TIDMGNK
RNS Number : 4626G
Greene King PLC
08 August 2016
Greene King plc
Annual report and financial statements and AGM circular
In accordance with Listing Rule 9.6.1, copies of the annual
report and financial statements for the year ended 1 May 2016 and
of the circular convening the 2016 annual general meeting (AGM)
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.
The annual report and the AGM circular will also be available on
the company's website, www.greeneking.co.uk.
Lindsay Keswick
Company Secretary
5 August 2016
Information required by the Disclosure and Transparency Rule
6.3.5
The principal purpose of this announcement is to notify the
submission by the company to the UK Listing Authority of copies of
the annual report and financial statements and of the AGM circular.
However, the information set out below, which is extracted from the
annual report, is also included in the announcement for the sole
purpose of complying with Disclosure and Transparency Rule 6.3.5
and the requirements it imposes on issues as to how to make annual
financial reports public. It should be read in conjunction with the
company's preliminary results announcement released on 29 June
2016. This material is not a substitute for reading the full annual
report. Page numbers and cross-references in the extracted
information below refer to page numbers and cross-references in the
annual report.
Responsibility statement
The following statement is extracted from page 69 of the annual
report and is not connected to the extracted information presented
in this announcement or in the preliminary results
announcement.
"Statement of directors' responsibilities in respects of the
financial statements
The directors are responsible for preparing the annual 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 elected to prepare the group financial statements in
accordance with International Financial Reporting Standards
('IFRSs') as adopted by the European Union, and the parent company
financial statements in accordance with United Kingdom Generally
Accepted Accounting Practice (United Kingdom Accounting Standards
and applicable law), including Financial Reporting Standard 101
Reduced Disclosure Framework ("FRS 101"). 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 judgments and estimates that are reasonable and prudent;
-- present information, including accounting policies, in a
manner that provides relevant, reliable, comparable and
understandable information;
-- in respect of the group financial statements, state whether
IFRSs as adopted by the European Union have been followed, subject
to any material departures disclosed and explained in the financial
statements;
-- provide additional disclosures when compliance with the
specific requirements in IFRSs is insufficient to enable users to
understand the impact of particular transactions, other events and
conditions on the group's financial position and financial
performance;
-- in respect of the parent company financial statements, state
whether applicable UK Accounting Standards, including FRS 101, have
been followed, subject to any material departures disclosed and
explained in the financial statements; and
-- prepare the financial statements on the going concern basis
unless it is inappropriate to presume that the company and/or the
group will continue in business.
The directors are responsible for keeping adequate accounting
records that are sufficient to show and explain the company's and
group'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 comply with the
Companies Act 2006 and, with respect to the group financial
statements, Article 4 of the IAS Regulation. They are also
responsible for safeguarding the assets of the company and group
and hence for taking reasonable steps for the prevention and
detection of 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 comply 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.
Directors' responsibility statement
The directors confirm, to the best of their knowledge:
-- that the consolidated financial statements are prepared in
accordance with IFRSs, as adopted by the European Union, give a
true and fair view of the assets, liabilities, financial position
and profit of the company and undertakings included in the
consolidation taken as a whole;
-- that the annual report, including the strategic report,
includes a fair review of the development and performance of the
business and the position of the company and undertakings included
in the consolidation taken as a whole, together with a description
of the principal risks and uncertainties that they face; and
-- having taken into account all matters considered by the board
and brought to the attention of the board during the year, the
directors consider that the annual report, taken as a whole, is
fair, balanced and understandable. The directors believe that the
disclosures set out in this annual report provide the information
necessary for shareholders to assess the company's performance,
business model and strategy."
The names of the directors who gave these statements are:
Rooney Anand (chief executive)
Philip Yea (chairman)
Mike Coupe
Kirk Davis
Ian Durant
Rob Rowley
Lynne Weedall
Principal risks and uncertainties
The following description of the principal risks and
uncertainties is extracted from page 34 of the report and
accounts.
"This section highlights some of the key risks and uncertainties
which affect Greene King. The group is of course exposed to risks
wider than those listed, but these are believed to be likely to
have the greatest impact on our business at this moment in
time.
For the first time this year we have indicated whether we
believe the risk has increased, decreased or remained the same
during the year and also how each risk relates to our strategic
priorities.
Strategic Risks
Specific risk area
Integration of Spirit Pub Company and failure to deliver the
full anticipated synergies.
Change since last year
Decreased.
Potential impact
Reduced revenue, profitability and lower growth rates than our
strategic objectives.
Mitigation and monitoring
Integration steering committee overseeing integration. Retention
arrangements in place for critical-to-retain staff. Communication
plan designed to keep all staff and other stakeholders informed of
progress and changes impacting them. Synergy targets established
and systems are in place to record synergies captured. Brand swap
plans in place and being implemented and monitored.
Risk appetite
We have an appetite for risks which we understand and which are
consistent with the delivery of our strategic objectives.
Link to strategic priorities
Build attractive and strong brands. Work with the best people.
Own the best invested pub estate.
Specific risk area
Failure to develop an appealing customer offer, to identify and
respond to fast-changing consumer tastes and to maintain and grow
market share.
Change since last year
No change.
Potential impact
Reduced revenue, profitability and lower growth rates than our
budget.
Mitigation and monitoring
Research conducted into consumer trends and plans developed to
respond to key trends, including the piloting of new variations of
existing brands. Use of guest satisfaction tools and net promoter
scores to collect customer feedback and measure performance of our
pubs. Increased investment in support and training for our
employees to ensure service standards meet guest expectations and
continue to improve. Increased use of social media to enhance
communication with our guests and other consumers.
Risk appetite
With our vision to be the best pub company in the UK we expect
to be able to react swiftly and appropriately to changing consumer
trends to ensure continuity of earnings growth and achievement of
our strategic objectives.
Link to strategic priorities
Build attractive and strong brands. Industry-leading value,
service and quality. Work with the best people. Own the best
invested pub estate. Maintain a strong balance sheet and flexible
capital structure.
Economic and market risks
Specific risk area
Reduced consumer confidence in the UK, particularly in the light
of the referendum vote to leave the European Union. and increasing
competitor activity.
Change since last year
Increased.
Potential impact
Reduced revenue, profitability and lower growth rates.
Mitigation and monitoring
Focus on value, service and quality to appeal to a broad range
of consumers. Piloting of new variations of existing brands. Costs
are kept under constant review and mitigation plans prepared and
implemented where appropriate. Broad geographic spread of pubs
including in London and the South East. Ongoing agreement
innovation, training and support for our tenants. Monitoring of
competitor activity at strategic and tactical level.
Risk appetite
We acknowledge and recognise that in the normal course of
business, the group is exposed to risk and we are willing to accept
a level of risk in order to achieve our strategic priorities and
will manage the business accordingly.
Link to strategic priorities
Build attractive and strong brands. Industry-leading value,
service and quality. Own the best invested pub estate.
Operational and people risks
Specific risk area
Significant cyber security breach.
Change since last year
Increased.
Potential impact
Potential impact on our ability to do business, impacting
revenue and profitability. Reputational damage and financial damage
from fines or compensation.
Mitigation and monitoring
Networks are protected by firewalls and anti-virus protection
systems with back-up procedures also in place. Plans in place to
further enhance controls in this area including ongoing investment.
Constant monitoring of threats to data protection by viruses,
hacking and breach of access controls, with additional controls
added during the year. Data governance committee drives improved
behaviours and management response.
Risk appetite
We have a low appetite for significant breaches within our IT
operations.
Link to strategic priorities
Work with the best people. Maintain a strong balance sheet and
flexible capital structure.
Specific risk area
Risks associated with the recruitment and retention and
development of employees and licensees.
Change since last year
No change.
Potential impact
Inability to execute our business plans and strategy. Potential
impact on the profitability of our Pub Partners business where the
risks relate to licensees.
Mitigation and monitoring
A branded recruitment plan is in place with a strong pipeline of
suitable candidates. In addition, we operate a range of
apprenticeship programmes. Remuneration packages are benchmarked to
ensure that they remain competitive and appropriate mechanisms are
in place for managing pay progression. Career development
programmes are in place to retain key employees and leadership
training has been introduced for all levels of management. Our
annual employee engagement survey is used to obtain direct feedback
from employees on a range of issues. Exit interviews are conducted
with all head office, Brewing & Brands and retail managers to
enable action plans to be developed to deal with key leaver
reasons. The range of tenancy agreements, training programmes and
support available is designed to attract and retain the best
quality licensees.
Risk appetite
The nature of the sector in which we operate is predisposed to
high turnover levels, but we have a low tolerance for levels which
exceed the sector average. We expect our staff to have appropriate
skills to deliver the functions of the business.
Link to strategic priorities
Work with the best people.
Specific risk area
Reliance on a number of key suppliers and third party
distributors and on own ability to produce, package and distribute
our own beers.
Change since last year
Increased.
Potential impact
Supply disruption could impact customer satisfaction, leading to
loss of revenue. Key supplier or distributor withdrawal or long
term failure could reduce revenues or lead to increased costs.
Inability to brew and distribute our own beers could lead to loss
of revenue.
Mitigation and monitoring
Back up plans are maintained in the event of the failure by or
loss of a key supplier. Detailed risk management and mitigation
plans exist in our internal production and distribution activities,
which are tested regularly across the business. Key suppliers are
expected to maintain disaster recovery plans, which we review on a
regular basis.
Risk appetite
We recognise that we carry an inherent risk in relation to third
party suppliers, but we seek to minimise this risk through
management and control.
Link to strategic priorities
Build attractive and strong brands. Industry-leading value,
service, quality bar.
Regulatory risks
Specific risk area
Risk of increased regulation, and failure to respond to recent
changes in regulation, in relation to any matter affecting our
retail business, including National Living Wage, the apprenticeship
levy, the anticipated rates revaluation in 2017 and potential
future changes in relation to the sale of alcohol.
Change since last year
Increased.
Potential impact
Legislation such as the National Living Wage and the
apprenticeship levy will drive up costs as will any increases in
rates charged on our pubs and restaurants. Legislation impacting
consumers could potentially reduce demand leading to reduced
revenue.
Mitigation and monitoring
We have developed a plan which will in part mitigate the cost
impact of the National Living Wage and the apprenticeship levy over
the next three years. Monitoring of legislative developments and
active engagement with government where necessary. Diversified
offer to include soft drinks, coffee, food and accommodation to
reduce our reliance on alcohol based revenue.
Risk appetite
We recognise that in the normal course of business, we are
exposed to legislative risk that we need to manage appropriately in
order to meet our strategic objectives.
Link to strategic priorities
Build attractive and strong brands. Maintain a strong balance
sheet and flexible capital structure.
Specific risk area
Failure to respond to the threats to our Pub Partners business
posed by the introduction of the "market rent only" (MRO) option
and the statutory code.
Change since last year
No change.
Potential impact
Loss of income and profits in Pub Partners from reduced beer
margin and penalties for breach of the statutory code.
Mitigation and monitoring
Development of agreements that are exempt from the MRO option
with plans to adopt these where possible. Site by site plans
developed to mitigate risks. Upweighted compliance team in place
with training for all relevant employees, and enhanced processes
and procedures to reduce risks.
Risk appetite
We recognise that in the normal course of business, we are
exposed to legislative risk that we need to manage appropriately in
order to meet our strategic objectives.
Link to strategic priorities
Own the best invested pub estate. Maintain a strong balance
sheet and flexible capital structure.
Specific risk area
Failure to comply with major health & safety legislation,
including in the areas of food safety and fire safety, or
significant food integrity issues.
Change since last year
Increased.
Potential impact
Serious illness, injury or even loss of life to one of our
customers, employees or tenants, or significant food integrity
issues, could have a significant impact on our reputation, leading
to financial loss too.
Mitigation and monitoring
Comprehensive range of formally documented policies and
procedures in place, including centrally managed system of
compliance KPI tracking and internal and independent audits to
ensure compliance with current legislation and approved guidance.
Health & safety policies reviewed by our primary authority
partner, Reading Borough Council, which has rated our safety
management systems as very good. Safety measures are in place,
including a supplier assurance programme, to ensure that product
integrity is maintained and that all food and drink products are
fully traceable. Compliance programme in place to ensure pubs are
safely handed over to new tenants.
Risk appetite
We have no appetite for health and safety breaches within our
operations.
Link to strategic priorities
Build attractive and strong brands. Industry-leading value,
service and quality.
Financial risks
Specific risk area
Inability to meet the funding requirements of the enlarged
group.
Change since last year
Decreased.
Potential impact
Reduced revenue, profitability and lower growth rates than our
strategic plan.
Mitigation and monitoring
The group's debt structures and financing requirements are kept
under regular review. The group has a GBP460m bank facility to
support activities outside the securitisation vehicles, which was
entered into in July 2013 and is available until July 2018. We
completed a tap of our Greene King securitisation vehicle in May
2016.
Risk appetite
We expect the group to be able to access suitable financial
facilities to meet the ongoing requirements of the business and our
longer term strategic objectives.
Link to strategic priorities
Maintain a strong balance sheet and flexible capital
structure.
Specific risk area
Liquidity and covenant risk relating to the group's
securitisation and other financing arrangements.
Change since last year
No change.
Potential impact
A breach of any financial covenants applicable to the group
would impact our ability to pay dividends or reinvest cash, and
impact our reputation and ongoing creditworthiness.
Mitigation and monitoring
Long-term strategy and yearly business plans are formulated to
ensure that financial covenants can be met and monitored on a
regular basis. Working capital is carefully forecast, regularly
reviewed by the finance teams and closely managed.
Risk appetite
We expect to be able to meet our payment obligations and
covenant levels under a range of cautious but plausible liquidity
scenarios.
Link to strategic priorities
Maintain a strong balance sheet and flexible capital
structure.
Specific risk area
Funding requirements of our defined benefit pension schemes,
which are subject to the risk of changes in life expectancy, actual
and expected price inflation and investment yields.
Change since last year
Increased.
Potential impact
Increased deficit being recognised on our balance sheet, and
volatility of the deficit makes longer term planning more
difficult.
Mitigation and monitoring
All the schemes are now closed to future accrual to reduce
volatility. There is regular monitoring of the schemes' investments
and dialogue with the trustees on an ongoing basis regarding
funding requirements.
Risk appetite
We expect to maintain funding levels for our pension schemes at
manageable levels.
Link to strategic priorities
Maintain a strong balance sheet and flexible capital
structure."
Related party transactions
The following description of related party transactions is
extracted from page 116 of the annual report.
"32 Related party transactions
No transactions have been entered into with related parties
during the period.
Greene King Finance plc and Spirit Issuer are structured
entities set up to raise bond finance for the group, and as such is
deemed to be related parties. The results and financial position of
these entities have been consolidated.
Compensation of directors and other key management personnel of
the group
2016 2015
GBPm GBPm
Short term employee benefits (including national insurance contributions)
Post-employment pension and medical benefits 4.9 4.6
Termination benefits 0.5 0.6
Share based payments 1.0 0.4
2.3 2.1
--------------------------------------------------------------------------- ------ ------
8.7 7.7
Key management personnel
Key management personnel are deemed to be those employees who
are directors of Greene King plc or its subsidiaries.
Directors' interests in an employee share incentive plan
Details of the options held by executive members of the board of
directors are included in the remuneration report. No options have
been granted to the non-executive members of the board under this
scheme."
This information is provided by RNS
The company news service from the London Stock Exchange
END
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