Annual Financial Report

RNS Number : 2862P

Marks & Spencer Group PLC

04 June 2015

 

Issued: 4 June 2015

Marks and Spencer Group plc (the "Company")

Annual Report and Financial Statements 2015

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 Hemscott.com/nsm.do:  

·      Annual report and financial statements 2015;

·      Strategic report and supplementary material 2015;

·         The Notice of Annual General Meeting of the Company which will be held at Wembley    Stadium, Wembley, London HA9 0WS at 11am on Tuesday 7 July 2015; and

·      Proxy forms for the 2015 Annual General Meeting.

In accordance with DTR 6.3.5(3) the Annual report and financial statements 2015, and the Strategic report and supplementary material 2015 are accessible on marksandspencer.com/annualreport2015. 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 20 May 2015. 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 2015. 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.

Brand and reputation: Our updated values of Inspiration, Innovation, Integrity and In Touch influence how we do business and our reputation for being one of the UK's most trusted brands
Description	Mitigating activities
GM customer engagement Continued loss of engagement with our customer As we strengthen our brand recognition and reassert our GM quality and style credentials, it is important that we understand and address our customers' needs in an increasingly competitive market.	-   Regular engagement with customers through data gathered by our Customer Insight Unit and focus groups. -   Updated brand positioning and marketing approach with greater emphasis on product. -   Continued focus on product quality and style, including adherence to our Clothing Quality Charter. -   Continual updates to the M&S.com website to enhance the online customer shopping experience. -   Ongoing improvements to store environment, addressing specific customer feedback. -   Targeted marketing and promotional activity using customer loyalty data.
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 as we grow our global food business and given 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 product quality. -   Proactive horizon scanning, including focus on fraud and adulteration.     -   Food Standards Agency endorsed approach to reducing campylobacter. -   Updated supplier and depot auditing programme.
Food competition Loss of market share, due to changes in the competitive landscape or customer behaviours. With the current upheaval amongst the supermarkets and the polarisation between value and premium, it is important that we continue to provide a point of difference through product quality, value and innovation, as well as convenience.	-   Significant focus on product innovation to retain point of difference and drive customer loyalty. -   Continued focus on product availability to customers. -   Regular review of price positioning. -   Simply Food expansion to provide convenience to customers.
Day-to-day operation: We are a customer-centric business and strive to deliver an efficient and effective operation
Description	Mitigating activities
GM margin Failure to improve margin whilst maintaining our quality and Plan A standards As we drive increased GM margin through improved design and sourcing capability it is essential that we maintain our ethical sourcing standards and continue to drive improvements to product quality.	-   Margin targets defined and regularly monitored. -   Robust and established supplier ethical audit programme in place.     -   Strong sourcing capability led by experienced overseas Sourcing Directors. -   End-to-end review of GM design, trading and sourcing underway.
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 including policies, procedures and security technologies.   -   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 M&S.com.
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 is substantial, with potential to significantly impact our complex and interdependent systems.	-   Clear decision-making process for system changes, including established Change Approval Board process and change freezes during critical trading periods.           -   Proactive management of cross-programme dependencies including 'release management' approach to Group system changes together. -   Robust disaster recovery plans in place for critical business applications.
Selling channels: We have ambitious plans for our UK, International and Multi-channel businesses as part of our evolution to be a truly international, multi-channel retailer
Description	Mitigating activities
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.
International expansion Our plan to grow our International business is limited by global volatility, the start up profitability of new markets or substandard infrastructure As we continue to increase our international presence and build a leadership 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. It is also critical that we have systems in place to ensure that we can respond proactively to any geo-political issues, and to local regulatory matters, including taxation.	-   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.       -   Property Board approval of new store openings and monitoring of returns on investment. -   International representation in key Group initiatives.
People and change: Our people are fundamental to the long-term success and growth of this business
Description	Mitigating activities
Our people Our organisational culture and structure limit our ability to adapt to market changes with pace As our evolution to a truly international, multi-channel retailer continues, it is essential that our organisational set-up allows us to respond to market changes and competition with pace.	-   Robust employee engagement process. -   Alignment of employee development programmes with business strategy. -   Fast decision-making enabled through the removal of structural complexity. -   Employee reward based on performance in line with our values of Inspiration, Innovation, Integrity and In Touch.
Staff retention Failure to retain key people due to offers from competitors or loss of confidence in the business From our expert food technologists and product developers to our recently strengthened GM design teams, our people are in demand from our competitors.	-   Succession planning in place for key roles and senior leaders. -   Performance management process and bonus scheme structure focused on rewarding high performers.
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.	-   Our Strategic Programme Office provides central governance for major Group initiatives, including cross-programme inter-dependencies, supported by robust project management discipline.     -   Status and benefits realisation updates provided 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.
GM Supply chain and logistics network We fail to evolve our supply chain and logistics network to maximise availability to customers and speed up delivery times As we stabilise and leverage the capability of our Castle Donington distribution centre, we must continue to focus on the implementation of our single-tier network, to provide a modern and flexible infrastructure for our business.	-   Ongoing simplification and stabilisation of Castle Donington distribution centre ahead of peak 2015. -   Phased approach to distribution centre transformation. Robust programme governance in place, including interdependencies with other Group initiatives. -   Management team strengthened through external hires into key roles. -   Ongoing review of progress against agreed operational and financial objectives.
The Group Risk Profile will evolve as mitigating activities reduce net risk over time, or as new risks emerge. Two new risks have been added to the Group Risk Profile since the prior year (Food competition and Staff retention); the remaining risks have essentially remained the same. No risks have been removed from the Group Risk Profile since the prior year.

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 2014 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 pages 34 and 35 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 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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