TIDMSBRY
RNS Number : 0282H
Sainsbury(J) PLC
02 June 2017
2 June 2017
LEI: 213800VGZAAJIKJ9Y484
J Sainsbury plc (the "Company")
Annual Report and Financial Statements 2017
The following documents have today been posted or otherwise made
available to shareholders:
-- Annual Report and Financial Statements 2017
-- Notice of Annual General Meeting
-- Form of Proxy
In accordance with Listing Rule 9.6.1R, a copy of each of these
documents will be uploaded to the National Storage Mechanism and
will be available for viewing shortly at
www.morningstar.co.uk/uk/NSM
The above documents may be viewed online at
www.about.sainsburys.co.uk/investors/annual-report-2017 and
www.about.sainsburys.co.uk/investors/shareholder-information/agm
respectively.
A condensed set of the Company'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 Results Announcement on 3
May 2017. That information together with the information set out
below which is extracted from the Annual Report and Financial
Statements 2017 (the "Annual Report 2017") constitute the material
required by Disclosure Guidance 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 2017. Page and note
references in the text below refer to page numbers in the Annual
Report 2017. To view the preliminary announcement, slides of the
results presentation, the transcript of the presentation and the
webcast please visit
www.about.sainsburys.co.uk/investors/results-reports-and-presentations.
Enquiries
Investor Relations Media
James Collins Louise Evans /
Rebecca Reilly
+44 (0) 20 7695 +44 (0) 20 7695
0080 7295
Our Principal Risks and Uncertainties
The risk management process is aligned to our strategy. 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. As outlined on
page 11, the current business strategy and objectives are
categorised into the following areas:
-- Colleagues making the difference;
-- Great products and services at fair prices; and
-- There for our customers.
The Sainsbury's Operating Board formally reviews the corporate
risk map twice a year, which captures the principal risks to
achieving Sainsbury's business objectives. The risk discussion
includes assessment of both gross and net risk, where gross risk
reflects the risk exposure and risk landscape before considering
the mitigations in place, and net risk the residual risk after
mitigations. The risk appetite for each key risk is also discussed
and assessed with a target risk position agreed to reflect the
level of risk that the business is willing to accept. The
Sainsbury's Operating Board reviews risk dashboards during the
year, comprised of key risk indicators, to ensure they identify any
potential risk movement towards or away from their risk appetite.
This enables the Operating Board to agree and monitor appropriate
actions as required.
Mitigations in place supporting the management of the risk to a
net risk position are also described for each principal risk and
uncertainty.
Where principal risks have been included in the risk modelling
undertaken as part of the preparation of the viability statement
(see page 45), this has been indicated with the following symbol
*
Key risk movements
The principal and emerging risks are discussed and monitored
throughout the year to identify changes to the risk landscape.
Risks are reviewed in line with the Company's strategic objectives.
A new principal risk was disclosed in 2016 regarding the political
and regulatory environment. Following the UK's decision to leave
the European Union (EU) in June 2016, Sainsbury's believe that this
risk has increased due to the ongoing uncertainty which may
adversely impact trading performance across the sector.
All principal risks were reviewed following the acquisition of
Home Retail Group to ensure that they reflect the risk across the
Sainsbury's Group, including the acquired Argos business. It is
considered that all of the risks are incorporated within the
principal risks and uncertainties disclosed below, with no material
change required. It was considered however that Sainsbury's Group's
risk exposure to political and regulatory risks and business
continuity incidents may be greater due to the increased size and
complexity of the business.
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 (gross risk
exposure increased)
Risk Mitigation
--------------------------- -------------------------------------
A major incident or The Group has detailed plans
catastrophic event in place, supported by senior
could impact on the representatives who are trained
Group's ability to in dealing with major incidents
trade. Following the and have the authority levels
acquisition of Home to make decisions in the event
Retail Group, Sainsbury's of a potentially disruptive
exposure to business incident.
continuity and major
incident risks may The business continuity strategy,
be greater due to including incident management,
the increased size resilience exercises and testing,
and complexity of has been aligned across the
the business. Group. The Business Continuity
Steering Group, which includes
representatives from Sainsbury's
Bank, Argos and Habitat, 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 the response
and any associated risk to
the business.
Group wide business continuity
resilience exercises are undertaken
to imitate real life business
continuity scenarios and test
the Group's ability to respond
effectively.
Key strategic locations have
secondary backup sites which
would be made available within
pre-defined timescales and
are regularly tested.
--------------------------- -------------------------------------
Business strategy and change (gross risk exposure no change)
*
Risk Mitigation
---------------------------- -----------------------------------------------------------------
If the Board adopts The business strategy is
the wrong business focused on the following:
strategy or does
not communicate or * We know our customers better than anyone else;
implement its strategies
effectively, the
business may be negatively * We will be there wherever and whenever they need us;
impacted. Risks to
delivering the strategy,
change initiatives * We will offer great products and services at fair
forming part of the prices;
strategy and other
significant supporting
change such as the * Our colleagues make the difference; and
integration with
Argos need to be
properly understood * Our values make us different.
and managed to deliver
long-term growth
for the benefit of
all stakeholders The progress against strategic
alongside management programmes and any risks
of business as usual. to delivery, such as the
ability to implement and
deliver change and new business
initiatives, are regularly
reviewed by the Board and
the overall strategy is reviewed
at the annual 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. In addition,
management performs ongoing
monitoring of business as
usual performance to determine
indicators of potential negative
performance as a result of
change initiatives.
---------------------------- -----------------------------------------------------------------
Colleague engagement, retention and capability (gross risk
exposure no change)
Risk Mitigation
------------------------------- ------------------------------------
The Group employs The Group's employment policies
195,000 colleagues and remuneration and benefits
who are critical to packages are regularly reviewed
the success of our and are designed to be competitive
business. Attracting with other companies, as well
and maintaining good as providing colleagues with
relations with talented fulfilling career opportunities.
colleagues and investing In addition to strong leadership
in their training and nurturing of talent by
and development are line managers, processes are
essential to the efficiency also in place to identify
and sustainability talent and actively manage
of the Group's operations. succession planning throughout
Delivery of the strategic the business. Ongoing reviews
objectives, including are performed to understand
integration with Argos the nature of capability and
and progress on multi-channel specific skill sets required
and digital, increases to deliver objectives. This
the risk impact of is supported by embracing
an inability to attract, new ways of attracting talent
motivate and retain and our corporate value 'Great
talent, specific skill Place to Work' reinforces
sets and capability. our commitment to giving people
In addition, the challenging the opportunity to be the
trading environment best they can be.
requires a focus on
efficient operations Colleague surveys, performance
which may include reviews, listening groups,
change initiatives communications with trade
impacting colleagues, unions, regular communication
therefore presenting of business activities and
a risk of loss of colleague networking forums
colleague trust or such as Yammer, the updated
engagement. colleague portal (Our Sainsbury's)
and colleague learning portal
are some of the methods the
Group uses to understand and
respond to colleagues' needs.
As change initiatives are
implemented,
the methods described above
will continue to be employed
to understand and maintain
colleague trust and engagement.
------------------------------- ------------------------------------
Data security (gross risk exposure no change) *
Risk Mitigation
----------------------------- -----------------------------------
It is essential that A Data Governance Committee
the security of customer, is established and is supported
colleague and company by focused working groups
confidential data looking at the management
is maintained. A of colleague data, customer
major breach of information data, information security,
security could have commercial data and awareness
a major negative and training. Senior appointments
financial and reputational have been made into roles
impact on the business. specifically focused on data
The risk landscape governance and information
is increasingly challenging security. The Chief Information
with deliberate acts Security Officer continues
of cybercrime to develop the Information
on the rise, targeting Security Strategy and build
all markets and heightening the necessary capability
the risk exposure. to deliver against that strategy.
The Head of Data Governance
focuses on improving how
we handle data across the
organisation. 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
third parties who hold sensitive
customer or colleague data
continues to take place,
and progress is monitored
by the Data Governance Committee.
A risk based security testing
approach across Group IT
infrastructure and applications
is in place to identify ongoing
vulnerabilities.
----------------------------- -----------------------------------
Environment and sustainability (gross risk exposure no
change)
Risk Mitigation
------------------------------- ------------------------------------------------
Environment and sustainability A number of initiatives are in place, which
are core to Sainsbury's are being led by the Environmental Action
values. The key risk Team and the Corporate Responsibility Steering
facing the Group Group, to reduce our environmental impact
in this area relates and to meet our customers' expectations
to reducing the environmental in this area.
impact of the business
with a focus on reducing Further details are included in the Our
packaging and new values make us different section on pages
ways of reducing 24 to 39.
waste and energy
usage across stores,
depots and offices.
------------------------------- ------------------------------------------------
Financial and treasury risk (gross risk exposure no change)
*
Risk Mitigation
---------------------------- ------------------------------------------------
The main financial The Group Treasury function is responsible
risks are the availability for managing the Group's liquid resources,
of short and long-term funding requirements, interest rate and
funding to meet business currency exposures and the associated risks
needs and fluctuations as set out in note 23 on page 139. The Group
in interest, commodity Treasury function has clear policies and
and foreign currency operating procedures which are regularly
rates. The business reviewed and audited.
has acquired full
ownership of Sainsbury's Sainsbury's Bank operates an enterprise
Bank which presents wide risk management framework. The principal
a risk that the Group's financial risks relating to the Bank and
financial performance associated mitigations are set out in note
and position may 23 to the financial statements on page 139.
be negatively impacted
if the Bank transition With regard to pensions, investment strategies
and performance are are in place which have been developed by
not delivered as the pension trustees, in consultation with
planned. In addition, the Company, to manage the volatility risk
there remains a risk of liabilities, to diversify investment
around pensions as risk and to manage cash. Both Group defined
the Group operates benefit schemes are closed to future accrual.
two defined benefit
pension arrangements
that are subject
to risks in relation
to liabilities as
a result of changes
in interest rates,
life expectancy and
inflation and their
alignment to the
value of investments
and the returns derived
from such investments.
---------------------------- ------------------------------------------------
Health and safety - people and product (gross risk exposure no
change) *
Risk Mitigation
---------------------------- -------------------------------------
Prevention of injury Clear policies and procedures
or loss of life for are in place detailing the
both colleagues and controls required to manage
customers is of utmost health and safety and product
importance. In addition, safety risks across the business
it is paramount to and comply with all applicable
maintaining the confidence regulations. These cover the
our customers have end-to-end operation, from
in our business. 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 safety teams.
---------------------------- -------------------------------------
Political and regulatory environment (gross risk exposure
increased) *
Risk Mitigation
---------------------------- -----------------------------------
There remain heightened We continue to engage actively
levels of political with governments, administrations
and regulatory uncertainty and regulatory bodies.
in the UK following We publically communicate
the referendum vote matters where we believe
to leave the EU in industry change is required
June 2016, the triggering with a view to enabling
of Article 50 in March fair competition that is
2017, and the general beneficial to our customers.
election in June 2017. We communicate
This uncertainty is our views, and those of
expected to continue our customers and colleagues,
for the foreseeable regarding geopolitical
future until EU exit issues with the aim of
negotiations have been informing the debate and
completed and alternative ensuring our opinions are
trade deals have been represented in the policy
put in place. This and decision making processes.
situation may adversely
impact trading performance
across the sector.
An increasing focus
on localism to drive
and deliver policy
and current legislative
requirements including
Business Rates, Workplace
Pensions,
the National Living
Wage and Apprenticeship
Levy place a cumulative
burden on Sainsbury's.
---------------------------- -----------------------------------
Trading environment and competitive landscape (gross risk
exposure no change) *
Risk Mitigation
------------------------------- ----------------------------------
Effective management We adopt a differentiated
of the trading account strategy with a continued
is key to the achievement focus on delivering quality
of performance targets. products and services with
The sector outlook 'universal appeal', at
has been and is set fair prices, helping our
to remain challenging. customers Live Well for
The challenging trading Less. This is achieved
environment, driven through the continuous
by ongoing competitive review of our product quality,
retail pricing combined key customer metrics, monitoring
with growing inflationary of current market trends
cost pressures, may and price points across
adversely impact performance. competitors, active management
There is also an ongoing of price positions, development
risk of supplier failure, of sales propositions and
with possible operational increased promotion and
or financial consequences marketing activity. We
for the Group. continue with our commitment
to provide customers even
better value with lower
regular prices. In delivering
our strategic plan, including
our price investment, we
will maintain the strength
of our balance sheet and
have therefore identified
a series of measures to
conserve cash in the business.
Through these measures
we will deliver sustainable
operating cost savings.
With regards to supplier
continuity, Sainsbury's
maintains regular, open
dialogue with key suppliers
concerning their ability
to trade.
------------------------------- ----------------------------------
Related party transactions
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:
2017 2016
GBPm GBPm
---------------------------------- ---- ----
Short-term employee benefits 10 7
Post-employment employee benefits 1 1
Share-based payments 6 4
---------------------------------- ---- ----
17 12
---------------------------------- ---- ----
Nine key management personnel had credit card balances with
Sainsbury's Bank (2016: ten). These arose in the normal course of
business and were immaterial to the Group and the individuals. Five
key management personnel held saving deposit accounts with
Sainsbury's Bank (2016: five). These balances arose in the normal
course of business and were immaterial to the Group and the
individuals.
b) Joint ventures and associates
Transactions with joint ventures and associates
For the 52 weeks to 11 March 2017, the Group entered into
various transactions with joint ventures and associates as set out
below.
2017 2016
GBPm GBPm
------------------------------------------------- ---- ----
Management services received - (1)
Management services provided 8 4
Income share received from joint ventures 29 33
Dividend and distributions received 65 46
Proceeds from repayment of loan to joint venture 2 -
Investment in joint ventures and associates (18) (18)
Rental expenses paid (57) (65)
Year-end balances arising from transactions with joint ventures
and associates
2017 2016
GBPm GBPm
------------------------------ ---- ----
Receivables
Other receivables 12 28
Loans due from joint ventures 3 3
Payables
Other payables - (1)
Loans due to joint ventures (5) (5)
Loans with joint ventures are non-interest bearing and repayable
on demand.
c) Retirement benefit obligations
As discussed in note 29, 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 29 to these financial
statements.
Statement of Directors' responsibilities
The Directors are responsible for preparing the Annual Report
and Financial Statements in accordance with applicable law and
regulations.
Company law requires the Directors to prepare financial
statements for each financial year that give a true and fair view
of the state of affairs of the Group and the Company as at the end
of the financial year, and of the profit or loss of the Group for
the financial year. Under that law, the Directors have prepared the
Group financial statements in accordance with International
Financial Reporting Standards (IFRS) as adopted by the European
Union (EU) and have elected to prepare the Parent Company financial
statements in accordance with United Kingdom Generally Accepted
Accounting Practice, including FRS 101 'Reduced Disclosure
Framework' (UK Accounting Standards and applicable law). 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 IFRSs as adopted by the European Union and
applicable UK Accounting Standards have been followed, subject to
any material departures disclosed and explained in the Group and
Company financial statements respectively; and
-- 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 Directors'
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.
Having taken all the matters considered by the Board and brought
to the attention of the Board during the year into account, we are
satisfied that the Annual Report and Financial Statements, taken as
a whole, is fair, balanced and understandable.
The Board believes that the disclosures set in this Annual
Report provide the information necessary for shareholders to assess
the Group's performance, business model and strategy.
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
pages 54 to 55, confirms 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; and
-- the Strategic Report and Directors' Report contained in the
Annual Report and Financial Statements 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.
By order of the Board
Tim Fallowfield
Company Secretary and Corporate Services Director
2 May 2017
This information is provided by RNS
The company news service from the London Stock Exchange
END
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