Last checked at 18 May 2021 07:00
18 May 2021
Tesco PLC
Annual Report and Financial Statements and Notice of Annual General Meeting 2021
Further to the release of its preliminary results announcement on 14 April 2021, Tesco PLC (the "Company") announces that it has today published its Annual Report and Financial Statements 2021. In addition, the Company announces that its Notice of Annual General Meeting 2021 (the "Notice") has been sent to shareholders. The 2021 Annual General Meeting will be held at our Heart building, Shire Park, Welwyn Garden City, Herts, AL7 1TW on Friday, 25 June 2021 at 9.30 am (the "AGM").
We recognise the ongoing importance of engaging with investors, especially during these unprecedented times. In light of the current UK Government restrictions, we propose to follow a slightly different format for this year's events. We invite investors to join a Virtual Shareholder Event on Friday, 18 June 2021 at 2.00pm. This will allow shareholders to hear from the Board and ask questions relating to the business of the AGM. During this event, shareholders will receive presentations from the Group Chair, John Allan, and the Group Chief Executive, Ken Murphy, on the performance and activities of Tesco during the past year. This new event will also allow those shareholders who vote in advance of the AGM to do so after having heard from the Board. Following the latest guidance issued by the UK Government, it is not clear whether all shareholders who may wish to attend the AGM in person will be able to do so. Therefore, it is proposed that we hold the AGM with the minimum number of shareholders present (which will be facilitated by Tesco) as is required under the Company's articles of association to enable the business of the AGM to be conducted. Further information and the current arrangements for the AGM can be found on our website at www.tescoplc.com/AGM2021.
The Company's Annual Report and Financial Statements 2021, Notice of Annual General Meeting 2021 and Little Helps Plan Progress Update can be viewed on the Company's website at www.tescoplc.com.
In accordance with Listing Rule 9.6.1R, copies of the following documents have been submitted to the National Storage Mechanism and will shortly be available for inspection at https://data.fca.org.uk/#/nsm/nationalstoragemechanism
· Annual Report and Financial Statements 2021;
· Notice of Annual General Meeting 2021; and
· Proxy Form for the 2021 Annual General Meeting.
The Company's preliminary consolidated financial information and information on important events that have occurred during the year, and their impact on the financial statements were included in the Company's preliminary results announcement on 14 April 2021. That information, together with the information set out below, which is extracted from the Annual Report and Financial Statements 2021, 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 Financial Statements 2021. Page and note references in the text below refer to page numbers and note references in the Annual Report and Financial Statements 2021. To view the preliminary results announcement, visit the Company's website: www.tescoplc.com.
Enquiries: Robert Welch
Company Secretary
Tesco PLC
Tesco House
Shire Park
Kestrel Way
Welwyn Garden City
Hertfordshire
AL7 1GA
Tel: 07793 222569
LEI Number: 2138002P5RNKC5W2JZ46
Principal risks and uncertainties
Key Elements of our risk management framework
Our established risk management framework enables us to manage and report the risks that we face as a business. A risk that can seriously affect our performance, future prospects or reputation is termed a principal risk.
To manage our risks effectively we have identified a risk appetite which is driven by the following factors:
- our performance should be competitive, responsible and focused on creating value for all our stakeholders including customers, colleagues, suppliers and shareholders;
- our behaviours must be in line with our Code of Business Conduct to protect and enhance our reputation;
- we aim to operate our business within the capital allocation framework we have set out; and
- we seek to ensure that our principal risks are effectively managed.
Principal risks are discussed and agreed by Executive management and the Audit Committee. These risks are cascaded to the business units (top-down), who manage and report on the principal risks and any additional significant business unit risks. Business units also escalate risks as appropriate (bottom-up) to the Executive Committee. Our regular risk discussions consider emerging risks and include horizon scanning, which are reported at business unit and Executive Committee levels.
The principal risks are discussed and evaluated through regular meetings with senior management. The Board discusses each principal risk at least annually to provide oversight and ensure they remain well-managed and relevant.
The seven steps of the risk, controls and assurance framework on page 31 are embedded within our business as key elements of how we manage our risks and ensure appropriate controls are in place.
The risk assessment process relies on our evaluation of the likelihood and impact of risks, and on the development and monitoring of appropriate internal controls. Risk registers, detailing the risks we face, are an important component of how we manage our risks.
Risk Management
We have carried out a robust review of our principal risks, which includes periodic assessments of the risks we believe could threaten our business model, future performance, solvency or liquidity.
The Brexit risk has reduced since last year when there was no clarity on the long-term trading relationship between the UK and EU once the transition period expired on 31 December 2020. The new UK-EU Trade and Cooperation Agreement (TCA) removed the uncertainty of a no-deal Brexit. While this has reduced the Brexit risk, uncertainty remains around the full effect of Brexit, how the TCA will be implemented and how the trading relationship will develop.
We reported the COVID-19 pandemic as a new principal risk last year, and it remains an elevated risk. The pandemic has had a more profound impact on economies and people than was then expected. Uncertainty remains as to whether the recent lockdowns and vaccination programme are sufficient to bring the pandemic under control and allow normal life to return and, if so, when. The impact of the pandemic is also reflected across many of the principal risks and our mitigation strategies for them.
Climate change has become a widely acknowledged global emergency and a key priority for governments, businesses and citizens around the world. While risks relating to climate change and sustainability have previously been integral parts of several of our principal risks, we have now included climate change as a separate principal risk.
Tesco Bank has been through a challenging year due to increased macroeconomic uncertainty driven by, among others, the COVID-19 pandemic, thereby increasing its risk profile.
During the year, we recognised the potential disruption arising from the lengthy regulatory processes involved in the sale of our businesses in Thailand and Malaysia, which was completed in December 2020. The actions we took to monitor and manage these risks proved effective.
The following table sets out our principal risks, their movement during the year, and a summary of key controls and mitigating factors. They do not include all our risks and they are not set out in priority order. Additional risks not presently known, or that we currently deem to be less material, may also have adverse effects.
As part of our continuous improvement approach to risk management, and aided by the appointment of a new Chief Audit and Risk Officer in September 2020, we will continue to develop our methodology and risk framework. This will enhance risk management in supporting effective decision-making. As part of this, we also continue to develop and enhance our approach to risk appetite.
Principal risk | Risk movement | Key controls and mitigating factors |
Brexit † | ||
Failure to adapt to the UK's new trading relationship with the EU, and how it may develop as further agreements are reached or political decisions made, results in disruption to our business, cost inflation and impacts on our ability to supply our customers with the products and at the prices they expect. These and any adverse impact of Brexit on the UK economy could affect our business, financial results and operations. | The new UK-EU Trade and Cooperation Agreement (TCA) came into effect from 1 January 2021, setting out the conditions for tariff-free trading with the EU and removing the uncertainty of a no-deal Brexit. The business is impacted by more cumbersome border controls, goods inspection, and customs documentation, with the most trade friction being between Great Britain and Northern Ireland and Ireland. The full effect of Brexit on the business will emerge as new trade patterns are established and the new regulatory framework is better understood.
Risk decreasing | - We continue to assess and monitor the potential risks of Brexit and its impacts on our customers, colleagues and shareholders. We are also taking appropriate mitigation measures to address challenges including logistics, resourcing and supply with clear oversight by senior leaders and our Brexit Governance Group. - Our focus has been on avoiding transportation delays and bottlenecks. We are also working to ensure the accuracy of documentation to avoid waste and to ensure we maximise the shelf life of our fresh produce by working with our logistics partners. - We continue to work closely with Government, regulatory bodies and industry on implementing the TCA, sharing data and analysis to inform policymaking. |
COVID-19† | ||
The continuing global COVID-19 pandemic may have a significant and prolonged impact on global economic conditions, disrupt our supply chain (including our supplier base, specifically regarding business closure and consolidation, labour shortage, raw material supply and cost inflation), increase employee absences and adversely impact our operations (including Tesco Bank). Failure to adapt to changes brought about by this and any future pandemics in our markets and the environment in which we operate may adversely affect our competitiveness and financial results. | During the year, governments around the world introduced emergency public measures, including travel bans, quarantines and public lockdowns. These measures have, to varying degrees, been relaxed then reintroduced as COVID-19 transmission subsided before surging again, with new variants adding to the speed of transmission. Vaccines have been developed and are being rolled out with significant coverage in our core UK market, however uncertainty remains as to whether recent lockdowns and the vaccination programme are sufficient to bring the pandemic under control and allow normal life to return and, if so, when. It is also unclear how the pandemic will have changed the environment in which we operate and the choices customers make.
No risk movement | - The safety and wellbeing of our colleagues and customers has been and continues to be our overriding priority. Our Executive Committee is monitoring events closely with regular Board oversight, evaluating the impacts and designing appropriate response strategies. - Our teams continue to work tirelessly to implement specific actions to minimise disruption faced by our customers in these challenging times. This includes increasing our retail store colleague headcount (with redeployment of colleagues where possible), securing additional supply chain capacity to meet changes in demand, implementing changes to stores (including hours, additional security, hygiene and social distancing measures), and extending support to colleagues and customers at increased risk. - We have developed practices within our stores and distribution centres, as well as for office colleagues working from home, to help people adapt to the new ways of working. We have aligned our controls accordingly with appropriate assurance measures in place. - The availability of cash resources and committed facilities, together with our strong cash flow, are supporting Tesco's liquidity and longer-term viability.
|
Data security and data privacy† | ||
Failure to comply with legal or regulatory requirements relating to data security and data privacy in the course of our business activities results in reputational damage, fines or other adverse consequences. This includes criminal penalties and consequential litigation which may result in an adverse impact on our financial performance or unfavourable effects on our ability to do business. | As a retail organisation, we hold a large amount of personal data on customers and colleagues. The threat landscape has been ever-growing while we continue to invest in our security and privacy programmes. The move to homeworking for most office-based colleagues during the pandemic has presented its own security challenges and response requirements.
No risk movement | - We put our customers and colleagues at the heart of all decisions we make in relation to the processing of personal data. Our data privacy and protection policies clearly set out how we can protect and appropriately restrict customer, supplier and colleague data. Our multi-year technology security programme is driving enhanced data security capabilities. - We have an established team in our security operations centre to detect, report and respond to security incidents. - We have a third-party supplier assurance programme focusing on third-party data security and privacy risks. - We have a privacy compliance programme, which includes assessment and monitoring of risk across our global business. - There is regular reporting on progress and results of the security and privacy programmes to governance and oversight committees. - We recognise the importance of training and communication to help prevent data security and privacy-related incidents and have regular induction, awareness and refresher courses for our colleagues. - We have next-generation, behaviour-based anti-virus and malware solutions, data and payment encryption and threat detection tools that help us reduce the likelihood of being compromised. |
Health and safety | ||
Failure to meet safety standards in relation to our workplace results in death or injury to our customers, colleagues, or third parties, or in damage to our operations and leads to adverse financial and reputational consequences. | The pandemic has presented unique challenges for the safety of our customers and colleagues. It has driven the need for rigorous risk assessment, the rapid rollout of new ways of serving customers and of working for colleagues, clear communication, and close attention to and compliance with Government pronouncements.
No risk movement | - We have a business-wide, risk-based safety framework which defines how we implement and report on safety controls to ensure that colleagues, contractors and customers have a safe place to work and shop. - We require each business to maintain a comprehensive risk register and safety improvement plan to document and track enhancements. - Governance and oversight are established in the form of our Group Risk and Compliance Committee and business unit-specific health and safety committees. These committees review critical metrics and monitor the effectiveness of related controls. - Our safety audits, whistleblowing arrangements and the results of our annual colleague surveys inform management on the delivery of targeted safety initiatives, including communication plans. - Our assurance activities, such as store and distribution compliance reviews, safety health checks and audits, help us assess our compliance with established policies and processes. They enable us continuously to seek and identify areas for potential improvement. |
Climate change† | ||
Climate change has the potential to change dramatically the world in which we live and operate, and tackling climate change, by taking measures to limit its impact to manageable levels, has become a key priority for governments, businesses and citizens around the world. Even if manageable, the effect of climate change will be quite profound, and these measures will themselves have a significant impact on economies and the choices people make. Climate change has, therefore, moved from an emerging risk to a principal risk for the business. | Climate change has become a widely acknowledged global emergency, moving from an emerging risk to a principal risk for the business.
New risk | - Our Little Helps Plan on pages 12 to 16 sets out our ambitions and action plans for addressing climate change. The Board's Corporate Responsibility Committee provides governance and oversight. - We have established a number of metrics with appropriate management oversight and governance mechanisms to enable us to monitor progress. We are working with third-party organisations to continue developing this suite of metrics. There is a level of external assurance over the metrics, and we are working to further enhance and extend this. - We seek to align our climate-related ambitions with our financial policies and have launched our first sustainability-linked bond. We have also extended our climate-related financial disclosures. |
Responsible sourcing and supply chain† | ||
Failure to meet product safety standards results in death, injury or illness to customers. Failure to ensure that products are sourced responsibly across our supply chain (including fair pay for workers, adhering to human rights, clean and safe working environments, meeting climate change and sustainability commitments) and that all social and environmental standards are met, results in supply chain disruption, regulatory breaches, and reputational impacts of not meeting societal expectations. | The pandemic (and to an extent contingency planning for Brexit) put significant stress on our supply chain during the year. Surges in demand placed pressures on supply, and some suppliers were unable to maintain operating capacity. We have also had to adopt new approaches to our technical and supplier audits to ensure our standards have been met. We have continued to drive our environmental agenda, including actions relating to deforestation and animal welfare.
No risk movement | - Our product standards, policies and guidance help ensure that products are safe, legal and of the required quality. They cover food and non-food, as well as goods and services not for resale. - We have policies and guidance to help ensure human rights are respected and environmental impacts are responsibly managed. These include a focus on appropriately monitoring conditions and progress, tackling endemic sector risks and addressing wider community needs. - We run colleague training programmes on food and product safety, responsible sourcing, hygiene controls, and also provide support for stores. We also provide targeted training for colleagues and suppliers dealing with specific challenges such as modern slavery. - Our crisis management procedures are embedded within operations to quickly resolve issues if non-compliant products are produced or sold with clear escalation protocols. - We operate supplier audit and product analysis programmes to monitor product safety, traceability and integrity, human rights and environmental standards. They include unannounced audits of suppliers' sites and facilities. |
Competition and markets† | ||
Failure to deliver an effective, coherent and consistent strategy in response to our competitors and changes in market conditions result in a loss of market share and profitability. | We continue to face the challenges of a changing competitive landscape and price pressures across our markets. Our strategies are well-developed and we review them regularly to remain competitive and informed by competitor and market activity.
No risk movement | - Our Board develops and regularly challenges the strategic direction of our business to enhance our ability to remain competitive on price, range and service. This includes developing our online channels and multiple formats to allow us to compete in different markets. - Our Executive Committee and operational management regularly review markets, trading opportunities, competitor strategy and activity. - We carry out market scanning and competitor analysis to refine our customer proposition. |
Transformation | ||
Failure to achieve our transformation objectives due to poor prioritisation, ineffective change management and a failure to understand and deliver the technology required, results in an inability to progress sufficiently quickly to maintain a competitive cost structure and generate sufficient cash to meet business objectives. | There has been ongoing delivery of key programmes to meet our transformation objectives while we continue to push forward with new initiatives.
No risk movement | - We have clear market strategies and business plans to address changes to business priorities, strategic objectives and external market factors. - We have executive-level governance and oversight for all activities to ensure programmes are adequately resourced, milestones achieved, and key rollout decisions approved. - Real-time independent assurance activities are conducted during the transformation programme. |
Political, regulatory and compliance† | ||
Failure to comply with legal and other requirements in an increasingly restrictive regulatory environment due to changes in the global political landscape, results in fines, criminal penalties for Tesco or colleagues, consequential litigation and an adverse impact on our reputation, financial results, and/or our ability to do business. | Long-term changes in the global political environment and societal expectations are leading to greater regulation of business and potential penalties. In some markets, regulations can result in favouring local companies.
No risk movement | - Wherever we operate, we aim to ensure that we incorporate the impacts of political and regulatory changes in our strategic planning and policies. - We have compliance programmes and committees to manage our most important risks (e.g. anti-bribery and competition law) and we conduct assurance activities for each key risk area. - Our Code of Business Conduct and various policies (e.g. gifts and entertainment, conflicts of interest) are supported by new starter and annual compliance training and other tools such as our whistleblowing hotline. - The engagement of leadership and senior management is critical to the successful management of this risk area. We have established structured communication plans to provide a clear tone from the top. |
Technology | ||
Failure of our IT infrastructure or key IT systems results in a loss of information, inability to operate effectively, financial or regulatory penalties, and negative impacts on our reputation. Further, failure to build resilience at the time of investing in and implementing new technology results in potential loss of operating capability. | Dependence on technology continues to grow throughout the Group. We continue to improve our technology environment and invest in disaster recovery and business continuity, which are helping manage our exposure to external threats.
No risk movement | - Our multi-year programme continues to enhance our technology infrastructure and resilience capabilities. This involves significant investment in our hosting strategy, partnering with cloud providers and re-engineering some of our legacy retail systems, while building redundancy for key business systems. - Our investment in data centre facilities is providing greater resiliency and oversight for our key systems. - Our technology security programme continues to enhance our information security capabilities, thereby strengthening our infrastructure and information technology general controls. - We have combined governance processes to ensure alignment between our technology disaster recovery and business continuity activities. |
People | ||
Failure to attract, retain and develop the required capability and to embed our values in our culture results in an impact on the delivery of our purpose and business performance. | Market competition for key leadership and specialist talent remains strong. The year has also presented significant people challenges in supporting vulnerable colleagues, recruiting and training huge numbers of new permanent and temporary colleagues, supporting the shift to homeworking for most office-based colleagues, reinforcing our culture and driving our diversity and inclusion programmes harder.
No risk movement | - Our talent planning and people development processes are established across the Group. - Talent and succession planning are regularly discussed by line management and the Executive Committee, with regular oversight by the Nominations and Governance Committee and the Board. - We have clear potential and performance criteria and talent principles, underpinned by our employer value proposition and strategy. - An independent assessment of all leadership-level promotions and external hires is conducted to ensure capability, potential, leadership and values. - The Remuneration Committee agrees the objectives and remuneration arrangements for senior management. - Our 'how to' and 'when to' speak up programmes across all areas include our protector line and complaints process. These allow colleagues to raise in confidence any workplace concerns such as dishonest activity, bias or something that endangers colleagues, the public or the environment. - Our established Group Diversity and Inclusion strategy ensures that everyone is welcome and that we provide all our colleagues with equal opportunities for growth and development. This is embedded in our values, and we are committed to building an inclusive workplace. |
Customer† | ||
Uncertainties (including the pandemic and the effects of Brexit) and macroeconomic conditions impact our customers' budgets and force customers to reappraise the concepts of value and loyalty in a way to which we are unable to respond. | There remains considerable uncertainty as to the further impact on the economy and employment from the pandemic and on households. Also, the full effects of Brexit on the economy in the short and longer term are unclear. However, we feel we have the right strategies and processes in place to monitor this risk and manage it as far as circumstances will allow. The pandemic has seen a significant shift in consumer demand for online shopping which led us to significantly increase our capacity.
No risk movement | - We have a value, price, promotions and Clubcard strategy that drives our business priorities with governance and oversight mechanisms. - We have a consistent approach to building impactful customer propositions, offering high-quality and competitive value while improving the customer experience. - We undertake Group-wide customer insight analysis to improve our propositions by understanding and leveraging trends around customer behaviour, expectations and experience across the different parts of the business. - We have well-established product development and quality management processes, which keep the needs of our customer central to our decision-making. - We monitor the effectiveness of our processes by regularly tracking our business and competitors against measures that customers tell us are important to their shopping experience. |
Brand, reputation and trust† | ||
Failure to create brand reappraisal opportunities to improve quality, value and service perceptions, as well as meet societal expectations in relation to climate and sustainability, results in a negative impact on the trust which our communities and stakeholders place in our brand. | There has been widespread recognition of the steps we took to feed the nation while keeping customers and colleagues safe during the year, prioritising vulnerable customers and providing support for local communities around the country. We are, however, very aware that hard-won reputations can be quickly lost, and we continue to implement initiatives and activities aligned to our strategic priorities to continue to build and maintain trust. No risk movement | - Our Group policies, procedures and our Code of Business Conduct set out the detailed expectations and behaviours that enable us to make the right decisions for our customers, colleagues, suppliers, communities and investors. - We listen to our customers and stakeholders as part of our communication and engagement programmes. We reflect their needs in our plans, which include health, community, sourcing, climate and sustainability initiatives. - The Board's Corporate Responsibility Committee oversees all corporate responsibility activities and initiatives, including climate and sustainability programmes, to ensure alignment with customer priorities and our brand strategy. - We continue to use the advice of specialist external agencies and our in-house marketing expertise to maximise the value and impact of our brand. |
Tesco Bank | ||
Tesco Bank is exposed to a number of risks, the most significant of which are operational, regulatory, credit, funding, liquidity, market and business risk.
| The pandemic has resulted in lower trading activity, lending balances and income in the Bank and increased provisions for expected credit losses, reflecting forecast unemployment, resulting in a loss for the year. The Bank continues to actively manage the risks to which it is exposed and maintains significant regulatory capital. While the overall risks facing the Bank are similar to that of a year ago, the risk profile is judged to have increased, reflecting the uncertainty as to the timing and strength of a recovery in the economy on which the financial performance of the Bank relies.
Risk increasing | - The Bank has a formal structure for reporting, monitoring and managing risks. This comprises, at its highest level, the Bank's risk appetite, approved by the Bank Board and supported by the risk management framework. - The Tesco PLC Board also reviews and approves the Bank's financial risk appetite. Risk appetite defines the type and amount of risk that the Bank is prepared to accept to meet its strategic objectives. It forms a link between the day-to-day risk management of the business and its strategic priorities, long-term plan, capital planning and stress-testing. Adherence to risk appetite is monitored monthly. - The risk management framework brings together governance, risk appetite, the three lines of defence, the policy framework and risk management tools to support the business in managing risk as part of its day-to-day activities. The framework includes scenario analysis and regular stress-testing of financial resilience. - There is Bank Board risk reporting throughout the year, with updates to the Tesco PLC Audit Committee provided by the Bank's Chief Financial Officer and Audit Committee Chairman. A member of the Tesco PLC Board or Executive Committee is normally a member of the Bank's Board to enhance visibility and knowledge sharing. |
Liquidity† | ||
Failure of our business performance to deliver cash as expected; access to funding markets or facilities being restricted; failures in operational liquidity and currency risk management; Tesco Bank cash call; or adverse changes to the pension deficit funding requirement create calls on cash higher than anticipated, leading to impacts on financial performance, cash liquidity or the ability to continue to fund operations. | Tesco Group has traded robustly overall through the pandemic and the injection of £2.5bn from the proceeds of the sale of our Asia business has greatly reduced the prospect of having to make further pension deficit contributions in the future. The Group has maintained an Investment Grade rating from the credit rating agencies, and maturing bonds and the revolving credit facilities were refinanced.
No risk movement
| - We maintain an infrastructure of systems, policies and reports to ensure discipline and oversight on liquidity matters, including specific treasury and debt-related issues. - Our treasury policies are regularly reviewed by management, the Executive Committee and the Board. - The Group's funding strategy is approved annually by the Board and includes maintaining appropriate levels of working capital, undrawn committed facilities and access to the capital markets. - We regularly review liquidity levels and sources of cash, and we maintain access to committed credit facilities and debt capital markets. - We have a long-term funding framework in place for the pension deficit and there is ongoing communication and engagement with the Pension Trustees. - While recognising that Tesco Bank is financially separate from Tesco PLC, we continue to monitor the activities of Tesco Bank that could give rise to risks to Tesco PLC. - The Audit Committee reviews and annually approves our viability and going concern statements and reports into the Board. |
† Indicates that the principal risk has been included as part of the longer-term viability scenarios as detailed on pages 38 and 39.
Internal control
The key elements of the Group's internal control framework are monitored throughout the year and the Audit Committee has conducted a review of the effectiveness of the Group's risk management and internal control systems on behalf of the Board. To support the Board's annual assessment, Group Risk and Audit prepared a report on the Group's principal risks and internal controls. This describes the risk management systems and key internal controls, as well as the work conducted in the year to improve the risk and control environment, including the level of assurance undertaken. The internal control framework is intended to effectively manage rather than eliminate the risk of failure to achieve our business objectives. It can only provide reasonable, but not absolute, assurance against the risk of material misstatement or financial loss.
Statement of Directors' responsibilities
The Directors are responsible for preparing the Annual 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 are required to prepare the Group financial statements in accordance with international accounting standards in conformity with the requirements of the Companies Act 2006 and International Financial Reporting Standards adopted pursuant to Regulation (EC) No 1606/2002 as it applies in the European Union. The Group Financial Statements are also prepared in accordance with IFRS as issued by the International Accounting Standards Board. The Directors have also chosen to prepare the Parent Company financial statements in accordance with United Kingdom Generally Accepted Accounting Practice (United Kingdom Accounting Standards and applicable law), including Financial Reporting Standard (FRS) 101 Reduced Disclosure Framework. 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 the Parent Company financial statements, the Directors are required to:
- select suitable accounting policies and then apply them consistently;
- make judgements and accounting 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 inappropriate to presume that the Company will continue in business.
In preparing the Group financial statements, International Accounting Standard 1 requires that Directors:
- properly select and apply accounting policies;
- 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 IFRSs are insufficient to enable users to understand the impact of particular transactions, other events and conditions on the entity's financial position and financial performance; and
- make an assessment of the Company's ability to continue as a going concern.
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 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. The Directors are responsible for the maintenance and integrity of the corporate and financial information included on the Company's website. Legislation in the United Kingdom governing the preparation and dissemination of financial statements may differ from legislation in other jurisdictions. Each of the serving Directors, whose names and functions are set out on pages 42 to 46, confirm that, to the best of their knowledge:
- the financial statements, prepared in accordance with the relevant financial reporting framework, give a true and fair view of the assets, liabilities, financial position and profit or loss of the Company and the undertakings included in the consolidation taken as a whole;
- the Strategic report includes a fair review of the development and performance of the business and the position of the Company and the undertakings included in the consolidation taken as a whole, together with a description of the principal risks and uncertainties that they face; and
- the Annual Report and Financial Statements, taken as a whole, are fair, balanced and understandable and provide the information necessary for shareholders to assess the Company's position and performance, business model and strategy.