8th Jun 2016 16:54
UK Mail Group plc
("UK Mail" or the "Company")
Annual Financial Report 2016
Notice of Annual General Meeting 2016
Proxy Form
The Company has today published the following documents on its website, www.ukmail.com:
· Annual Report and Accounts 2016
· Notice of Annual General Meeting 2016
· Proxy Form
A copy of the above documents has been submitted to the National Storage Mechanism and will shortly be available for inspection at: www.Hemscott.com/nsm.do
The Company will hold its 2016 Annual General Meeting at the offices of Investec, 2 Gresham Street, London, EC2V 7QP on Thursday 14 July 2016 at 12:00 noon.
Attached to this announcement is the additional information required under Rule 6.3.5 of the Disclosure and Transparency Rules of the Financial Conduct Authority, including a description of the principal risk factors for the Company, as set out in the Annual Report and Financial Statements 2016, and a statement of directors' responsibilities.
ADDITIONAL INFORMATION
Principal risks and uncertainties
The following information is extracted from pages 27 to 31 of the Annual Report and Accounts 2016. Further information on how the Group manages risk is detailed on pages 41 to 52 of the corporate governance section within the Annual Report and Accounts 2016.
Like all businesses, the Group faces a number of actual and potential risks which if not properly controlled, could hinder the successful implementation of our strategy and impact the Group's overall financial performance. The Board, who maintain the overall responsibility to ensure that the Group has in place a balanced approach to risk management, believes that a robust risk management process considers the risks in the context of their impact and probability.
The Group's risk management monitoring and review process primarily comprises of;
· A Risk Register;
· A minimum four risk reviews per annum; two of which are undertaken by the Board and two by the Audit Committee;
· An annual review and consideration of the Group's risk appetite; and
· An approved Risk Management policy.
Identification and monitoring of risks
On a quarterly basis, the process requires management throughout the business to identify, evaluate and monitor risks and take the necessary steps to reduce, eliminate or manage those risks.
These risks are scored as to the likelihood of their occurrence and the scale of their potential impact, after allowance is made for the effectiveness of existing or planned mitigating controls, such that the overall Risk Register can be suitably prioritised.
This Risk Register, together with the identification, implementation and progression of mitigation plans are reviewed on an on-going basis in detail by senior management of the Group.
During the year, the Audit Committee on behalf of the Board (who ultimately retain the responsibility for the Company's risk management framework) twice reviewed the risk management process and the most significant risks identified on the Risk Register.
These significant risks were reported in detail to the Audit Committee on a High Entity Risk Register ('HERR'), of which 27 risks (2015: 24 risks) had been identified at the date of this report. Further detail of the work undertaken by the Audit Committee in this area can be found in the Audit Committee report on page 48.
Issues arising at these meetings were further discussed at the main Board meetings as appropriate, in addition to the discussion of a further two quarterly risk reviews.
The tables that follow detail the principal risks and uncertainties faced by the Group and the steps taken to mitigate such risks and uncertainties. The Board considers these to be the most significant risks, and whilst not directly comparable, they have been ranked in terms of relative importance to the Company at this time.
They do not comprise all of the risks identified by the Company, nor those presently unknown to management, or those currently deemed less material, which may also have an adverse effect on the business.
Additionally, the Group, in common with others is exposed to a number of financial risks including market risk, credit risk, interest risk, liquidity risk, and capital risk, details of which can be found in note 25.
Risk | Potential Impact | Mitigation | Assurance |
Operational plan failure (increase in risk)
The Group has relocated to a new National hub at Ryton following contractual agreement with HS2 Ltd to acquire the National hub at Birmingham.
Whilst the new hub is fully operational, it is not operating at the planned level of throughput and efficiency. |
Operational costs may be higher than expected, whether directly at the hub or within the wider network.
Additional hub capacity is required to handle 'non-machinable' freight.
|
Operational performance is closely monitored by operational management.
Plans are well progressed to reduce operational costs and increase hub capacity.
A second hub for 'non-machinable' freight has been introduced. |
The plans for the hub and the operation are monitored on a weekly basis by the Executive directors and on a monthly basis by the full Board. |
Loss of key management (increase in risk)
The Group is highly reliant on the continued service of its key executives and management, who possess commercial, operational, IT and financial skills that are critical to the success of the Group.
|
Loss of knowledge and/or necessary expertise resulting in a reduced ability to achieve the Group's strategic and business objectives.
Loss of competitive advantage due to the delayed delivery of projects or required developments.
|
Remuneration packages are regularly reviewed to ensure that key executives and management are remunerated in line with local prevailing market rates.
Senior management regularly reviews the availability of the required skills within the Group, and will seek to engage suitable staff where necessary.
Positions can be backfilled by contract staff, providing headroom to the key executive or manager.
All employees are appraised at least twice per year with agreed objectives and development plans set.
|
Resourcing requirements are monitored by departmental and operational heads, together with HR, on an on-going basis.
The Main Board monitors, reviews and challenges the resourcing of any proposed project or development, prior to approval. |
IT Systems failure (no change in risk)
Reliance is placed upon the proper functioning of IT systems for the effective running of operations.
|
Any prolonged interruption to the Group's IT systems could have a materially adverse effect on its business.
The Group could suffer loss of confidential data and damage to its brand reputation, and face regulatory penalties. |
The Group has a Business Continuity Plan in the event of IT systems failure. Networks are protected by firewalls and antivirus protection. Systems are backed up, and offsite disaster recovery facilities exist in the event that a major issue affects one of our key locations.
Executive Director approval is required for any material system change. A full implementation review and/or parallel running is/are undertaken by the sponsoring department and IT prior to any new system 'go live'.
The Group has initiated two key medium-term IT modernisation projects to cater for significantly increased transactional volumes.
|
Continued investment in IT infrastructure.
Core areas of the Group are subject to certification including ISO 27001 Information Security Management.
Internal IT department constantly monitors threats to data protection by viruses, hacking and breach of access controls.
Deloitte LLP has been appointed as the Group's 'internal IT audit' resource to provide specialist expertise. |
Competitive (no change in risk)
The Group operates in highly competitive markets and faces competition from international, national, regional and local companies, as well as the Royal Mail.
|
Increased competitive activity could lead to an adverse effect on results, either through loss of customers or pressure on margins, putting growth, profitability and cash flow at risk. |
Market activity, competitor behaviour, and trading opportunities are regularly reviewed.
Dedicated customer account teams exist for larger accounts.
Hierarchical approval for customer rates charged.
The Group seeks to expand the available market through the introduction of new products and services.
The Group has a wide customer base geographically spread across a large number of business sectors.
|
Competitor activity is monitored at both a strategic and tactical level to enable suitable actions to be developed in response.
Feedback from customers, including complaints, together with the findings from customer satisfaction surveys are routinely monitored, discussed and action plans developed as appropriate.
The Group's performance against KPI's is regularly reviewed by senior operational executives and at Main Board meetings. |
Business continuity (increase in risk)
The Group could be materially affected if there was a significant incident such as a terrorist incident, fire or flooding, particularly at one of the major hubs, or the main automated sortation equipment was inoperable for a period of time.
|
Severe disruption and reputational damage to the business, which would ultimately impact on the Group's financial performance. |
A detailed Business Continuity Plan is being developed for the main Ryton site, which once operational will be tested on a rotational basis.
Business continuity plans exist and are regularly tested at all the other sites. |
The progress of this plan is monitored and reviewed by the Risk Committee, the Audit Committee and the main Board.
Disaster Recovery and Business Continuity plans are regularly reviewed and tested at frequent intervals. |
Physical theft and security (no change in risk)
Physical theft or fraudulent interception of consignments could damage the Group's reputation.
Employees or subcontractors could suffer physical attack.
|
The Group could suffer reputational damage and customer loss.
High value or a high number of incidents may impact the Group's insurance cost or cover. |
The Group has a dedicated Loss prevention department, which monitors criminal behaviour on a national and local basis.
The Group monitors the level of insurance cover, particularly in respect of high valued freight.
Drivers receive security training.
|
The Head of Loss Prevention monitors security incidents on an on-going basis, reporting key issues to the Audit Committee at least twice per annum.
The Group works to a 'zero-tolerance' policy and will aim to take legal action in respect of any incident.
All whistle-blowing reports received are investigated in full.
|
Legislation and regulation (no change in risk)
The Group is subject to numerous laws and regulations, with the mail market additionally regulated by the Office of Communications ('Ofcom').
The Group, in common with many businesses, is subject to litigation from time to time. |
Failure to comply or respond could lead to financial loss, either from financial penalties or damages, redeployment of management resource, or reputational damage to the Group.
|
The Group keeps abreast of forthcoming legislative and regulatory changes, and maintains controls and procedures to ensure full compliance.
The Group maintains active engagement with Ofcom, responding to consultations, when relevant.
The Group maintains both in house and external legal expertise.
|
The Board reviews reports from senior executives including the Group Legal Manager.
The Group is subject to various audits and compliance visits from both external bodies and in house internal audit and security teams |
Related parties
The Company's related parties together with details of material transactions and year-end balances with them are detailed in Note 30 of the Annual Report.
Statement of directors' responsibilities
The directors are responsible for preparing the Annual Report, the Directors' Remuneration 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 prepared the Group and Parent Company financial statements in accordance with International Financial Reporting Standards ('IFRSs') as adopted by the European Union ('EU'). 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 applicable IFRSs as adopted by the EU 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 will continue in business.
The directors are responsible for keeping adequate accounting records that are sufficient to show and explain 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 International Accounting Standards ('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.
The directors are responsible for the maintenance and integrity of information on the Group's website - www.ukmail.com. Legislation in the United Kingdom governing the preparation and dissemination of financial statements may differ from legislation in other jurisdictions.
The directors consider that the Report & Accounts, taken as a whole, is fair, balanced and understandable and provides the information necessary for shareholders to assess the Company's performance, business model and strategy.
Each of the directors, whose names and functions are listed on page 44 confirm that, to the best of their knowledge:
· the Group financial statements, which have been prepared in accordance with IFRSs as adopted by the EU, give a true and fair view of the assets, liabilities, financial position and profit of the Group; and
· the Strategic Report contained in the Report & Accounts includes 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.
A list of current directors of UK Mail Group plc is maintained on the UK Mail Group website, www.ukmail.com.
Steven Glew
Company Secretary
9 June 2016
About UK Mail
UK Mail Group plc is one of the leading independent parcels, mail and logistics services company within the UK and one of the main alternatives to Royal Mail for business mail requirements. More information is available at www.ukmail.com
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