TIDMGNK
RNS Number : 1885X
Greene King PLC
08 August 2018
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 29 April 2018
and of the circular convening the 2018 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.morningstar.co.uk/uk/NSM.
The annual report and the AGM circular will also be available on
the company's website, www.greeneking.co.uk.
Lindsay Keswick
Company Secretary
Greene King plc
LEI: 213800R9N5F2WRMGTR50
8 August 2018
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 28 June
2018. 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 75 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.
The United Kingdom Companies Act 2006 requires the directors to
prepare financial statements for each financial period that give a
true and fair view of the financial position of the group and the
parent company and the financial performance and cash flows of the
group for that period. 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 in accordance with applicable law, 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").
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 are 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 United Kingdom 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 United Kingdom 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 and in
accordance with applicable law, 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
Gordon Fryett
Rob Rowley
Richard Smothers
Lynne Weedall
Principal risks and uncertainties
The following description of the principal risks and
uncertainties is extracted from page 33 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.
Strategic priorities
1. Build brands that customers admire
2. Provide offers that deliver compelling value, service and quality
3. Develop people who exceed expecations
4. Maintain a well located and invested estate
5. Manage our finances prudently
Strategic risks
1. Business strategy
Specifics and potential impact
Failure to adopt the right strategy for the group or poor
execution of the group's strategy could lead to reduced revenue,
profitability and lower growth rates than our strategic
objectives.
Link to strategic priorities
1, 2, 3,4
Change since last year
No change
Mitigation
Our strategy is focussed on building brands that customers
admire, creating offers that deliver compelling value, service and
quality, developing people who exceed expectations, maintaining a
well-located and invested estate and managing our finances
prudently. Overall strategy is determined by the board at an annual
two day strategy meeting, and progress against strategic plans is
reviewed regularly by the board and the operating board, which is
tasked with the execution of the plans on a day to day basis. There
is regular review of the execution of strategic plans by management
in operating board meetings and at other relevant meetings, with a
particular focus on our Pub Company business.
Risk tolerance
We are comfortable managing risks which we understand and are
consistent with the delivery of our strategic objectives.
2. Customer offer
Specifics and potential impact
Failure to deliver an appealing customer offer, to identify and
respond to fast-changing consumer tastes and habits (including the
use of digital media), to respond to increased competition, to
price products appropriately and to align the portfolio to the
market could all lead to reduced revenue, profitability and lower
market share and growth rates than anticipated. It is unclear how
consumers will respond to the outcome of the Brexit
negotiations.
Link to strategic priorities
1,2,3,4,5
Change since last year
Increased.
Mitigation
We will focus on our four main brands going forward, as
explained elsewhere in this report, although we retain the ability
to tailor a pub's offer to its local customer requirements. We use
guest satisfaction tools, TripAdvisor scores and net promoter
scores to collect customer feedback and measure performance of our
pubs.
Competitor activity is monitored at both a strategic and
tactical level and each brand has its own pricing strategy, while
discounts and promotions are carefully targeted. The success of the
GBP10m we invested this year in the customer offer continues to be
monitored. Food and drink quality remain a high priority, as do a
focus on team training and digital enhancements.
Risk tolerance
With our vision to be the best pub and beer company in the UK we
expect to be able to react swiftly and appropriately to changing
consumer trends to maintain earnings and the achievement of our
strategic objectives.
Economic and market risks
3. Economic uncertainty and cost pressures
Specifics and potential impact
We are at risk of a weakening economy and softer consumer
confidence in the UK, which may become more volatile as Brexit
looms. We also continue to face significant cost headwinds,
including the National Living Wage, the Apprenticeship Levy, the
sugar tax and utilities taxes, which could all lead to reduced
revenue, profitability and lower growth rates. In Pub Partners any
difficulties our tenants are facing, such as cost/revenue pressure
and the availability of finance to fund investment, also impact
us.
Link to strategic priorities
1,2, 3, 4
Change since last year
Increased.
Mitigation
We have a relentless focus on value, service and quality and are
continuing to invest in our pubs. Plans have been developed to
mitigate much of the anticipated cost increases facing the
business, including changes to the management structure to increase
our competitiveness and agility. We have a broad geographic spread
of pubs across the country, including in London and the south
east.
Risk tolerance
We acknowledge and recognise that in the normal course of
business, the group is exposed to risks in this area. We are
willing to accept a level of risk in order to achieve our strategic
priorities and will manage the business accordingly.
Operational and people risks
4. GDPR compliance
Specifics and potential impact
The implementation of the General Data Protection Regulation in
the UK has highlighted the need to ensure that all our data
processing activities are compliant with the new legislation, that
we have the technical and operational systems in place to secure
the data we hold. A significant personal data breach could impact
our ability to do business, impacting both revenue and
profitability. In addition the risk of reputational damage and
financial damage from fines or compensation has increased.
Link to strategic priorities
1,3,5
Change since last year
new
Mitigation
A GDPR implementation team, under the sponsorship of senior
management, has implemented a range of policy, procedural, and
compliance control improvements across the business, covering all
aspects of the new requirements, and activities will continue to
improve the management of these risks, led by our data governance
committee, data protection officer and data protection champions
across the business. Staff training has been introduced for all
employees and further specialist follow-up training will be
provided to employees whose roles involve significant processing of
personal data. Solutions are being implemented for a number of
issues identified during the implementation programme. There will
be an ongoing programme to monitor data processing activities and
ensure compliance going forward.
Risk tolerance
We have a low tolerance for significant breaches of GDPR.
5. Cyber/IT security
Specifics and potential impact
A significant cyber security breach or other loss of data could
impact our ability to do business, impacting both revenue and
profitability as well as potentially compromising employee,
customer and supplier data. Deliberate acts of cyber crime are on
the increase, targeting all markets and heightening risk
exposure.
Link to strategic priorities
1,3,5
Change since last year
Increased.
Mitigation
We constantly monitor cyber threats to our business and have a
programme of works to counter ongoing cyber threats. Our cyber
programme focuses on a continuous evaluation of threat and a
programme of strengthening controls to mitigate the evolving
threats such as ransomware, IT security controls, threat
surveillance, patching, retirement of legacy systems and user
education - to ensure our defences are strong and evolve as
necessary. Disaster recovery plans for our critical applications
have been successfully tested, and the architecture is constantly
being updated and tested to improve the scale of speed of recovery
of our IT systems.
Risk tolerance
We have a low tolerance level for significant breaches within
our IT operations.
6. Recruitment, retention and development of employees and licensees
Specifics and potential impact
If we are unable to recruit, develop and retain key employees it
may be more difficult to execute our business plans and strategy,
impacting our revenue and profitability. The impact of Brexit
negotiations is yet to be fully understood. For our Pub Partners
division we face similar issues with regard to licensees.
Link to strategic priorities
1,2,3
Change since last year
Increased
Mitigation
We have both a branded recruitment plan to ensure that we
attract suitable candidates and operate a range of apprenticeship
programmes. More effective recruitment processes have been put in
place for key roles in our pubs and we have improved induction
training to improve retention in the early few months. We spent
over GBP3m in the year on training and development, and have rolled
out a company-wide training platform to all employees. Career
development plans are in place to retain key employees, whilst
remuneration packages are benchmarked to ensure that they remain
competitive. We plan to improve retention through greater
engagement with our staff through digital HR and through our
ongoing focus on the Winning Ways values programme. Key leaver
reasons are monitored so that specific issues can be dealt with,
and our annual employee engagement survey is used to obtain direct
feedback from employees on a range of issues. Managers are tasked
with developing action plans to deal with the feedback received.
For our tenanted pub business we have a range of tenancy
agreements, training programmes and support available to attract
and retain the best quality licensees.
Risk tolerance
The nature of the sector in which we operate is predisposed to
high employee turnover levels, but we have a low tolerance for
levels which exceed the sector average, and we expect our staff to
have the appropriate skills to deliver the functions of the
business.
7. Suppliers, distributors and our own production facilities
Specifics and potential impact
We are reliant on a number of key suppliers and third party
distributors to supply goods to our pubs and on our own ability to
produce, package and distribute our own beers. Short term supply
disruption could impact customer satisfaction and lead to loss of
revenue whilst the long term failure or withdrawal of key suppliers
or distributors could also lead to increased costs. If we were
unable to brew, package and distribute our own beers for long
periods we could suffer loss of revenue and profitability.
Link to strategic priorities
1,2
Change since last year
Increased
Mitigation
We maintain back up plans in case of the failure by or loss of a
key supplier, and we expect our key suppliers to maintain disaster
recovery plans which we review on a regular basis. Regular
monitoring is undertaken of KPIs applicable to both third party
suppliers and distributors, with issues flagged for resolution. In
the event of a failure in our own production and distribution
activities a range of alternative solutions exist to enable us to
continue to brew, package and distribute our own beers.
Risk tolerance
We recognise that we carry an inherent risk in relation to both
our own production facilities and third party suppliers but we seek
to minimise this risk through management and control.
8. Compliance with a range of legislation including health and
safety, food safety and employment legislation
Specifics and potential impact
If we fail to comply with major health and safety legislation
and cause serious injury or loss of life to one of our customers,
employees or tenants, this could have a significant impact on our
reputation, leading to financial loss. If there is an issue in our
food supply chain, including the provision of incorrect allergen
information, that leads to serious illness or loss of life to one
of our customers this could lead to restrictions in supply,
potential increases in the cost of goods and reduced sales.
Failure to comply with employment-related legislation such as
those relating to the National Minimum Wage and right to work could
lead to HMRC fines and additional expense.
Link to strategic priorities
1,2, 3,4
Change since last year
No change.
Mitigation
We have a comprehensive range of formally documented policies
and procedures in place, including centrally managed systems of
compliance KPI tracking and internal and independent audits to
ensure compliance with current legislation and approved guidance.
Our health and safety policies have been reviewed by our primary
authority partner, Reading Borough Council, which has rated our
safety management system, which includes training for all relevant
staff, as very good. We have also established a link between
environmental health 'Scores on the Doors' and remuneration
incentives for relevant employees, and we have introduced
procedures to improve in-pub support at times of change of general
manager.
In our tenanted estate we have a detailed compliance programme
to ensure that pubs are safely handed over to new tenants and we
provide technical support and audit to our key tenanted food
businesses and those with the poorest hygiene ratings. In relation
to our food supply chain we require all suppliers to have BRC or
SALSA accreditation as a minimum and we risk rate suppliers on an
annual basis to determine audit type and frequency. Regular
meetings are held with key suppliers to review issues and follow up
on any corrective actions required.
We have systems designed to ensure compliance with right to work
and National Minimum Wage legislation.
Risk tolerance
We have no tolerance for health and safety or food safety
breaches within our operations.
Financial risks
9. Funding requirements
Specifics and potential impact
If we are unable to meet the funding requirements of the group
we risk reduced revenue and lower profitability than our strategic
plan.
Link to strategic priorities
1, 4, 5
Change since last year
Decreased
Mitigation
The group's debt structures and financing requirements are
reviewed by the board who ensure that the capital structure plan
continues to support the requirements of the strategic 3 year plan.
The group has a GBP400m revolving credit facility for general
corporate purposes outside the securitisation and debenture
vehicles, which expires in 2021. In November 2017 we signed a new
3-year revolving credit facility for GBP350m to finance the
purchase of pubs from the Spirit debenture to refinance the
debenture debt. In December 2017 we prepaid the Spirit debenture
A1, A6 and A7 bonds, eliminating cash sweep and margin step up in
the debenture.
Risk tolerance
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.
10. Covenant risks
Specifics and potential impact
If we are unable to meet the covenant requirements of the
group's debenture, securitisation and other financing arrangements
our ability to pay dividends or reinvest cash could be affected,
which in turn would damage our reputation and ongoing
creditworthiness.
Link to strategic priorities
1, 4, 5
Change since last year
No change.
Mitigation
Long term strategy and 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
and closely managed by the finance teams. Our refinancing model
closely tracks future covenant headroom across all debt platforms
through all transactions considered.
Risk tolerance
We expect to be able to meet out payment obligations and
covenant levels under a range of cautious but plausible liquidity
scenarios.
11. Pension scheme funding
Specifics and potential impact
Any inability to meet the 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, could impact our balance sheet, whilst the
volatility of the deficit makes longer-term planning more
difficult.
Link to strategic priorities
5
Change since last year
No change.
Mitigation
All our final salary schemes are closed to future accrual to
reduce volatility. Liability management programmes are in place and
there is an ongoing dialogues with the trustees regarding funding
requirements. There is regular monitoring of the schemes'
investments and plans are in place to de-risk the investment
strategy of the Greene King pension scheme.
Risk tolerance
We expect to maintain funding levels for our pension schemes at
manageable levels."
Related party transactions
The following description of related party transactions is
extracted from page 122 of the annual report.
"31 Related party transactions
No transactions have been entered into with related parties
during the year.
Greene King Finance plc and Spirit Issuer plc 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
2018 2017
GBPm GBPm
Short term employee benefits (including national insurance contributions)
Post-employment pension and medical benefits 5.2 5.1
Termination benefits 0.6 0.6
Share based payments - -
0.1 0.1
--------------------------------------------------------------------------- ------ ------
5.9 5.8
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 news service of the
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of this information may apply. For further information, please
contact rns@lseg.com or visit www.rns.com.
END
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