Annual Report - National Storage Mechanism

RNS Number : 3145B

Marks & Spencer Group PLC

15 June 2016

 

15 June 2016

Marks and Spencer Group plc (the "Company")

Annual Report and Financial Statements 2016

In compliance with Listing Rule 9.6.1, the Company announces that the following documents have today been submitted to the UK Listing Authority, and will shortly be available for inspection via the National Storage Mechanism at morningstar.co.uk/uk/NSM:  

·           Annual report and financial statements 2016;

·           The Notice of Annual General Meeting of the Company which will be held at Wembley    Stadium, Wembley, London HA9 0WS at 11am on Tuesday 12 July 2016; and

·           Proxy forms for the 2016 Annual General Meeting.

In accordance with DTR 6.3.5(3) the Annual Report and Financial Statements 2016 is accessible on annualreport.marksandspencer.com. The Notice of Annual General Meeting is available on marksandspencer.com/investors. 

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 25 May 2016. 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 2016. 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.

Below are details of our principal risks and uncertainties and the mitigating activities in place to address them. It is recognised that the Group is exposed to risks wider than those listed. However, we have disclosed those we believe are likely to have the greatest impact on our 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
Clothing & Home Transformation Our future performance is impacted by a lack of improvement in product relevance, execution or brand momentum As we reassert our Clothing & Home quality and style credentials and work to improve availability, it is important that we understand and address our customers' needs in order to strengthen brand recognition in an increasingly competitive market.	-    Workstreams in place addressing product, price and process. -    Ongoing engagement with customers through data gathered by our Customer Insight Unit and focus groups, regularly shared with key areas of the business. -    Ongoing dashboard monitoring of brand momentum. -    Continued focus on product quality and style, including adherence to our Clothing Quality Charter.
Changing Consumer Behaviours Our business performance will be impacted if we fail to keep pace with changing consumer behaviours Consumer behaviours continue to evolve at pace; the proliferation of different purchasing channels has been unprecedented in recent years. We need to anticipate changes in the way our customers shop, including advances in digital technology. To leverage performance and keep pace with our competitors, we must proactively manage our property portfolio and operate a flexible business model.	-    M&S Venture Lab in place to keep us at the forefront of technological developments. -    Customer Insight Unit and focus groups monitor changes in consumer behaviours on an ongoing basis. -    Channel strategy regularly reviewed at Board level. -    Financial modelling of projected channel performance to facilitate proactive management of the store portfolio.
Business Transformation As we strive to transform our business, we must ensure that the changes we make are implemented effectively Our business is in a period of significant transformation, driven by a variety of internal and external factors. Effective management and implementation of associated people and process changes will be critical, whilst ensuring that our day-to-day operations are not adversely impacted.	-    Business transformation regularly discussed by the Group Board. -    Employee Communications team engaged to manage associated employee messaging. -    Robust programme management practices in place. -    Consultation with Business Involvement Group on changes related to our people.
Clothing & Home Supply Chain and Logistics Network We fail to evolve our supply chain and logistics network to maximise availability for our customers and speed up delivery times The growth of our business and achievement of strategic objectives is highly contingent on the successful execution of our Clothing & Home supply chain and logistics network strategy, the most recent stage of which was the launch of our redeveloped Bradford distribution centre.	-    Ongoing simplification and stabilisation of Castle Donington distribution centre. -    Phased approach to distribution centre transformation. -    Supply Chain Leadership Group created, supported by changes to Supply Chain & Logistics accountabilities. -    Robust programme governance in place, including interdependencies with other Group initiatives. -    Ongoing review of progress against agreed operational and financial objectives.
IT Integration Business processes are not adequately supported as a result of poorly integrated IT systems Our business operates using a large number of complex and interdependent systems. The effective integration of these is reliant on us having access to and leveraging the right skillset, coupled with a culture of operational precision	-    Proactive simplification of IT infrastructure and application landscape through:      - Clearly defined technology roadmaps for all business areas; and      - Decommissioning of legacy systems. -    Clear decision-making process for system changes, including established IT Change Approval Board.
Food Competition Loss of market share, due to market price deflation or changes in the competitive landscape The food market continues to evolve in response to changing customer behaviours and the increasing influence of the continental discounters. The ongoing polarisation between value and premium means it is important that we continue to provide a point of difference through newness, product quality and innovation, as well as convenience.	-    Significant focus on product newness and innovation to retain point of difference and drive customer loyalty. -    Continued focus on product availability for our customers. -    Regular review of price positioning. -    Simply Food expansion to provide convenience for our customers. -    Review of key lines to improve comparability with competitors.
Food Safety and Integrity A food safety or integrity related incident occurs or is not effectively managed As a leading retailer of quality fresh food, it is of paramount importance that we effectively manage safety and integrity, especially as we grow our global food business and given the 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 product quality. -    Proactive horizon scanning, including focus on fraud and adulteration. -    Robust store, supplier and depot auditing programme in place. -    Crisis management plan in place.
Clothing & Home Ethical Sourcing Our ethical standards continue to be of high importance as we make changes to our sourcing strategy The promotional nature of the retail environment, coupled with inherent cost base pressures, make achievement of margin targets a key objective for the business. Against this background, it is critically important that we maintain our high ethical standards and the strong control environment under which we operate.	-    Clearly defined sourcing policies and procedures. -    Mature supplier ethical auditing programme in place, involving independent third party auditors. -    Regional compliance teams providing ongoing in-country support. -    Factory listening groups in place. -    Member of the Ethical Trading Initiative.
Cyber/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.	-    Security controls in place including policies, procedures and security technologies. -    Ongoing monitoring of developments in cyber security threats, engaging with third party specialists where appropriate. -    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 M&S.com.
International The performance of our International business and fulfilment of our strategy is affected by a lack of brand momentum or substandard infrastructure To drive profitable growth, we need to ensure that our infrastructure and underlying processes and systems are sufficiently robust, and that our brand resonates across international markets.	-        Geographic spread mitigates against localised geo-political or economic risks. -        Local market knowledge provided by franchise and joint venture partnerships. -         Performance monitoring by region, country and store, including focus on like-for-like performance and action planning for poor performing stores. -         International representation in key Group initiatives.
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 traffic grows and our network infrastructure and operating model evolve, it is increasingly important to ensure that the M&S.com business and key dependencies are resilient.	-    Dual site M&S.com command centre operates 24/7 to monitor website availability and performance. -    Social media monitored to observe and respond to trends in customer experience. -    Business continuity plans, incident reporting and management procedures are well established and tested, with regular monitoring including quarterly Business Continuity Committee meetings. -    Proven resilience plans in place for the M&S.com platform.
Note: The Group Risk Profile will evolve as mitigating activities reduce net risk over time, or as new risks emerge. Three new risks have been added to the Group Risk Profile since the prior year (IT integration, Changing consumer behaviours and Business transformation); the remaining risks have essentially remained the same, with the exception of one risk where the emphasis has changed from Clothing & Home margin to Clothing & Home ethical sourcing. Four risks have been removed from the Group Risk Profile since the prior year (Our people, staff retention, IT change and Programme and workstream management).

The risks listed do not comprise all those associated with Marks & Spencer and the numerical referencing does not denote an 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 113 to 116.

Directors' Responsibility Statement

The 2016 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 2016 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 pages 32 and 33 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 include 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; and

- The 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 2016 Annual report, and on the Group's website: marksandspencer.com/the company.

For further information, please contact:

Group Secretariat: [phone]

 

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