Annual Financial Report

RNS Number : 9265I

Marks & Spencer Group PLC

05 June 2014

 



Issued: 5 June 2014

Marks and Spencer Group plc (the "Company")

Publication Announcement: Annual Report 2014

In compliance with Listing Rule 9.6.1, the Company has today submitted a copy of the following documents to the UK Listing Authority, which will shortly be available for inspection via the National Storage Mechanism which can be viewed at morningstar.co.uk/uk/NSM:  

-     Annual report and financial statements 2014;

-     Strategic report and supplementary material 2014; and

-     The Notice of Annual General Meeting of the Company which will be held at Wembley Stadium, Wembley, London HA9 0WS at 11am on Tuesday 8 July 2014.

In accordance with DTR 6.3.5(3) the Annual report and financial statements 2014, Strategic report and supplementary Material 2014and the Notice of Meeting will be available to view on the Company website: marksandspencer.com/annualreport2014.

A condensed set of Marks and Spencer Group plc financial statements 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 announcement on 22 May 2014. That information together with the information set out below which is extracted from the Annual report and financial statements constitute the requirements of DTR 6.3.5 which is to be communicated via an RIS in unedited full text.  This announcement is not a substitute for reading the full Annual report and financial statements.  Page and note references in the text below refer to page numbers in the Annual report and financial statements 2014. To view the preliminary announcement, visit the Company website: marksandspencer.com/thecompany.   

Principal risks and uncertainties

As with any business, we face risks and uncertainties on a daily basis. It is the effective management of these that places us in a better position to be able to achieve our strategic objectives and to embrace opportunities as they arise. Overleaf are details of our principal risks and the mitigating activities in place to address them. It is recognised that the Group is exposed to a number of risks, wider than those listed. However, a conscious effort has been made to disclose those of most concern to the business at this moment in time and those that have been the subject of debate at recent Board or Audit Committee meetings.

Description	Mitigating activities
Brand and reputation: Our founding principles of Quality, Value, Service, Innovation and Trust continue to influence how we do business and our reputation for being one of the UK's most trusted brands
GM customer engagement Continued loss of engagement with our customer As we seek to enhance the M&S brand, it is important that we understand and address our customers' needs in increasingly competitive UK and international markets and that we deliver a consistent M&S customer experience across all selling channels.	- Prioritisation of core customer in both GM and Marketing objectives - Regular review of customer reaction to product and in-store and online experience through focus groups and in-house Customer Insight Unit presentations - Ongoing improvements to product style and quality and to store environment, addressing specific customer feedback - Targeted marketing and promotional activity using customer loyalty data - Increased focus on quality and style, including the introduction of a Clothing Quality Charter - Updated M&S.com website to enhance the online customer shopping experience
Food safety and integrity A food safety or integrity related incident occurs or is not effectively managed As a leading retailer of fine quality fresh food, it is of paramount importance that we manage the safety and integrity of our products and supply chain, especially in light of the business' greater operational complexity and the heightened risk of fraudulent behaviour in the supply chain.	- Dedicated team responsible for ensuring that all products are safe for consumption through rigorous controls and processes - Continuous focus on quality - Proactive horizon scanning including focus on fraud and adulteration - Established supplier and depot auditing programme
People and change: Our people are fundamental to the long-term success and growth of this business
Our people Our organisational culture and structure limit our ability to adapt to market changes with pace To support our transformation to an international, multi-channel retailer, it is essential that our organisational set-up allows us to respond to market changes and competition with pace.	- External hires recruited into a number of senior roles bringing an alternative perspective and new skills - Robust employee engagement process for effective communication - Alignment of development programmes with business strategy - Faster decision-making enabled through the removal of structural complexity
Programme and workstream management Benefits from our major business programmes and workstreams are not realised We continue to undertake a number of major programmes to underpin the achievement of our plan; the delivery of forecasted benefits is critical to this.	- Strategic Programme Office centrally governs Group initiatives providing regular status and benefits realisation updates to the Executive Board - Proactive management of programme portfolio and associated benefits in the context of current market conditions and the Group's three-year plan - Programme governance structures in place for all major programmes, supported by robust project management discipline - Proactive identification and management of major crossprogramme interdependencies
GM logistics and supply chain network We fail to evolve our supply chain and logistics network to maximise availability to customers and speed-up delivery times Now that we have successfully launched the new national e-commerce distribution centre, we must continue to focus on the implementation of our single-tier network, including the full ramp-up of the Castle Donington distribution centre ahead of Christmas peak trading.	- Robust programme governance in place with clear identification of interdependencies with other Group initiatives - Phased approach to distribution centre transformation - Ongoing monitoring of progress against milestone plans and operating objectives - Ongoing review of contingency requirement during Castle Donington facility ramp-up
Selling channels: We have ambitious plans for our UK, International and Multi-channel businesses as part of our transformation to be an international, multi-channel retailer
M&S.com business resilience A major failure of our M&S.com platform or at our Castle Donington distribution centre impacts our ability to trade online As our online flagship grows and our network infrastructure and operating model evolves, it will become increasingly important to ensure that the M&S.com business is resilient and key dependencies are identified and mitigated.	- Dual site M&S.com command centre operates 24/7 to monitor website availability and performance - Social media monitored 24/7 to observe and respond to trends in customer experience online - Business continuity plans, incident reporting and management procedures are well established and tested with regular monitoring, including quarterly Business Continuity Committee meetings
International Our plan to grow our International business is limited by performance in legacy markets, the start-up profitability of new markets and substandard infrastructure As we continue to increase our international presence and build our position in priority markets, it is crucial that we maximise performance in both legacy and new markets, supported by robust systems and supply chain capability.	- Senior International team strengthened - Local knowledge provided by franchise and joint venture partnerships - Frequent monitoring of performance, including individual country reviews and a particular focus on like-for-like performance and poor performing stores - Property Board approval of new store openings and monitoring of returns on investment - Representation of International in key Group initiatives
Day-to-day operation: We are a customer-centric business and strive to deliver an efficient and effective operation
GM margin Failure to improve GM margin It is important that we deliver increased GM margin through improved design and sourcing capability, whilst continuing to drive improvements to product quality.	- Margin targets defined and regularly monitored - Robust planning process for all promotional activity - Sourcing capability strengthened through hiring two overseas Sourcing Directors - End-to-end review of General Merchandise design, trading and sourcing underway - Clothing Quality Charter embedded
Information security We experience a major breach in cyber, system or information security The business is subject to external threats from hackers or viruses, or sensitive data is accessed without authorisation.	- Extensive security controls in place in accordance with International Standards (ISO 27002) - Established processes, policies and technologies in place designed to enhance security - Tight control of sensitive data through limited and monitored access and the roll-out of systems possessing enhanced security - Established team dedicated to managing security requirements for the new M&S.com platform
IT change Unforeseen impact of IT changes to new and existing systems disrupts business operations As we undertake a number of significant change programmes, the rate and scale of IT change remains high, with potential to significantly impact our complex and interdependent systems.	- Established Change Approval Board process - Clear decision-making process for system changes, including the adoption of change freezes during critical trading periods - Proactive management of cross-programme dependencies including 'release management' to group system changes together - Robust Disaster Recovery plans in place for critical business applications
The Group Risk Profile will evolve as mitigating activities succeed in reducing the net risk over time, or as new risks emerge. As such, we have removed three risks from our Group Risk Profile since the prior year: - Economic outlook: the economic environment in which we operate will always present an inherent risk to our business. Our ability to respond to market changes is key and this is reflected within the risk related to 'Our people' - Multi-channel: we have successfully launched the multi-channel platform on time and on budget - GM stock management: this no longer features in our principal risks, recognising our increased controls in this area.   There are three new risks (Information security, GM margin and M&S.com business resilience). Two have been updated; GM customer engagement (2013: GM product), and GM logistics and supply chain network (2013: Distribution centre restructure). The remaining five risks are broadly consistent with the prior year.

The risks listed do not comprise all those associated with Marks & Spencer and are not set out in any order of priority. Additional risks and uncertainties not presently known to management, or currently deemed to be less material, may also have an adverse effect on the business.

Further information on the financial risks we face and how they are managed is provided on pages 112 to 115 of the Annual report.

Directors' Responsibility Statement

The 2013 Annual Report contains the following statements regarding responsibility for the financial statements in compliance with DTR 4.1.12.  Responsibility is for the full Annual report and financial statements 2014 and not the condensed statements required to be set out in the Annual Financial Report announcement.

The directors are responsible for the maintenance and integrity of the Company's website. Legislation in the UK governing the preparation and dissemination of financial statements may differ from legislation in other jurisdictions. Each of the directors, whose names and functions are listed on page 36 of the Annual Report, confirm that, to the best of their knowledge:

-- The Group financial statements, which have been prepared in accordance with IFRSs as adopted by the EU, give a true and fair view of the assets, liabilities, financial position and profit of the Group;

-- The Strategic Report and the Directors' Report contained in this report includes a fair review of the development and performance of the business and the position of the Group, together with a description of the principal risks and uncertainties that it faces;

-- This Annual Report, taken as a whole, is fair, balanced and understandable, and provides the necessary information for shareholders to assess the Group's performance, business model and strategy.

The Directors of Marks and Spencer Group plc are listed in the Group's 2014 Annual report, and on the Group's website: marksandspencer.com/the company.

For further information, please contact:

Group Secretariat: [phone]

 

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