Notice of AGM

RNS Number : 3674G

Sainsbury(J) PLC

05 June 2013

 



 

 

5 June 2013

Annual financial report announcement for the 52 weeks to 16 March 2013

In accordance with Listing Rule 9.6.1, copies of the following documents have been submitted to the UK Listing Authority and will shortly be available for inspection from the National Storage Mechanism, which can be accessed at www.hemscott.com/nsm.do:

·      Annual Report and Financial Statements 2013

·      Notice of Annual General Meeting 2013

The above documents may be viewed online at www.j-sainsbury.co.uk/ar13 and www.j-sainsbury.co.uk/notice13 respectively. 

A condensed set of Sainsbury's financial statements and information on important events that have occurred during the financial year and their impact on the financial statements were included in J Sainsbury plc's preliminary announcement on 8 May 2013.  That information together with the information set out below which is extracted from the Annual Report and Financial Statements 2013 constitute the material required by Disclosure and Transparency Rule 6.3.5 which is required to be communicated to the media in full unedited text through a Regulatory Information Service.  This announcement is not a substitute for reading the full Annual Report and Financial Statements 2013.  Page and note references in the text below refer to page numbers in the Annual Report and Financial Statements 2013. To view the preliminary announcement, slides of the results presentation, the transcript of the presentation and the webcast: please visit www.j-sainsbury.co.uk.

Enquiries:
Investor Relations	Media
Adam Wilson Katsibas	Alex Cole/Trevor Datson
[phone]	[phone]

 
Principal Risks and Uncertainties

The risk management process is closely aligned to our strategy, which focuses on growing the business through the addition of new range, space, business development, channels to market and property management. Risk is an inherent part of doing business. The management of these risks is based on a balance of risk and reward determined through careful assessment of both the potential likelihood and impact as well as risk appetite.  Consideration is given to both reputational as well as financial impact, recognising the significant commercial value attributable to the Sainsbury's brand. Each principal risk and uncertainty is considered in the context of how it relates to the achievement of the Group's strategic objectives.  The current business strategy and objectives are categorised into five areas of focus as follows:

·     Great food;

·     Compelling general merchanise & clothing;

·     Complimentary channels & services;

·     Developing new business; and

·     Growing space & creating property value.

The most significant principal risks identified by the Board and the corresponding mitigating controls are set out below in no order of priority.

Business continuity and major incidents response

Risk

Mitigation

A major incident or catastrophic event could impact on the Group's ability to trade.

Sainsbury's has detailed plans in place, supported by senior representatives who are trained in dealing with major incidents and have the authority levels to make decisions in the event of a potentially disruptive incident. The Business Continuity Steering Group meets quarterly to ensure that the business continuity ('BC') policy and strategy is fit for purpose.  In addition, it oversees the mitigation of all risks associated with BC and IT disaster recovery.  In the event of any unplanned or unforeseen events the Business Continuity Management Team is convened at short notice to manage any associated risk to the business. All key strategic locations have secondary backup sites which would be made available within pre-defined timescales and are regularly tested.

Business strategy

Risk

Mitigation

If the Board adopts the wrong business strategy or does not communicate or implement its strategies effectively, the business may be negatively impacted. Risks to delivering the strategy need to be properly understood and managed to deliver long-term growth for the benefit of all stakeholders.

A clear strategy remains in place with five key areas of focus: ·      Great food; ·      Compelling general merchandise & clothing ·      Complementary channels & services; ·      Developing new business; and ·      Growing space & creating property value. Progress against these areas of focus and any risks to delivery, such as the availability of suitable new store sites, are regularly reviewed by the Board and the overall strategy is reviewed at the two-day Strategy Conference. The Operating Board also holds regular sessions to discuss strategy. This activity is supported by a dedicated strategy team. To ensure the strategy is communicated and understood, the Group engages with a wide range of stakeholders including shareholders, colleagues, customers and suppliers on a continual basis.

Colleague engagement, retention and capability

Risk

Mitigation

The Group employs around 157,000 colleagues who are critical to the success of our business. Attracting and maintaining good relations with talented colleagues and investing in their training and development is essential to the efficiency and sustainability of the Group's operations.

The Group's employment policies and remuneration and benefits packages are regularly reviewed and are designed to be competitive with other companies, as well as providing colleagues with fulfilling career opportunities. Colleague surveys, performance reviews, communications with trade unions and regular communication of business activities are some of the methods the Group uses to understand and respond to colleagues' needs. Processes are also in place to identify talent and actively manage succession planning throughout the business.

Data security

Risk

Mitigation

It is essential that the security of customer, colleague or company confidential data is maintained.  A major breach of information security could have a major impact on the business.

Various information security policies and standards are in place which focus on encryption, network security, access controls, system security, data protection and information handling.   A review of key contractors across the organisation who hold sensitive customer or colleague data is ongoing, and progress is monitored by the Information Security Committee.  A risk based security testing approach across Sainsbury's IT infrastructure and applications is in place to identify and remediate ongoing vulnerabilities.

Developing New Business

Risk	Mitigation
Exploring a range of new opportunities beyond our core business forms part of our five areas of focus.  Robust identification and management of risks associated with the new business development agenda is essential to support successful delivery of objectives.	The existing risk management framework and processes embedded in the business extend to exploring new opportunities beyond the core.  All projects have a steering group and subject matter experts are engaged as appropriate.  A formal review and approval governance structure is also in place.

Environment and sustainability

Risk	Mitigation
Environment and sustainability are core to Sainsbury's values.  The key risk facing the Group in this area relates to reducing the environmental impact of the business with a focus on reducing packaging and new ways of reducing waste and energy usage across stores, depots and offices.	A number of initiatives are in place, which are being led by the Environmental Action Team and the Corporate Responsibility & Sustainability Steering Group, to reduce our environmental impact and to meet our customers' expectations in this area. Further details are included in the Corporate Responsibility review on pages 43 to 45 of the Annual Report and Financial Statements 2013.

Financial strategy and treasury risk

Risk	Mitigation
The main financial risks are the availability of short and long-term funding to meet business needs, counterparty liabilities and fluctuations in interest and foreign currency rates which continue to be impacted by the turbulence in the financial markets.	The Group Treasury function is responsible for managing the Group's liquid resources, funding requirements and interest rate and currency exposures and the associated risks as set out in note 28 on page 104 of the Annual Report and Financial Statements 2013. The Group Treasury function has clear policies and operating procedures which are regularly reviewed and audited.

Health and safety - people and product

Risk

Mitigation

Prevention of injury or loss of life for both colleagues and customers is of utmost importance.  In addition, it is paramount to maintaining the confidence our customers have in our business.

Clear policies and procedures are in place detailing the controls required to manage health and safety and product safety risks across the business and comply with all applicable regulations.  These cover the end-to-end operation, from the auditing and vetting of construction contractors, to the health and safety processes in place in our depots, stores and offices to the controls in place to ensure people and product safety and integrity.  In addition, established product testing programmes are also in place to support rigorous monitoring of product traceability and provide assurance over product safety and integrity.  Supplier terms and conditions and product specifications set clear standards for product/raw material safety and quality which suppliers are expected to comply with. Process compliance is supported by external accreditation and internal training programmes, which are aligned to both health and safety laws and Sainsbury's internal policies.  In addition, resource is dedicated to manage the risk effectively, in the form of the Group Safety Committee and specialist teams including Convenience Risk Managers and Logistics and Commercial Safety Specialists.

IT systems and infrastructure

Risk	Mitigation
The Group is reliant on its IT systems and operational infrastructure in order to trade efficiently.  Inadequate systems or  failure of key systems could have a significant impact on our business.	The Group has extensive controls in place to maintain the integrity and efficiency of its systems including detailed recovery plans in the event of a significant failure. New innovations and upgrades to systems are ongoing to improve both the customer experience and colleague efficiency. Prior to introducing system changes, rigorous testing is completed.

Pension risk

Risk

Mitigation

The Group operates a number of pension arrangements which includes a defined benefit scheme. This scheme is subject to risks in relation to its liabilities as a result of changes in life expectancy, inflation and future salary increases, and to risks regarding the value of investments and the returns derived from such investments.

An investment strategy is in place which has been developed by the pension trustee, in consultation with the Company, to mitigate the volatility of liabilities, to diversify investment risk and to manage cash.  In April 2013, a proposal was announced to close the Sainsbury's Defined Benefit Pension Scheme to future accrual, which will help us to manage the escalating costs of pensions and protect the pension that colleagues have already built up in the scheme.  A consultation period is currently underway following which a final decision will be made.

Regulatory environment

Risk

Mitigation

The Group's operations are subject to a broad spectrum of regulatory requirements.  Key areas subject to regulation include planning, competition and environmental issues, employment, pensions and tax laws and regulations over the Group's products and services. Failure to comply with laws and regulations could lead to civil and/or criminal legal prosecution and fines or imprisonment imposed on Sainsbury's or our colleagues. In addition, a breach could lead to reputational damage.

There is an established governance process in place to monitor regulatory developments and to ensure that all existing and forthcoming regulations are complied with. Regular reviews are completed across the estate to ensure compliance and that training needs are addressed as required. Processes for monitoring and embedding training for key new legislation are in place and Sainsbury's also has a dedicated internal legal department to provide the relevant colleagues impacted by the regulations with advice and guidance.

Trading environment

Risk

Mitigation

Effective management of the trading account is key to the achievement of performance targets. The continued challenging economic environment and competitive retail pressure could affect the performance of the Group in terms of sales, costs and operations, through: ·     the ongoing challenges to household disposable income; ·     competitor pricing positions; ·     the reduction of the industry profit pool in the last year; and ·     commodity costs driving up the cost of goods. There is also a risk of supplier or other counterparty failure, with possible operational or financial consequences for the Group.

We continue to focus on delivering quality products with 'universal appeal', at a range of price points ensuring value for all our customers. This is achieved through the continuous review of our key customer metrics, monitoring of current market trends and price points across competitors, active management of price positions, development of sales propositions and increased promotion and marketing activity. While external cost pressures including oil-related costs, commodity pricing and business rates affect our business, the Group continues to work hard to mitigate the impact of these cost pressures on customers and on our overall profitability through the delivery of cost savings.  Sainsbury's undertakes credit checks on suppliers and maintains regular, open dialogue with key suppliers concerning their ability to trade.

Transitional risk - Sainsbury's Bank

Risk Acquiring full ownership of Sainsbury's Bank will introduce change-driven operational risk in particular through the transitional period.   This transitional risk could have an adverse impact on people, processes, regulatory compliance and technical infrastructure.  Failure to transition successfully may have an adverse impact on the Sainsbury's brand.   A robust risk management process is essential to support successful transition.

Mitigation Executive sponsorship and a change governance structure is in place to manage and oversee the transition, including engagement of management with financial services experience.  The risk management process includes early identification of key transitional risks along with mitigation plans.  Tracking of risk mitigation effectiveness will be ongoing throughout the transitional period.

Related party transactions

Group

a)   Key management personnel

The key management personnel of the Group comprise members of the J Sainsbury plc Board of Directors and the Operating Board.  The key management personnel compensation is as follows:

	2013	2012
	£m	£m
Short-term employee benefits	9	9
Post-employment employee benefits	1	1
Share-based payments	11	9
	21	19

Seven key management personnel had credit card balances with Sainsbury's Bank (2012: six). These arose in the normal course of business and were immaterial to the Group and the individuals.  Seven key management personnel held saving deposit accounts with Sainsbury's Bank (2012: six).  These balances arose in the normal course of business and were immaterial to the Group and the individuals.

b)   Joint ventures

Transactions with joint ventures

For the 52 weeks to 16 March 2013, the Group entered into various transactions with joint ventures as set out below.

	2013	2012
	£m	£m
Management services provided	17	7
Offset of creditor balance with investment	(43)	-
Interest income received in respect of interest bearing loans	1	1
Dividend income received	18	-
Repayment of loan to joint ventures	16	-
Investment in joint ventures	(1)	-
Sale of assets	-	12
Loan to joint venture	(5)	-
Acquisition of companies	(21)	-
Rental expenses paid	(71)	(75)

Year-end balances arising from transactions with joint ventures

	2013	2012
	£m	£m
Receivables
Other receivables	14	13
Loans due from joint ventures
Floating rate subordinated undated loan capital1	25	25
Floating rate subordinated dated loan capital2	30	30
Other	15	16
Payables
Loans due to joint ventures	(5)	(48)

1      The undated subordinated loan capital shall be repaid on such date as the Financial Services Authority shall agree in writing for such repayment and in any event not less than five years and one day from the dates of draw down.  In the event of a winding up of Sainsbury's Bank, the loan is subordinated to ordinary unsecured liabilities.  Interest is payable three months in arrears at LIBOR plus a margin of 1.0 per cent per annum for the duration of the loan.

2      No repayment of dated subordinated debt prior to its stated maturity may be made without the consent of the Financial Services Authority.  In the event of a winding up of Sainsbury's Bank, the loan is subordinated to ordinary unsecured liabilities.  Interest is payable three months in arrears at LIBOR plus a margin of 0.6 per cent per annum for the duration of the loan.

c)  Retirement benefit obligations

As discussed in note 30 of the Annual Report and Financial Statements 2013, the Group has entered into an arrangement with the Pension Scheme Trustee as part of the funding plan for the actuarial deficit in the Scheme.  Full details of this arrangement are set out in note 30 of the Annual Report and Financial Statements 2013.

 

Company

a)   Subsidiaries

The Company enters into loans with its subsidiaries at both fixed and floating rates of interest on a commercial basis.  Hence, the Company incurs interest expense and earns interest income on these loans and advances.  The Company also received dividend income from its subsidiaries during the financial year.

Transactions with subsidiaries

	2013	2012
	£m	£m
Loans and advances given to, and dividend income received from subsidiaries
Loans and advances given	402	341
Loans and advances repaid by subsidiaries	(330)	(281)
Interest income received in respect of interest bearing loans and advances	161	146
Dividend income received	250	276
Loans and advances received from subsidiaries
Loans and advances received	(318)	(339)
Loans and advances repaid	3	61
Interest expense paid in respect of interest bearing loans and advances	(104)	(108)

Year-end balances arising from transactions with subsidiaries

	2013	2012
	£m	£m
Receivables
Loans and advances due from subsidiaries	2,461	2,352
Payables
Loans and advances due to subsidiaries	(5,390)	(5,316)

b) Joint ventures

Transactions with joint ventures

For the 52 weeks to 16 March 2013, the Company entered into transactions with joint ventures as set out below. 

		2013		2012
		£m		£m
Services and loans provided to joint ventures
Interest income received in respect of interest bearing loans		1		1

Year-end balances arising from transactions with joint ventures

	2013	2012
	£m	£m
Receivables
Loans due from joint ventures
Floating rate subordinated undated loan capital1	25	25
Floating rate subordinated dated loan capital2	30	30
Payables
Loans due to joint ventures	(5)	(5)
		-

1      The undated subordinated loan capital shall be repaid on such date as the Financial Services Authority shall agree in writing for such repayment and in any event not less than five years and one day from the dates of draw down.  In the event of a winding up of Sainsbury's Bank, the loan is subordinated to ordinary unsecured liabilities.  Interest is payable three months in arrears at LIBOR plus a margin of 1.0 per cent per annum for the duration of the loan.

2      No repayment of dated subordinated debt prior to its stated maturity may be made without the consent of the Financial Services Authority.  In the event of a winding up of Sainsbury's Bank, the loan is subordinated to ordinary unsecured liabilities.  Interest is payable three months in arrears at LIBOR plus a margin of 0.6 per cent per annum for the duration of the loan.

Statement of Directors' Responsibilities

As set out above, this statement is repeated here solely for the purposes of complying with Disclosure and Transparency Rule 6.3.5.  The statement relates to and is extracted from the Annual Report and Accounts 2013.  It is not connected to the extracted information presented in this announcement or the preliminary results announcement released on 8 May 2013. 

The Directors are responsible for preparing the Annual Report, the Remuneration report and the financial statements in accordance with applicable law and regulations.

Company law requires the Directors to prepare financial statements for each financial year. Under that law the Directors have prepared the Group and Company financial statements in accordance with International Financial Reporting Standards ('IFRSs') as adopted by the European Union. 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 the Company and of the profit or loss of the Group for that period. In preparing these 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 IFRSs as adopted by the European Union have been followed, subject to any material departures disclosed and explained in the financial statements;

·     prepare the financial statements on the going concern basis unless it is inappropriate to presume that the Group and the Company will continue in business.

The Directors are responsible for keeping adequate accounting records that are sufficient to show and explain the Group's and the Company's transactions and disclose with reasonable accuracy at any time the financial position of the Company and the Group and enable them to ensure that the financial statements and the Remuneration report comply with the Companies Act 2006 and, as regards the Group financial statements, Article 4 of the IAS Regulation. They are also responsible for safeguarding the assets of the Company and the Group 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 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 Directors, whose names and functions are listed on page 35 of the Annual Report and Financial Statements 2013 confirm that, to the best of their knowledge:

·      the Group and Company 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 and Company; and

·      the Directors' report contained in the Annual Report includes a fair review of the development and performance of the business and the position of the Group and Company, together with a description of the principal risks and uncertainties that it faces.

 

END

 

 

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