasises those risks that could theoretically threaten the Group’s ability to operate, or to continue in existence
(with the VR designation). The assessment period
The Directors have assessed the viability of the Group over the three year period to May 2024, as this is an appropriate planning time horizon given the speed of change and customer demand in the industry and is in line with the Group’s strategic planning period. Assessment of viability The viability of the Group has been assessed taking into account the Group’s current financial position, available bank facilities, and the Board approved FY22 budget and three year strategic plan.
Scenario
Associated principal risks and uncertainties Description and potential impact
Business strategy
Attracting and retaining appropriate colleagues’ capacity and capability
Failure to deliver the Securing Growth Together transformation programme. Loss of key colleagues or inability to attract and retain key talent. The potential impact of the above would act as a barrier to future growth. A critical systems failure, leading to an inability to provide services to customers. The potential impact of this would be short-term reputational damage and an inability to do business in the short term, impacting revenue and profits. A cyber security breach occurs with theft of data and disruption to business services. The potential impact of this would be long-term reputational damage significantly impacting future revenue. The world was victim to a global pandemic of Covid-19 in early 2020. Most affected countries were locked down for a minimum of six weeks and the economic disruption is still ongoing. The potential longer-term impact of this would be loss of jobs due to loss of revenue. There would also be reputational damage if there was a cyber security breach due to the remote working we have put in place to safeguard our people.
Systems failure
Availability of critical information systems Cyber risk (including data protection)
Cyber security breach
Cyber risk (including data protection)
Covid-19 (over and
Global pandemic – Covid-19
above base case short- term impact)
48
NCC Group plc — Annual report and accounts for the year ended 31 May 2021
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