Marks & Spencer Group PLC Annual Financial Report (6700Q)

TIDMMKS

RNS Number : 6700Q

Marks & Spencer Group PLC

07 June 2018

7 June 2018

Marks and Spencer Group plc (the "Company")

Annual Report and Financial Statements 2018

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 2018; 

-- Notice of Annual General Meeting of the Company, which will be held at Wembley Stadium, Wembley, London HA9 0WS at 11am on Tuesday 10 July 2018; and

   --           Proxy forms for the 2018 Annual General Meeting. 

In accordance with DTR 6.3.5(3) the Annual Report and Financial Statements 2018 and the Notice of Annual General Meeting are accessible on marksandspencer.com/annualreport2018.

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 23 May 2018. 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 2018. To view the preliminary announcement, visit the Company website: marksandspencer.com/thecompany.

For further information, please contact:

Group Secretariat: [phone]

Additional Information

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 & CONTEXT                                             MITIGATING ACTIVITIES 
 Trading Environment                                            - Development of, and delivery against, 
  The performance of our business will                           the five-year transformation plan. 
  be impacted if we fail to meet customer                        - Targeted recruitment to strengthen 
  expectations or respond to the continued                       capabilities of our senior leadership 
  pressures of a changing retail environment.                    teams in both Clothing & Home and Food. 
  Aggressive competition, cost pressures                         - Full strategic reviews and setting 
  and the consumer impact of the UK's                            of clear short- and medium-term priorities 
  departure from the European Union                              for our businesses. 
  all contribute to the challenge that                           - Delivery of our International strategy. 
  is faced.                                                      - Refining our operating model to eliminate 
                                                                 silos and create devolved, 
  Our Clothing & Home business must                              accountable businesses. 
  respond to the continued shift in                              - Revised disciplines around store prices, 
  customer preferences towards online                            ranges and promotions across 
  and mobile shopping. Consequently,                             our business. 
  our strategy is focused on the creation                        - Implementation of our digital first 
  of a seamless, relevant customer                               initiatives. 
  experience and the need to be 'digital                         - Improved alignment of business needs 
  first'. We must also continue to                               and engagement with the UK store estate 
  strengthen capability across all                               team, and changes to our Property leadership. 
  areas of our Clothing & Home business                          - Completion of a forensic review of 
  to ensure we deliver contemporary,                             costs and commencement of our cost delivery 
  wearable style and wardrobe essentials                         plan. 
  that our customers want. 
 
  Food consumers continue to be driven 
  by value and we need to ensure our 
  product ranges resonate and are available 
  at the right price. While we have 
  limited influence over a number of 
  contributory factors, for example 
  raw material prices and the impact 
  of Brexit, we recognise the need 
  to manage costs, driving efficiencies 
  and delivering savings in areas such 
  as packaging and waste. 
 
  This new risk is a consolidation 
  of a number of risks, which were 
  disclosed separately in the prior 
  year, to better reflect the increasingly 
  challenging conditions facing our 
  business. 
                                                               ------------------------------------------------------- 
 Business Transformation                                        - Acceleration of our plan to operate 
  As we build a platform for change,                             from fewer, larger Clothing & Home stores. 
  the successful delivery of our business                        - Reassessment of the Simply Foods store 
  transformation programme is critical                           opening programme. 
  - a failure to execute faultlessly                             - Implementation of a Technology Transformation 
  and at pace will hinder progression.                           Programme, leveraging the support of 
  Our business is undertaking a number                           key third-party relationships. 
  of transformation projects; many                               - Improvements to our website. 
  of these are significant in their                              - Commencement of an end-to-end review 
  own right but the level of interdependency                     of our supply chain and logistics network 
  also requires careful alignment.                               across both businesses to deliver improved 
  Transforming our business will generate                        efficiency of picking, improved trade 
  cost savings but also underpins the                            utilisation and a faster more reliable 
  delivery of our strategic objectives.                          service for stores and customers. 
                                                                 - Operational improvements at Castle 
   *    The reshaping of our UK store estate continues at an     Donington. 
        accelerated pace. We need to ensure that the             - Strong programme governance to track 
        programme delivers against agreed targets and that we    progress against plan, resourcing and 
        incorporate changes in customer preferences into         capability and to monitor critical interdependencies. 
        decision making on a timely basis.                       - High levels of cross functional engagement 
                                                                 to ensure consistency and collaboration 
                                                                 in setting and achieving objectives. 
   *    We must deliver on our digital first ambitions -         - Independent audit reviews of key programme 
        improving customer experience, reducing costs and        delivery. 
        working smarter across the business. 
 
 
   *    Our supply chain must be fit for purpose. It is 
        currently slow, outdated and expensive, and must be 
        improved. 
 
 
 
  This new risk is an expansion of 
  the prior year's specific risk around 
  our store estate programme and now 
  incorporates a far broader range 
  of transformational projects. 
                                                               ------------------------------------------------------- 
 Food Safety and Integrity                                      - Clearly defined requirements through 
  A food safety or integrity related                             Terms of Trade, Codes of 
  incident occurs or is not effectively                          Practice, Standard Operating Procedures 
  managed.                                                       and Specifications from 
  Food safety and integrity remains                              farm to fork, including in-store processes. 
  vital for our business. We need to                             - Qualified and capable technical team. 
  manage the potential risk to customer                          Professional status maintained 
  health and confidence that faces                               through training and Technologist Continual 
  all food retailers, while also considering                     Professional Development programme (independently 
  how external pressures facing the                              validated by Institute of Food Science 
  food industry could influence the                              and Technology). 
  integrity of our food, our reputation                          - Clear accountabilities for policy and 
  and shareholder value.                                         standard development at technical leadership 
                                                                 level coupled with individual accountability 
  Many of these pressures, including                             for product safety at technologist level. 

  inflationary costs, labour quality                             - Long established store, supplier and 
  and availability, increased regulatory                         depot auditing programme in place, including 
  scrutiny and the as yet unknown impact                         unannounced audits and raw material testing. 
  of Brexit are outside of our control.                          - Quarterly review of control framework 
                                                                 by the technical leadership. 
  We also recognise the criticality                              - Clear and tested crisis management 
  of internal influences including                               plan in place to respond to incidents. 
  the level of change underway in our                            - Sector leading initiatives, such as 
  Food business and the significant                              over the provenance of our beef. 
  levels of new product development.                             - Membership of Food Industry Intelligence 
                                                                 Forum. 
  This all places greater demand on 
  the technical team and suppliers 
  to complete required raw material 
  testing and product safety checks 
  to guarantee provenance, safety and 
  integrity. 
                                                               ------------------------------------------------------- 
 Corporate Compliance and Responsibility                        - Clear policies and procedures in place, 
  Failure to deliver against our regulatory                      including Human Rights, 
  obligations, social commitments or                             Modern Slavery and Global Sourcing Principles. 
  stakeholder expectations undermines                            - Mandatory induction briefings and annual 
  our reputation as a responsible retailer.                      training for relevant 
  Responsible corporate behaviour is                             colleagues for key regulations. 
  a basic expectation of all businesses,                         - Oversight from established committees 
  especially those that are consumer                             where necessary, including 
  facing. Public sentiment can shift                             Data Protection, Fire Health & Safety 
  rapidly, especially as the traditional                         and Plan A. 
  influencers of public perception                               - Experienced in-house regulatory legal 
  evolve and issues can escalate rapidly                         team with external expertise 
  through social media.                                          sought as needed. 
                                                                 - Dedicated regulatory officers in place 
  There are also many examples of where                          across the business responsible 
  'good' corporate behaviour has, over                           for driving compliance. 
  time, become a legal or regulatory                             - Strong and transparent engagement with 
  requirement. Human Rights, Modern                              regulators. 
  Slavery, Anti-Bribery and Data Protection                      - Forward looking Plan A 2025 commitments 
  are just a few examples impacting                              with associated 
  our business.                                                  governance to anticipate future environmental 
  The mandatory nature of an increasingly                        and social issues. 
  broad and stringent legal and regulatory                       - Established audit and monitoring systems 
  framework creates pressure on both                             in place. 
  business performance and market reaction.                      - Customer contact centre insight and 
  While our business operates appropriate                        analysis of live social media issues. 
  controls, we recognise that potential 
  noncompliance is a risk for all businesses 
  and that there can be no room for 
  complacency. 
 
  Given the high level of trust we 
  have with customers and stakeholders, 
  coupled with our high media profile, 
  we must get this right. 
                                                               ------------------------------------------------------- 
 Information Security (including Cyber)                         - Established security controls, including 
  Failure to adequately prevent or                               policies, procedures and use 
  respond to a data breach resulting                             of security technologies. 
  in business disruption, brand damage                           - Head of Data Governance and Data Governance 
  or loss of information for our customers,                      Group in place. 
  stakeholders or our business.                                  - Dedicated Corporate Security team with 
  The increasing sophistication of                               ongoing focus on improving 
  potential cyber-attacks, coupled                               the physical security environment. 
  with the General Data Protection                               - Dedicated Head of Cyber Security, leading 
  Regulation, highlight the escalating                           a team of cyber security 
  information security risk facing                               experts and analysts, with 24/7 monitoring 
  all businesses. Our reliance on a                              and defence tools. 
  number of third-parties to host and                            - Third-party cyber maturity assessments 
  hold data also means the risk profile                          performed and refreshed. 
  of our information security is changeable.                     - Ongoing monitoring of developments 
                                                                 in cyber security threats, 
  We recognise the importance of ongoing                         engaging with third-party specialists 
  education and vigilance within M&S                             as appropriate. 
  to reduce the likelihood of attack                             - Periodic testing by Internal Audit. 
  or breach in (i) an internal environment                       - Control of sensitive data through limited 
  that is undergoing significant transformation                  and monitored access and 
  and (ii) an external environment                               the roll-out of systems with enhanced 
  that is changing at pace. We must                              security. 
  ensure that our control environment                            - Dedicated workstream focused on information 
  evolves and that our systems operate                           security as part of the Technology Transformation 
  effectively. A data protection breach                          Programme. 
  would not only impact our reputation, 
  but would also cause business disruption 
  and could result in a significant 
  fine. 
                                                               ------------------------------------------------------- 
 Technology                                                     - Technology Transformation Programme 
  To support future profitable growth,                           in place, supported by strong 
  we need to keep pace and develop                               governance principles, to enable the 
  our technology and innovation capability.                      Digital First ambitions and to 
  The digital world continues to evolve                          deliver improved customer experience. 
  at an unprecedented rate, influencing                          - New Technology Operating Model to drive 
  consumer behaviours and setting a                              clear accountabilities and 
  high bar in terms of IT infrastructure                         efficiencies, including the adoption 
  requirements.                                                  of industry standard agile methods. 
                                                                 - Appointment of a leading technology 
  We have clearly communicated our                               company as our principal 
  aim to be digital first, and recognise                         partner, coupled with simplification 
  the need to invest to achieve this.                            and consolidation of the technology supplier 
                                                                 base. 
  Our existing IT infrastructure needs                           - Proactive simplification of IT infrastructure 
  to be more flexible to lower costs,                            through clearly defined technology roadmaps 
  leverage developments and enable                               for all business areas and strong governance 
  us to move with pace to meet customer                          processes. 
  and colleague needs.                                           - Cross channel technology investment 
                                                                 strategy in place and aligned to 
  In addition to developing our technology,                      the family of businesses to mutually 
  we must develop the skills and capabilities                    agreed priorities. 
  of our people. This will be critical                           - Quarterly reviews to ensure benefits 
  to providing a top quartile, seamless                          are being delivered. 
  customer experience. 
                                                               ------------------------------------------------------- 
 Talent and Capability                                          - Talent identified as a critical component 
  We need to attract, develop, motivate                          of our People Strategy and a key enabler 
  and retain the right individuals                               in the delivery of our overall business 
  to achieve our operational and strategic                       strategy. 

  objectives to transform the culture                            - People KPIs in place supported by talent 
  and the business.                                              review at all levels of the organisation. 
  As we transform our business, the                              - Established biannual employee engagement 
  calibre of our people is integral                              survey, enhanced 
  to delivering operational and strategic                        during the year to provide additional 
  objectives, and is especially important                        insight. 
  in our drive to be Digital First.                              - Clear focus and transparent action 
                                                                 on fair pay, including gender, ethnicity, 
  Attracting, developing and retaining                           disability and age. 
  quality individuals is influenced                              - Launch of a new diversity forum. 
  by many factors, a number of which                             - Simplified, outputs focused framework 
  are outside of our control. Growing                            introduced for performance management. 
  market labour shortages, which may                             - Commencement of externally facilitated 
  be further compounded by Brexit,                               culture assessment. 
  and the perceived fragility of UK                              - Active engagement with our Business 
  retail could influence our ability                             Involvement Group. 
  to attract external talent. 
 
  However, our focus cannot solely 
  be outwards looking - our existing 
  workforce is one of our greatest 
  assets. We need to ensure that our 
  colleagues and culture are developed 
  to drive a Digital First and customer 
  centric mindset, colleagues need 
  to feel empowered to drive change 
  at pace. 
                                                               ------------------------------------------------------- 
 Brand and Customer Experience                                  - Targeted external hires to strengthen 
  Our brand and underpinning customer                            capability. 
  experience need to evolve with consumer                        - Revised operating model to better align 
  lifestyles and attitudes for us to                             brand and marketing with 
  remain relevant and successfully                               the specifi c needs of our two businesses. 
  attract and retain customers. Consumer                         - Investment in capability to measure 
  lifestyles and attitudes continue                              customer experience through 
  to evolve at pace in an increasingly                           introduction of an end to end and multichannel 
  diversified and competitive retail                             Net Promoter Score 
  environment.                                                   programme, supported by third party expertise. 
                                                                 - Established Customer Insight Unit and 
  We are proud of our strong brand                               focus groups in place. 
  recognition, but external pressures                            - Review of Sparks loyalty programme 
  make it more difficult for all businesses                      underway, supported by 
  to drive brand relevance and attract                           proposition improvements to strengthen 
  and retain customers, failure to                               member engagement. 
  do so creates the very real risk                               - Increasing our relevance and proactive 
  of a decline in market share. We                               monitoring of social media 
  must attract and retain our core                               to observe and respond to trends in customer 
  customer segments.                                             experience. 
 
  Our intention to be a customer-centric, 
  digital first business has been clearly 
  communicated. We need to ensure that 
  our organisational design and operating 
  model support this aim and that we 
  put the customer at the forefront 
  of all our decision making. Our Sparks 
  loyalty programme, marketing strategies 
  and cross functional ways of working 
  will be key enablers in achieving 
  this, supported by meaningful measurement 
  of customer experience. 
                                                               ------------------------------------------------------- 
 Third Party Management                                         - Clear procurement and supplier management 
  To drive value for our business we                             policies in place, 
  need to successfully manage and leverage                       including specific requirements for strategic 
  our third-party relationships and                              suppliers. 
  partners.                                                      - Defined service level agreements and 
  Our business is increasingly engaged                           key performance indicators 
  in significant third-party partnerships.                       in place for key contracts. 
  These span our full operating model,                           - Defined contract governance and oversight 
  from products and services to franchise                        standards, including 
  management and our international                               dedicated 'supplier owners' managing 
  joint venture.                                                 key contracts. 
                                                                 - Strong engagement with in-house legal 
  To fully leverage these relationships,                         and procurement teams. 
  we need to have clear, consistently                            - Key supplier business contingency planning. 
  applied processes to track performance,                        - Internal audit engagement. 
  ensuring commercial expectations 
  are delivered. We also recognise 
  the importance of managing the business 
  interruption risk conferred by such 
  dependencies, and of maintaining 
  appropriate contingency plans in 
  response. 
 
  We cannot lose sight of the expertise 
  and eff ort that is required to effectively 
  manage third-parties, especially 
  as we move through our transformation 
  programme. 
                                                               ------------------------------------------------------- 
 

The risks listed do not comprise all those associated with Marks & Spencer and are not listed in 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. These less material risks are kept in view in case their likelihood or impact should show signs of increasing.

Further information on the financial risks we face and how they are managed is provided on pages 105 to 111.

Directors' Responsibility Statement

The 2018 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 2018 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 26 and 27 of the Annual Report, confirm that, to the best of their knowledge:

- The Group financial statements, prepared in accordance with the applicable set of accounting standards, give a true and fair view of the assets, liabilities, financial position and profit or loss of the Company and the undertakings included in the consolidation taken as a whole.

- The Management Report includes a fair review of the development and performance of the business and the position of the Company and the undertakings included in the consolidation taken as a whole, together with a description of the principal risks and uncertainties that they face.

- 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 2018 Annual Report, and on the Group's website: marksandspencer.com/thecompany.

This information is provided by RNS, the news service of the London Stock Exchange. RNS is approved by the Financial Conduct Authority to act as a Primary Information Provider in the United Kingdom. Terms and conditions relating to the use and distribution of this information may apply. For further information, please contact [e-mail] or visit www.rns.com.

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June 07, 2018 07:09 ET (11:09 GMT)