Greene King Regulatory News (GNK)

Greene King plc

Annual report and financial statements and AGM circular

In accordance with Listing Rule 9.6.1, copies of the annual report and financial statements for the year ended 3 May 2015 and of the circular convening the 2015 annual general meeting (AGM) have been submitted to the UK Listing Authority and will shortly be available for inspection from the National Storage Mechanism, which can be accessed at www.hemscott.com/nsm.do.

The annual report and the AGM circular will also be available on the company's website, www.greeneking.co.uk.

Lindsay Keswick

Company Secretary

7 August 2015

Information required by the Disclosure and Transparency Rule 6.3.5

The principal purpose of this announcement is to notify the submission by the company to the UK Listing Authority of copies of the annual report and financial statements and of the AGM circular. However, the information set out below, which is extracted from the annual report, is also included in the announcement for the sole purpose of complying with Disclosure and Transparency Rule 6.3.5 and the requirements it imposes on issues as to how to make annual financial reports public. It should be read in conjunction with the company's preliminary results announcement released on 1 July 2015. This material is not a substitute for reading the full annual report. Page numbers and cross-references in the extracted information below refer to page numbers and cross-references in the annual report.

Responsibility statement

The following statement is extracted from page 61 of the annual report and is not connected to the extracted information presented in this announcement or in the preliminary results announcement.

"Statement of directors' responsibilities in respects of the group financial statements

The directors are responsible for preparing the annual report and the group financial statements, in accordance with applicable United Kingdom law and those International Financial Reporting Standards as adopted by the European Union.

Under company law the directors must not approve the group financial statements unless they are satisfied that they present fairly the financial position, financial performance and cash flows of the group for that period. In preparing those group financial statements the directors are required to:

§ select suitable accounting policies in accordance with IAS 8: Accounting Policies, Changes in Accounting Estimates and Errors and then apply them consistently;

§ present information, including accounting policies, in a manner that provides relevant, reliable, comparable and understandable information;

§ provide additional disclosures when compliance with the specific requirements in IFRS is insufficient to enable users to understand the impact of particular transactions, other events and conditions on the group's financial position and financial performance; and

§ state that the group has complied with IFRS, subject to any material departures disclosed and explained in the financial statements; and

§ make judgments and estimates that are reasonable and prudent.

The directors are responsible for keeping adequate accounting records that are sufficient to show and explain the group's transactions and 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.

Statement of directors' responsibilities in respect of the parent company financial statements

The directors are responsible for preparing the strategic report, the directors' 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 elected to prepare the financial statements in accordance with United Kingdom Generally Accepted Accounting Practice (United Kingdom Accounting Standards and applicable law). 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 company and of the profit or loss of the company for that period. In preparing those financial statements, the directors are required to:

§ select suitable accounting policies and then apply them consistently;

§ make judgments and estimates that are reasonable and prudent;

§ state whether applicable UK Accounting Standards have been followed, subject to any material departures disclosed and explained in the financial statements; and

§ prepare the financial statements on the going concern basis unless it is appropriate to presume that the company will not continue in business.

The directors are responsible for keeping adequate accounting records that are sufficient to show and explain the company's transactions and disclose with reasonable accuracy at any time the financial position of the company and enable them to ensure that the company financial statements comply with the Companies Act 2006. They are also responsible for safeguarding the assets of the company and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities.

Directors' responsibility statement

The directors confirm, to the best of their knowledge:

· that these financial statements prepared in accordance with IFRS, as adopted by the European Union, give a true and fair view of the assets, liabilities, financial position and profit of the parent company and undertakings included in the consolidation taken as a whole; and

· that the annual report, including the strategic report, includes a fair review of the development and performance of the business and the position of the company and undertakings included in the consolidation taken as a whole, together with a description of the principal risks and uncertainties that they face; and

· having taken into account all matters considered by the board and brought to the attention of the board during the year, the directors consider that the annual report, taken as a whole, is fair, balanced and understandable. The directors believe that the disclosures set out in this annual report provide the information necessary for shareholders to assess the company's performance, business model and strategy.

The names of the directors who gave these statements are:

Rooney Anand (chief executive)

Tim Bridge (chairman)

Mike Coupe

Kirk Davis

Ian Durant

Rob Rowley

Lynne Weedall

Principal risks and uncertainties

The following description of the principal risks and uncertainties is extracted from page 28 of the report and accounts.

We have a formal risk management process which is designed to identify, assess and prioritise risks within the business, so that their impact on sustainable profitability is minimised and the group is able to deliver our business plans and strategic objectives, as well as to maximise shareholder returns.

The board retains ultimate responsibility for the group's risk management framework and reviews the group's principal risks on an annual basis. The board has delegated responsibility for assurance for the risk management process to the audit committee, which regularly reviews the risk management processes for each division and functional area. The implementation of risk management and internal control systems is the responsibility of the executive directors and other senior management.

Each division and functional area is tasked with maintaining, reviewing and regularly updating a risk register. Classification of risks takes into account the likelihood of their occurrence and the scale of potential impact (both financial and reputational) on the business. Each division and functional area is then responsible for evaluating current controls and drawing up plans to improve controls and manage new risks. Progress of these risk implementation plans is monitored by senior management on a regular basis. In addition, a group-wide risk committee reviews the individual risk registers in detail, monitors the risk mitigation plans and assists in the production of the group risk register.

Given that some risks are external and not fully within our control, the risk management processes are designed to manage risks which may have a material impact on our business, rather than to fully mitigate all risks.

This section highlights some of the key risks and uncertainties which affect Greene King, but it is not intended to be an exhaustive analysis of all risks facing the business.

Strategic Risks

Specific risk area

Integration of Spirit Pub Company and delivery of anticipated synergies.

Potential impact

Reduced revenue, profitability and lower growth rates.

Mitigation

Integration steering committee established to oversee integration, with agreed guidelines as to the aims of the integration. Retention arrangements in place for key staff. Communication plan designed to keep all staff and other stakeholders informed of progress and changes impacting them. Synergy targets established and systems are in place to record synergies captured. Plans to deliver revenue synergies through rationalisation of brands and offers are being drawn up.

Specific risk area

Failure to develop an appealing customer offer (including through diversification), to identify and respond to fast-changing consumer tastes and to maintain and grow market share.

Potential impact

Reduced revenue, profitability and lower growth rates.

Mitigation

Research conducted into consumer trends and plans developed to respond to key trends. Use of guest satisfaction tools and Net Promoter Scores to collect customer feedback and measure performance of our pubs. Greater investment in support and training for our employees to ensure service standards meet consumer expectations. Enhanced use of social media to communicate better with our customers and other consumers. Diversification options kept under constant review.

Economic and market risks

Specific risk area

Consumer confidence in the UK and increasing competitor activity.

Potential impact

Reduced revenue, profitability and lower growth rates.

Mitigation

Focus on value, service and quality to appeal to a broad range of consumers. Broad geographic spread of pubs including in London and the south -east. Ongoing agreement innovation, training and support for our tenants. Monitoring of competitor activity at strategic and tactical level.

Operational and people risks

Specific risk area

Brand damage caused by poor service standards, food provenance issues or other factors could deter customers.

Potential impact

Loss of revenue and reputational damage.

Mitigation

Tight controls in place to protect and enhance our reputation and brand values. Staff training, mystery guest visits, product recall procedures and incident escalation systems are in place. Social media monitoring to facilitate responses to issues being raised online. Supplier assurance programme ensures we are able to verify food provenance. Third party audits on food take place regularly to ensure standards are being maintained.

Specific risk area

Risk of major systems failure, cyber security breach and breach of the Payment Card Industry Data Security Standard regarding customer credit card data.

Potential impact

Potential impact on our ability to do business, impacting revenue and profitability. Reputational damage and financial damage from fines or compensation.

Mitigation

Networks are protected by firewalls and anti-virus protection systems with backup procedures also in place. Business continuity plan for critical business processes in place, which is regularly reviewed and tested. We have systems in place to ensure compliance with the necessary payment card industry standards and keep these under regular review. We have access to an off-site disaster recovery facility if required. Constant monitoring of threats to data protection by viruses, hacking and breach of access controls, with additional controls added during the year. Data governance committee drives improved behaviours and response management.

Specific risk area

Risks associated with the recruitment and retention and development of employees and licensees.

Potential impact

Inability to execute our business plans and strategy. Potential impact on the profitability of our Pub Partners business where the risks relate to licensees.

Mitigation

A branded recruitment plan is in place with a strong pipeline of suitable candidates and we operate a range of apprenticeship programmes. Remuneration packages are benchmarked to ensure that they remain competitive and appropriate mechanisms are in place for managing pay progression. Career development programmes are in place to retain key employees and leadership training has been introduced for all levels of management. Our annual employee engagement survey is used to obtain direct feedback from employees on a range of issues. Exit interviews are conducted with all head office, Brewing & Brands and Retail managers to enable action plans to be developed to deal with key leaver reasons. The range of tenancy agreements, training programmes and support available is designed to attract and retain the best quality licensees.

Specific risk area

Reliance on a number of key suppliers and third party distributors and on own ability to produce, package and distribute our own beers.

Potential impact

Supply disruption could impact customer satisfaction. Key supplier or distributor failure over the longer term could reduce revenues or lead to increased costs.

Mitigation

Backup plans are maintained in the event of the failure by or loss of a key supplier. Detailed risk management and mitigation plans exist in our internal production and distribution activities, which are tested regularly across the business. Key suppliers are expected to maintain disaster recovery plans, which we review on a regular basis.

Regulatory risks

Specific risk area

Risk of increased regulation, and failure to respond to recent changes in regulation, in relation to the sale or consumption of alcohol, including changes to drink driving laws, minimum pricing or other similar measures.

Potential impact

Potentially reduces demand leading to reduced revenue and profitability.

Mitigation

Use of price changes and promotions to encourage customers to drink responsibly, and education of our customers to ensure that they understand the legislation. Monitoring of legislative developments and active engagement with government where necessary. Diversified offer to include soft drinks, coffee, food and accommodation to reduce our reliance on alcohol-based revenue.

Specific risk area

Failure to comply with health and safety legislation, including in the areas of food safety and fire safety.

Potential impact

Serious illness, injury or even loss of life to one of our customers, employees or tenants could have a significant impact on our reputation, leading to financial loss too.

Mitigation

Comprehensive range of formally documented policies and procedures in place, including centrally managed system of compliance KPI tracking and internal and independent audits to ensure compliance with current legislation and approved guidance. Health and safety policies reviewed by our primary authority partner, Reading Borough Council, which has rated our safety management systems as very good. Safety measures are in place to ensure that product integrity is maintained and that all food and drink products are fully traceable. Compliance programme in place to ensure pubs are safely handed over to new tenants.

Specific risk area

Compliance with the Pubs Code to be introduced under the Small Business, Enterprise and Employment Act 2015

Potential impact

The mandatory "market rent only" option to be introduced by the Pubs Code, and the other provisions thereof, could increase costs for Pub Partners (including the risk of fines) and reduce revenue.

Mitigation

New, innovative agreements are being introduced to minimise the impact of the Pubs Code. Arrangements to monitor compliance with the current voluntary code will continue under the new Pubs Code.

Financial risks

Specific risk area

Inability to meet the funding requirements of the enlarged group.

Potential impact

Reduced revenue, profitability and lower growth rates.

Mitigation

The group's debt structures and financing requirements are kept under regular review. The group has a £460m bank facility to support activities outside the securitisation vehicles, which was entered into in July 2013 and is available until July 2018.

Specific risk area

Liquidity and covenant risk relating to the group's securitisation and other financing arrangements.

 Potential impact

A breach of any financial covenants applicable to the group would impact our ability to pay dividends or reinvest cash, and impact our reputation and ongoing creditworthiness.

Mitigation

Long-term strategy and yearly business plans are formulated to ensure that financial covenants can be met and monitored on a regular basis. Working capital is carefully forecast, regularly reviewed by the finance teams and closely managed.

Specific risk area

Failure to maintain sound systems of internal control to deal accurately with the large numbers of transactions undertaken by the business and ensure compliance with statutory obligations, including those relating to tax.

Potential impact

Fraud being perpetrated against us. Damage to our reputation caused by non-compliance with statutory obligations or a material mis-statement in the reported results of the company.

Mitigation

Our systems of internal control, more details of which appear on page 45 of the annual report, include robust controls, appropriately qualified staff, segregation of duties and authority levels for expenditure and payments. Appropriate advice is taken to ensure relevant statutory compliance and there is regular board oversight of open tax positions and the group's tax policy.

Specific risk area

Funding requirements of our defined benefit pension schemes, which are subject to the risk of changes in life expectancy, actual and expected price inflation and investment yields.

Potential impact

Increased deficit being recognised on our balance sheet, and volatility of the deficit makes longer term planning more difficult.

Mitigation

All the schemes are now closed to future accrual to reduce volatility.

There is regular monitoring of the schemes' investments and dialogue with the trustees on an ongoing basis regarding funding requirements.

Related party transactions

The following description of related party transactions is extracted from page 100 of the annual report.

"30 Related party transactions

No transactions have been entered into with related parties during the period.

Greene King Finance plc is a special purpose entity set up to raise bond finance for the group, and as such is deemed a related party. The results of this entity have been consolidated.

Compensation of directors and other key management personnel of the group

Directors' interests in an employee share incentive plan

Details of the options held by executive members of the board of directors are included in the remuneration report. No options have been granted to the non-executive members of the board under this scheme."