Annual Report & Notice of AGM

RNS Number : 5502R

Royal Mail PLC

15 June 2018

 

Royal Mail plc

LEI: 213800TCZZU84G8Z2M70

15 June 2018

Publication of Annual Report and Financial Statements 2017-18 and 2018 Notice of Annual General Meeting

Following the release by Royal Mail plc (the Company) on 17 May 2018 of the Company's Financial Report for the Full Year Ended 25 March 2018 announcement, the Company announces that it has today published its Annual Report and Financial Statements 2017-18 (Annual Report 2017-18) on Royal Mail's website: https://www.royalmailgroup.com/results 

The 2018 Annual General Meeting (AGM) will be held on Thursday 19 July 2018 at 11.00am at the Mercure Sheffield St Paul's Hotel, 119 Norfolk Street, Sheffield, S1 2JE. The 2018 Notice of AGM has also been published and is now available via Royal Mail's website:

https://www.royalmailgroup.com/investors/shareholder-communications/annual-general-meetings

In accordance with Listing Rule 9.6.1, copies of the Annual Report 2017-18, Notice of AGM and Proxy Form have been submitted to the National Storage Mechanism and will shortly be available for inspection at: www.morningstar.co.uk/uk/NSM 

The Company also announces that it will provide shareholders, by their chosen communication means, the above documents.  

Disclosures required in accordance with DTR 6.3.5

Information on important events that have occurred during the financial year and their impact on the Annual Report 2017-18 were included in the Financial Report for the Full Year Ended 25 March 2018 announcement released on 17 May 2018. This, together with the following information, which is extracted from the Financial report for the full year ended 25 March 2018 (Financial Report) and the Annual Report 2017-18, constitutes the information required by DTR 6.3.5 to be communicated in full, unedited text through a regulatory information service.  This information is not a substitute for reading the full Annual Report 2017-18. Any page or note references in the text below refer to those in the Annual Report 2017-18. 

For further information, please contact:

Company Secretary:

Kulbinder Dosanjh

Phone: [phone]

Email: [e-mail]

Investor Relations:

Catherine Nash

Phone: [phone]

Email: [e-mail] 

Media Relations:

Beth Longcroft

Phone: [phone]

Email: [e-mail] 

PRINCIPAL RISKS

The Governance section describes in detail how the Group manages its risk from the Group Board level, its respective sub-committees and throughout the organisation. Further details can be found on pages 54-99.

The table below details each principal business risk, those aspects that would be impacted were the risk to materialise, our assessment of the current status of the risk and how the Group mitigates it.

Principal risk	Status	How we are mitigating the risk
New Pension, Pay and Pipeline agreement and the risk of industrial action There is extensive trade union recognition in respect of our workforce in the UK with a strong and active trade union. As Royal Mail Group continues to pursue the necessary efficiency programmes in order to remain competitive in the letters and parcels markets and implements the new Pensions, Pay and Pipeline agreement, there remains a risk of industrial action.
Industrial action	↓
There is a risk that one or more material disagreements or disputes between the Group and its trade unions could result in widespread localised or national industrial action. Widespread localised or national industrial action would cause material disruption to our business in the UK and would be likely to result in an immediate and potentially ongoing significant loss of revenue for the Group. It may also cause Royal Mail to fail to meet the Quality of Service targets prescribed by Ofcom, leading to enforcement action and fines.	The Agenda for Growth agreement developed jointly with the Communication Workers Union (CWU) represented a fundamental change in our relationship with the CWU, and continues to promote stability in industrial relations. In February 2018, we announced the new Pensions, Pay and Pipeline agreement (the "agreement") with the CWU. As part of the agreement, Royal Mail and the CWU have committed to a broad programme of operational change, as well as pension reform, changes to pay and terms and conditions and a vision to achieve a 35-hour working week by 2022. The agreement requires a high level of operational change in an increasingly competitive market, which may put additional strain on the stability of our industrial relations.	Our Agenda for Growth agreement with the CWU provides a joint commitment to improved industrial relations and to resolving disputes at pace and in a way that is beneficial to both employees and Royal Mail. Under the Agenda for Growth, there is a prescribed resolution process for disputes which requires trained mediators nominated by and representing both the CWU and the business. This must be followed before any industrial action can take place. The Agenda for Growth agreement has legally binding protections for the workforce in respect of future job security and our employment model. This can be rescinded in the event of national industrial action if the appropriate dispute resolution processes have not been followed.
Pension arrangements	↓
We recognise that pension benefits are important to our people and that we need to continue to provide sustainable and affordable pensions arrangements that are acceptable to our people and unions. There is a risk that we may be unable to obtain the necessary legislative changes to enable us to implement the UK's first Collective Defined Contribution (CDC) pension scheme as agreed with the CWU.	We have closed the Royal Mail Pension Plan (RMPP) to future accrual in its previous Defined Benefit form and introduced a Defined Benefit Cash Balance Scheme from 1 April 2018. Both this transitional arrangement and the CDC scheme are expected to contain pension costs at about ￡400 million per annum.	We are lobbying Government to make the necessary legislative and regulatory changes required to introduce the CDC pension scheme.
Efficiency	↔
Royal Mail must become more efficient and flexible in order to compete effectively in the letter and parcel markets and grow revenue. The success of our strategy relies on the effective control of costs across all areas and the delivery of efficiency benefits. We continue to operate a tight balance between achieving efficiency improvements whilst having some of the highest service specifications of any major country in Europe. This requires careful management of efficiency and Quality of Service.	In February 2018 we announced the agreement with with the CWU. As part of the agreement, Royal Mail and the CWU have committed to a broad programme of operational change, as well as pension reform, changes to pay and terms and conditions and a vision to achieve a 35-hour working week by 2022. We are continuing to see the positive impact of our cost avoidance activities across the UK business. This has involved focus on our efficiency performance in all areas, while providing quality service to our customers through our engaged workforce. Our cost avoidance programme achieved £235 million of costs avoided in 2017-18, despite the industrial relations environment. However, the negotiation of fundamental changes to our pension and other terms and conditions impacted productivity performance, which has fallen below the lower range of our two to three per cent target. It also impacted progress in some business as usual transformation initiatives. Coming out of a difficult industrial relations environment and given the scale of change underpinning the agreement, there is a risk we will be unable to make the required short-term business as usual and/or programme level cost avoidance changes in a timely way consistent with the agreement.	The agreement creates a platform for Royal Mail and CWU to work jointly together to rebuild confidence and trust, deliver change and pursue opportunities to support growth and efficiency. This includes trialling new delivery methods, a new resource scheduling system and automated hours data capture, as well as progressing towards a shorter working week dependent on progress on efficiency and change initiatives. The implementation of the agreement will be underpinned by a rigorous programme comprising the initiatives within the agreement. The agreement also includes proposals for a series of Forums that will allow us to work collaboratively with our unions to agree efficiency improvements and growth opportunities. This includes a fundamental review of the pipeline over three, five and seven years, an innovation forum as well as a forum to monitor progress to move towards a shorter working week. We exceeded our target on cost avoidance and have over 200 projects and initiatives both in and outside of the core operations, which underpin the cost avoidance target of £230 million in 2018-19. We continue to scope additional cost avoidance opportunities beyond 2018-19.
Changes in market conditions and customer behaviour The industry sectors in which we operate remain highly competitive, with customers demanding more and our competitors responding quickly to these changing demands.
Customer expectations and Royal Mail's responsiveness to market changes	↔
Changes in customer expectations, and changes in the markets in which the Group operates, could impact the demand for our products and services. There is a risk that our product offerings and customer experience may not adequately meet evolving customer expectations, or that we are unable to innovate or adapt our commercial and operational activities fast enough to respond to changes in the market. We expect the letters sector to remain in structural decline, in the medium-term, driven by e-substitution, lower GDP, the possible impact of GDPR and continuing business uncertainty.	We expect addressed letter volumes (excluding political parties' election mailings) to continue to decline in the range of four - six per cent per annum in the medium-term. For 2018-19, we expect to be at the higher end of the range of decline for the full year due to the impact of GDPR. However, during 2018-19 the rate could move outside of this range for a period during the year. GDPR may drive risk-averse behaviour, leading to a reduction in marketing mail volumes in 2018-19. However, marketing mail does not fall within the scope of The Privacy and Electronic Communications Regulations (PECR), which affect marketing by electronic means, such as email and SMS. The parcels sector is competitive and evolving. Competition in the UK domestic and international markets is intense, with competitors offering innovative solutions that include convenient, reliable delivery and return options, and improved tracking services. The UK has one of the most developed e-commerce markets in the world. Growth available in the addressable UK parcels market has been impacted by Amazon's activities. Amazon is both a customer of and a competitor to the Group. Capacity expansion in the sector continues to exert downward pressure on prices. In the parcels business, disintermediation in online marketplaces may divert traffic to other carriers.	We have produced a guide, which highlights key aspects of the new GDPR legislation when communicating and marketing to customers, including how mail can help our customers thrive in a GDPR world. We are also undertaking intervention activity with our largest posting customers and cold data providers. During the year, we helped launch JIC MAIL (Joint Industry Committee) to offer standardised data on mails reach and frequency of mailing demonstrating more clearly to the market how consumers interact with direct mail. It is the first time that the mail industry has had independent data to indicate frequency and usage. There is a continuing requirement to invest in targeted growth and innovation to meet challenges in the marketplace, as well as reducing cost to ensure better price competitiveness. We use continuous in-depth market monitoring and research to track how well we match our customers' expectations, including relative to our competitors, and to predict volume trends. We continue to invest and introduce, at pace, new and improved products and services that enhance customers' online and delivery experience; and, expand our core offering to small and medium sized businesses and marketplace sellers. We target investments that will extend our value chain offer and increase our presence in faster growing areas of the parcels sector. We are investing in new equipment to respond to both our sending and receiving customers evolving needs such as timely and accurate tracking information. The agreement creates opportunities to implement initiatives such as later acceptance times. Estimated delivery window, enhanced collection and returns options are also key initiatives that are underway.
Economic and political environment	↔
Historically, there has been a correlation between economic conditions and the level of letter and B2B parcel volumes. Flat or adverse economic conditions could impact our ability to maintain and grow revenue, either by reducing volumes or encouraging customers to adopt cheaper products or formats for sending letters and parcels. The Labour Party's 2017 manifesto included a pledge to bring a number of private companies, including Royal Mail, back into public ownership.	The Board continues to monitor the economic environment including possible implications of Brexit on the UK economy and the Group's operations. Specific areas of focus include: ·  Business uncertainty, with the recent slowdown in economic activity, is possibly an indicator that business customers will look to reduce costs and compete aggressively for contracts, impacting letter volumes, in particular marketing mail. ·  A decline in the value of Sterling, which impacts our International business in terms of the exchange rate effect on imports and exports and through the impact of higher inflation resulting from increases in the prices of UK imported goods and services. Movements in the Sterling exchange rate could also result in higher import prices, increase terminal dues and impact domestic inflation rates leading to higher fuel and wage increases. ·  The terms on which the UK leaves the EU's customs union and VAT territory. Our International business is one of the largest third parties involved in the collection of tax and duties on behalf of HMRC. Changes to customs arrangements could impact processing procedures and charges for international mail, customer demand and the achievability of regulated Quality of Service standards for EU mail. Economic growth in the Eurozone has shown signs of improvement but remains fragile in some countries (notably Italy). The Board will, however, continue to monitor this position in terms of the impact on our international parcel volumes, including those handled by GLS. We are closely monitoring the development of Labour Party policy on renationalisation.	Macroeconomic risk assessments are embedded within the monthly Letters forecasting processes. The Group also has the following strategies in place: ·  A cost avoidance programme to respond to possible revenue headwinds. ·  Business initiatives that are responding to fluid competitive pressures (especially in the advertising arena). ·  A possible, absorbable reduction in investment in the short-term to protect the cash and indebtedness position of the business. Risks associated with Brexit are continually monitored and material risks reported to senior executives. An internal working group has been established, comprising taxation, legal and regulatory/policy experts, to work with the International business to update its Brexit scenario analysis as events unfold and new information becomes available. We are working closely with Government to put in place systems to ensure the movement of cross‑border parcels continues to operate effectively. The UK Government explicitly referenced the importance of the passage of small parcels via Royal Mail in the Customs Bill White Paper. We are also engaging with Ofcom and the Department for Business, Energy, and Industrial Strategy (BEIS) on the applicability of Quality of Service targets after the UK leaves the EU. Royal Mail engages regularly with politicians and policy makers, and closely monitors the potential impact of political and policy changes on the Company. The Company runs an extensive public affairs programme of engagement with politicians and policy makers. We regularly demonstrate the significant progress that the Company has made since privatisation in 2013.
Growing in new areas	↔
Our success in growing in new areas of business is dependent on such factors as our continued ability to identify new profitable and sustainable areas of business, implementing appropriate investments, and having in place suitable structures to support continued transformation of the business.	Royal Mail Group is well positioned to grow in new markets through its subsidiary, GLS. It has a replicable and scalable business model founded on the development of strong regional businesses. Through increasing its footprint and focusing on growth opportunities in areas such as the deferred parcels space and B2C parcels market, GLS is well positioned to support Royal Mail Group's overall strategy. We are continuing to seek opportunities to develop a broader revenue base and growth in the UK and overseas.	Our acquisitions are primarily delivered through a targeted and focused expansion of GLS' geographic footprint, investing behind a proven operating model with a track record of identification, integration and optimisation of acquisitions over many years. We are also developing partnerships with retailers and network partners to stimulate cross-border volumes between the UK and Asia, as well as working with China Post to provide Chinese and UK customers with faster delivery and tracking services. We also have a number of small-scale initiatives to seek new revenues, which leverage our existing assets. As an example, during 2017 Royal Mail launched a third party fleet offering to the market providing maintenance solutions. The agreement includes the establishment of a forum to assess new business opportunity ideas.
Regulatory and legislative environment The business operates in a regulated environment. Changes in legal and regulatory requirements could impact our ability to meet our targets and goals.
Absence of a sustainability framework to sustain the USO	↑
USO finances are fragile. The regulatory system applies some constraints to Royal Mail's ability to compete for traffic to support the costs of the Universal Service network. It imposes operational requirements not applied generally to the industry. These may impact our revenues and our ability to compete in the highly competitive sectors in which we operate. This could ultimately impact our ability to deliver the Universal Service on a sustainable basis.	Ofcom will continue to be focused on monitoring Royal Mail's efficiency. It will build a detailed delivery cost model to help inform its view on how cost might change over time under different scenarios. It will also be used to review the allocation of Royal Mail's delivery costs between parcels and letters. Ofcom is due to consult on the level of the Second Class Safeguard cap. The outcome could impact our commercial flexibility. We have been lobbying Ofcom to introduce fundamental changes to the regulatory environment. This includes a greater focus on sustainability. Ofcom has not taken forward our proposal for a proactive sustainability framework. It has also not taken forward the opportunity to raise consumer protection standards across the industry.	We undertake extensive engagement with Ofcom across all workstreams, including the cost modelling review and Second Class Safeguard cap consultation. We will provide comprehensive, evidence-led reports setting out our position. We are continuing to lobby BEIS and Ofcom to tackle emerging issues of USO sustainability. We are arguing for fundamental changes in the regulatory environment including: ·  greater focus on sustainability including through the prompt introduction of a proactive sustainability framework; and ·  a level playing field across the whole industry, including higher consumer protection standards in parcels and lifting labour standards across the delivery sector.
Competition Act investigation	↔
In January 2014, Royal Mail issued Contract Change Notices (CCNs) under the terms of the access contract regime. In February 2014, Ofcom announced that they would investigate some of these CCNs. The opening of the investigation automatically suspended the CCNs that were the subject of the investigation. These CCNs were therefore never implemented. Ofcom issued a Statement of Objections in July 2015. This statement sets out Ofcom's provisional view that Royal Mail breached competition law by engaging in conduct that amounted to unlawful discrimination against postal operators competing with Royal Mail in delivery. Depending on the outcome of the Ofcom investigation and any appeal, Royal Mail may be fined.	Royal Mail is refuting all of the allegations. In its annual concurrency report published on 30 April, the Competition and Markets Authority stated that Ofcom expects to make a decision in this case before summer 2018. However, Ofcom has not published a formal timetable (or provided any such timetable to Royal Mail).	This investigation remains a key agenda item on all updates to both the Royal Mail Board and Audit and Risk Committee. We are working closely with our external advisers at every stage of this investigation and our position remains that we have been fully compliant with competition law. We have refuted in our written and oral representations all of the allegations that Ofcom has put forward, and we will continue to defend our case.
Employment legislation and regulation	↔
Changes to laws and regulations relating to employment (including the interpretation and enforcement of those laws and regulations) could, directly or indirectly, increase the Group's labour costs. Given the size of the Group's workforce, this could have an adverse effect on the Group.	Recent case law has suggested that, in some circumstances, regular overtime and commission payments should form part of holiday pay calculations. The legal position remains unclear as case law is still evolving in this area. We have concluded an agreement with the trade union about initial steps to mitigate the concern about holiday pay for part timers. Further discussions are also planned on this subject.	We continue to monitor developments in case law relating to the application of the Working Time Directive in respect of holiday pay calculations. Based on our estimates of the potential financial impact, we believe that we have made sufficient provision for any historic liabilities that may arise. We liaise with the CBI, HMRC and HM Treasury to influence employment tax developments and minimise the impacts for Royal Mail as far as possible.
Health, safety and wellbeing	↔
The way in which we conduct our business, despite having a rigorous health and safety regime, can occasionally have a human impact. That is why the health, safety and wellbeing of our employees, contractors, agency workers and members of the public is of the utmost importance to us. We acknowledge that there is a risk that a health and safety incident or failure could result in the serious injury, ill health or death of employees, contractors, agency workers or members of the public. This risk is a key focus for us, given the potential human impact and the corporate ramifications. We are including it now in our Principal Risks to reflect its major internal significance. Such an incident may lead to criminal prosecution or fines by the enforcing authority or civil action by the injured party resulting in large financial losses and reputational damage for the Group. Similarly, inadequate arrangements for effectively managing the health and wellbeing of our employees could also lead to financial losses and reputational damage - through increased sickness absence, lower productivity, civil action or criminal prosecution.	The business has a large number of employees including seasonal staff and agency workers. It also operates a very large fleet, employs a large number of contractors and interacts extensively with members of the public. A large proportion of our employees spend most of their time working outdoors, on foot or driving, where the environment cannot be controlled. Despite the very significant focus on our people's wellbeing, due to this wide reach and the number of people affected by the business's undertakings, the risk of serious harm to people cannot be totally mitigated. The potential fines for very large organisations (as defined by the Health and Safety Executive) have greatly increased as a result of the Sentencing Guidelines - health and safety breaches now have a much greater financial impact for the business. We acknowledge that every health and safety incident has a human impact. An integrated Safety, Health and Environment System was completed and deployed in 2017-18. We continue to work to ensure full and consistent implementation is achieved across all parts of the business.	We are reviewing our Safety, Health and Environment Management System (SHEMS) to ensure that the Standards contained within it achieve legal compliance and adequately control our key risk areas. Operational implementation of the SHEMS is monitored via an annual audit programme and a professional and independent SHE function is in place to provide advice, support and guidance on the implementation of standards. There is an annual SHE initiative and communications plan in place. This is informed by a review of compliance data, risk data, KPI performance and legislative requirements. Employees have access to health and wellbeing assistance through our Feeling First Class website, First Class Support helpline and Occupational Health provision. SHE performance is discussed and reviewed by the board and senior leaders are committed to driving full compliance to the SHE Management System.
Major breach of information security, data protection regulation and/or cyber‑attack	↔
We are subject to a range of regulations, contractual compliance obligations, and customer expectations around the governance and protection of various classes of data. In common with all major organisations, we are the potential target of cyber‑attacks that could threaten the confidentiality, integrity and availability of data in our systems. A cyber security incident could also trigger material service and/or operational interruption. A major breach of data protection regulation is also considered a risk that could result in financial and reputational damage, including loss of customer confidence.	While no material losses related to cyber security or data breaches have been identified, given the increasing sophistication and evolving nature of this threat, and our reliance on technology and data for operational and strategic purposes, we consider cyber security and/or a breach of data protection regulation a principal risk.	As external threats become more sophisticated, and the potential impact of service disruption increases, we continue to invest in cyber security. Recognising that this risk cannot be eliminated, we continuously review our security enhancement and investment plans to reflect the changes in the threats we face. For GDPR we are undertaking activities across the Group to work towards compliance. This includes protecting us from data breaches, managing information rights and managing our marketing permissions correctly.
Attracting and retaining senior management	↔
Our performance, operating results and future growth depend on our ability to attract and retain talent with the appropriate level of expertise.	Voluntary turnover in senior management continues at similar levels to previous years but remains a business risk.	The Group's remuneration policy sets out that the overall remuneration package should be sufficiently competitive to attract, retain and motivate executives with the commercial experience to run a large, complex business in a highly challenging context. We operate a succession planning process and have in place talent identification and development programmes. Our succession planning enabled us to announce two major internal promotions in April 2018.

RELATED PARTY INFORMATION

This Note provides details of amounts owed to and from related parties, which include the Royal Mail Pension Plan (RMPP), the Group's associate companies, and payments to key management personnel. Details of the Group's principal subsidiaries and associates are also provided.

Related party transactions

During the reporting year the Group entered into transactions with related parties as follows:

	52 weeks 2018 £m	52 weeks 2017 £m
Sales/recharges to:
RMPP (administration and investment service recharge)	5	5
Purchases/recharges from:
Associate undertaking (Quadrant Catering Limited)	(7)	(8)
Amounts owed to:
Associate undertaking (Quadrant Catering Limited)	(1)	(1)

 

The sales to and purchases from related parties are made at normal market prices. Balances outstanding at the year end are unsecured, interest free and settlement is made by cash.

Key management compensation

	52 weeks 2018 £000	52 weeks 2017 £000
Short-term employee benefits	(14,592)	(11,174)
Post-employment benefits	(70)	(44)
Other long-term benefits	(551)	(734)
Share-based payments	(3,679)	(4,102)
Total	(18,892)	(16,054)

In July 2017, the Group made a payment of €6.6 million to Mr Rico Back as consideration for the termination of his contract of employment (and all rights and obligations contained within it) with GLS and its replacement with a new GLS contract. The original contract dated back to 2000 when the Post Office, then in State ownership, acquired German Parcel. It gave Mr Back certain management control rights relating to the governance of what subsequently became GLS, in order to retain its entrepreneurial focus. They included right of veto on decisions and membership of GLS' management board. In addition, Mr Back was only required to give the Company three months' notice and there were substantial payments for termination of his employment in certain circumstances. This arrangement was rooted in the fact that Mr Back was a shareholder in German Parcel, and its Managing Director, at the time of its acquisition by the Post Office. The Board came to the conclusion that some of the provisions of the original contract were increasingly inappropriate and needed to be removed. The growing importance of GLS for Royal Mail Group and our greater investment to accelerate its growth makes it important that it is integrated more closely with the rest of the Group, while maintaining its overall entrepreneurial focus and ethos. In addition, as part of the buyout, Mr Back's fixed pay was rebased downwards.

Key management are considered to be the Executive and Non-Executive Directors of Royal Mail plc, all other members of the Chief Executive's Committee (see page 62) and the remainder of the Persons Discharging Managerial Responsibilities.

The ultimate parent and principal subsidiaries

Royal Mail plc is the ultimate parent Company of the Group. The consolidated financial statements include the financial results of Royal Mail Group Limited and the other principal subsidiaries listed below. The reporting year end for these entities is 25 March 2018 unless otherwise indicated.

Company	Principal activities	Country of incorporation	% equity interest 2018	% equity interest 2017
General Logistics Systems B.V.1	Parcel services holding company	Netherlands	100	100
Royal Mail Estates Limited	Property holdings	United Kingdom	100	100
Royal Mail Investments Limited	Holding company	United Kingdom	100	100
RM Property and Facilities Solutions Limited(formerly Romec Limited)	Facilities management	United Kingdom	100	100

The Company has complied with section 410 of the Companies Act 2006 by including, in these financial statements, a schedule of interests in all undertakings (see Note 27).

1 GLS' reporting year end date is 31 March each year. No adjustment is made in the financial statements in this regard on the basis that, irrespective of the Group's reporting year end date (last Sunday in March) a full year of GLS results is consolidated into the Group.

STATEMENT OF DIRECTORS' RESPONSIBILITIES IN RESPECT OF THE ANNUAL REPORT AND FINANCIAL STATEMENTS 2017-18

The Directors are responsible for preparing the Annual Report and the Group and parent Company financial statements in accordance with applicable law and regulations.

Company law requires the Directors to prepare Group and parent Company financial statements for each financial year. Under that law, they are required to prepare the Group financial statements in accordance with IFRS as adopted by the EU and applicable law, and have elected to prepare the parent Company financial statements in accordance with UK Accounting Standards, including 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 Group and parent Company and of their profit or loss for that period. In preparing each of the Group and parent Company financial statements, the Directors are required to:

•  select suitable accounting policies and then apply them consistently;

•  make judgements and estimates that are reasonable, relevant, reliable and prudent;

•  for the Group financial statements, state whether they have been prepared in accordance with IFRS as adopted by the EU;

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

•  assess the Group and parent Company's ability to continue as a going concern, disclosing, as applicable, matters related to going concern; and

•  use the going concern basis of accounting unless they either intend to liquidate the Group or the parent Company or to cease operations, or have no realistic alternative but to do so.

The Directors are responsible for keeping adequate accounting records that are sufficient to show and explain the parent Company's transactions and disclose with reasonable accuracy at any time the financial position of the parent Company and enable them to ensure that its financial statements comply with the Companies Act 2006. They are responsible for such internal control as they determine is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error, and have general responsibility for taking such steps as are reasonably open to them to safeguard the assets of the Group and to prevent and detect fraud and other irregularities.

Under applicable law and regulations, the Directors are also responsible for preparing a Strategic Report, Directors' Report, Directors' Remuneration Report and Corporate Governance Statement that complies with that law and those regulations.

The Directors are responsible for the maintenance and integrity of the corporate and financial information included on the Company's website. Legislation in the UK governing the preparation and dissemination of financial statements may differ from legislation in other jurisdictions.

The Directors consider that the Annual Report and Financial Statements 2017-18, when taken as a whole, are fair, balanced and understandable and provides the information necessary for shareholders to assess the Group's position and performance, business model and strategy.

Each of the Directors, whose names and function are set out on pages 58-60 confirm that, to the best of their knowledge:

•  the financial statements, which have been prepared in accordance with the applicable set of accounting standards, 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; and

•  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.

This responsibility statement is approved by the Board of directors and is signed on its behalf by:

Moya Greene Chief Executive Officer

Stuart Simpson Chief Finance Officer

 

END

 

 

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